VTB Group announces IFRS results for August and 8 months of 2019
VTB Bank, the parent company of VTB Group, publishes its unaudited consolidated IFRS results for August 2019 and the 8 months ended 31 August 2019. The P&L statement components have been compared with modified financial results for 8 months 2018 (excluding Post bank, VTB Insurance and other companies deconsolidated later on), for the purposes of accuracy of the year-on-year analysis.
Dmitry Olyunin, First Deputy President and Chairman of VTB Management Board, said:
"In the second half of the year we are seeing acceleration of core business growth as well as improvement of bottom line.
"In August 2019 VTB Group continued to grow business volumes in line with strategic priorities, especially in Retail and SME business segments. We also had outrunning growth of customer funding which led to its stronger share in total liabilities structure. The Group's net profit reached in 8M 2019 RUB 115.3 billion which corresponds to ROE of 11.2%, while in August 2019 net profit was RUB 18.0 billion (ROE 13.4%).
"The results of August and 8M 2019 support our guidance on full year business growth as well as net profit target of RUB 200 billion".
In 8M and August 2019 VTB Group grew its operations and strengthened market shares.
- Total assets amounted to RUB 15.8 trillion as of 31 August 2019, up 4.2% in August and up 7.3% year-to-date. Loans and advances to customers (hereafter before provision charge for credit losses and other provisions) increased by 4.4% year-to-date to 11.9 trillion as of 31 August 2019. In 2019 loans to individuals remain the key growth driver having increased by 1.5% in August and by 12.8% year-to-date. At the same time most of the loan portfolio growth in August 2019 was generated by loans to legal entities which increased by 2.9% in August (by 1.4% year-to-date).
- The Group's market share in Russia in corporate and retail lending stood at 19.5% (+80 bp ytd) and 17.9% (+20 bp ytd), respectively.
- Deposits from legal entities increased by 6.8% in August and by 9.9% year-to-date, while deposits from individuals increased by 2.8% in August and by 9.4% year-to-date significantly outperforming the banking industry.
- As of 31 August 2019 the Group's market share in Russia in corporate and retail funding was 21.4% (+70 bp ytd) and 15.1% (+100 bp), respectively.
Strong asset quality led to a decrease in cost of risk and positively affected bottom line result of VTB Group.
- Total provision charge for credit losses and other provisions amounted to RUB 12.6 billion in August 2019 and RUB 63.7 billion in 8M 2019, down 20.3% and 26.9% y-o-y, respectively. Cost of risk was 0.8% in 8M 2019 and 1.2% in August 2019 reflecting stable loan quality across all business lines.
VTB Group has substantially improved its profitability metrics due to the growth in net operating income and the decline of provision charge for credit losses.
- In August 2019 net profit amounted to RUB 18.0 billion, up 66.7% year-on-year.
- In 8M 2019 net profit was RUB 115.3 billion, down 6.6% year-on-year. Since in 7M 2019 net profit was down 13.7% y-o-y, we see a monthly reduction of gap between the net profit of the current and of the previous years; we expect the subsequent profitability at levels bridging this gap and exceeding the last year's bottom line, which supports our guidance on full year 2019 net profit target of RUB 200 billion.
- Net interest income was RUB 36.3 billion in August 2019 and RUB 287.9 billion in 8M 2019, down 5.5% and down 3.1% y-o-y respectively. The net interest margin in 8M 2019 was 3.3%. We expect improvements in net interest margin and net interest income dynamics due to the monetary policy easing and on the backdrop of loan portfolio growth.
- Net fee and commission income was RUB 8.1 billion in August 2019 and RUB 60.6 billion in 8M 2019, up 14.1% and up 9.2% y-o-y, respectively. The Group's retail and SME business lines are the key contributors to net fee and commission income growth.
Cost growth in 8M 2019 driven by the consolidation of the recently acquired banks.
- Staff costs and administrative expenses amounted to RUB 164.3 billion in 8M 2019, up 20.5% year-on-year. The increase in staff costs and administrative expenses was driven by recent acquisitions and the subsequent consolidation of three banks (Bank Vozrozhdenie, West Siberian Commercial Bank and Sarovbusiness bank), as well as higher IT costs.
- Due to higher operating revenues cost to income ratio started to improve and reached 35.5% in August 2019 versus 43.8% in 8M 2019.
VTB maintained balance sheet stability as profitability was improving.
- Customer funding amounted to 80.1% of the Group's total liabilities as of 31 August 2019 (31 December 2018: 78.6%);
- The proportion of loan portfolio to customer funding (LDR ratio) was at target level of 98.0% as of 31 August 2019 (31 December 2018: 102.8%);
- As of 31 August 2019 Tier 1 Basel CAR was 12.0% and total CAR was 13.2%.
