VTB Group announces IFRS results for August 2015 and eight months ended 31 August 2015

Herbert Moos, Deputy Chairman of the Management Board, said: “In August we saw a continuation of the positive trends seen in the second quarter, with a further recovery of VTB Group’s net interest margin, normalisation of the cost of risk, and a slowdown in cost inflation. Moreover, the Group’s loan book resumed its growth, more than compensating for the decline in the first half of the year, which puts us well on track to deliver our full-year growth plans. The issue of preference shares substantially strengthened our capital position in line with the Group’s strategic objectives, making our business stronger and even more resilient.”

Income Statement:

• Net profit in August 2015 was RUB 0.4 billion, further reducing the year-to-date net loss to RUB 14.6 billion;
• The Group’s August performance was supported by an improved net interest margin (3.2% in August 2015 versus 2.1% in 1H 2015) and healthy net fee and commission income (RUB 6.3 billion in August and RUB 44.9 billion for the first eight months of 2015, up 43.2% and 20.1% year-on-year, respectively);
• Net operating income before provisions for the first eight months of 2015 was RUB 255.1 billion, down 14.5% year-on-year;
• The Group’s conservative risk policies and tighter origination standards led to a 17.6% year-on-year decrease in total provision charges in January-August 2015. Total provision charges for impairment of debt financial assets and for impairment of other assets, credit related commitments and legal claims amounted to RUB 109.7 billion, versus RUB 133.2 billion in January-August 2014;
• Cost of risk was 1.8% in August 2015 and 1.7% in 8M 2015, down from 2.8% in August 2014 and 2.6% in 8M 2014;
• Staff costs and administrative expenses amounted to RUB 19.6 billion in August and RUB 155.0 billion for 8M 2015, up 4.8% and 5.3% year-on-year, respectively. The Group’s costs continue to grow at a rate substantially below inflation, due to various cost control initiatives across key business lines;
• The Group’s cost-to-income ratio in August was close to target and amounted to 51.2%, due to a combination of improved operating performance and strict cost control.

Statement of Financial Position:

• Total assets grew 6.3% in August and 7.1% in January-August 2015, to RUB 13,057 billion;
• In August 2015, gross loans and advances to customers increased 5.0%, the growth for the first eight months of 2015 was 3.9%. Growth was driven by new loan issuance, as well as the revaluation of the of the Group’s FX-denominated loans, since the Russian Rouble weakened against the US Dollar and Euro;
• In August 2015, gross loans to legal entities grew 6.1% (up 5.3% year-to-date at 31 August 2015), and gross loans to individuals grew 1.0% (down 1.5% year-to-date);
• The NPL ratio was 6.9% of total gross loans at 31 August 2015, down 10 bps from the end-June level;
• NPL coverage ratio at 31 August 2015 remained at a solid 107.1% (30 June 2015: 109.0%);
• Total customer deposits grew 9.9% in August and 23.0% in 8M 2015, and amounted to RUB 6,975 billion at 31 August 2015. Corporate and retail deposit funding performed similarly, growing by 11.1% and 7.9% in August (24.5% and 20.6% year-to-date), respectively;
• The Group continued to reduce its reliance on wholesale funding, with the share of debt securities issued in total liabilities falling to 6.0% at 31 August 2015 (30 June 2015: 6.5%, 31 December 2014: 8.3%);
• The adjusted loan-to-deposit ratio remained at a comfortable 102.9% as of 31 August 2015 (30 June 2015: 99.5%, 31 December 2014: 113.4%);
• In July 2015, VTB Bank completed an issuance of class A preference shares in the amount of RUB 307 billion, significantly strengthening the Group’s capital base. At 31 August 2015, Tier 1 CAR was 12.8% (end-June 2015: 10.1%), and Total CAR was 15.3% (end-June 2015: 12.4%).