OREANDA-NEWS. May 29, 2014. VTB Group publishes its Interim Condensed Consolidated Financial Statements with the Independent Auditor’s Report for the three months ended 31 March 2014.

Andrey Kostin, VTB President and Chairman of the Management Board, said: "Over the first three months of the year, we continued to see very strong top line performance and solid balance sheet growth in our core businesses. At the same time, the volatile macroeconomic environment and geopolitical tensions had a significant impact on VTB Group’s P&L, and in particular on the cost of risk, prompting us to be prudent and more conservative in our lending and provisioning policies. We remain committed to our strategic priorities of growing the retail and mid-corporate banking businesses, while maintaining leading positions in corporate-investment banking as well as increasing our focus on risk management and cost efficiency. In line with our new strategy of quality growth, the Group is adhering to new standards of cost management, which will support its profitability against a weaker operating backdrop.”

In 1Q 2014 VTB Group posted record quarterly net interest income, supported by solid lending growth across the Retail, Corporate-Investment banking (CIB) and Mid-Corporate banking segments. Net interest margin (“NIM”) was 4.5% in 1Q 2014, unchanged from 1Q 2013 and 20 bps down from 4Q 2013. The moderate quarter-on-quarter NIM contraction was driven by an increase in the CBR key refinancing rate, the Group’s larger liquidity cushion, and by lower yields on the Group’s debt securities and retail loans, as the Group continued to optimise risk across various asset pools.

The Group once again posted healthy year-on-year growth in net fee and commission income (“NFCI”), as its Retail Business and Transaction Banking in CIB and Mid-Corporate banking continued to develop further their fee-generating product lines in line with expanding balance sheets. VTB Group’s Retail Business and Transaction Banking in 1Q 2014 earned NFCIs of RUB 7.5 billion and RUB 4.7 billion, or 52.4% and 32.9%, respectively, of the Group's total net fee and commission income.

Against the backdrop of Russia’s macroeconomic slowdown as well as political tensions in Ukraine, the Group saw elevated cost of risk (“CoR”) and weaker results from securities and foreign currencies.

CoR increased to 2.8% in 1Q 2014, up from 1.5% in 4Q 2013 and 1.6% in 1Q 2013. In loans to individuals, the CoR amounted to 5.5% for 1Q 2014 vs. 1.9% in 4Q 2013 and 3.7% in 1Q 2013. In the corporate loan book, the CoR was 1.9% for 1Q 2014 vs. 1.3% in 4Q 2013 and 1.0% in 1Q 2013.

The net loss from financial instruments at fair value through profit or loss and available-for-sale financial assets was RUB 3.9 billion in 1Q 2014, while the net loss from foreign currencies was RUB 8.2 billion, driven by Ukrainian hryvnia devaluation and increased swap costs during the quarter.

Staff costs and administrative expenses amounted to RUB 52.8 billion in 1Q 2014, up 15.0% from RUB 45.9 billion in 1Q 2013, driven by the expansion of the Group's retail business.