OREANDA-NEWS. November 9, 2007.Vozrozhdenie Bank (VZRZ) today reported nine months 2007 IFRS financial results:
Net income 1,216 million rubles ($48.7 million), double the same period in 2006
Return On Equity (ROE) at 20.0%, above 2006 average of 19.1%
Shareholders Equity reaches 11.2 billion rubles ($449 million)
Assets exceed 100 billion rubles ($4 billion) for the first time

Our strong business and financial results for the first nine months of 2007 confirm the success of the bank’s long term strategy. Under International Financial Reporting Standards (IFRS) our profit after tax was 1,216 million rubles or $48.7 million, twice the profit of the same period of 2006. Our Return on Equity (ROE) was 20.0%, above the average for last year at 19.1%, but we have now more than doubled the amount of equity available to support the bank’s rapidly expanding business. Careful attention to funding and good credit practices allow the bank to continue to expand its lending, primarily to small and medium size businesses, but with an increasing portion of good quality retail lending.

Business volumes continue to grow strongly with balanced growth coming from both retail and corporate sectors. Retail loan volumes are double the same time last year. Mortgages make up over half (52%) of our retail portfolio and are the most rapidly growing part of our retail lending. Credit quality has been stable this year and we continue to provide very conservatively for possible losses, with provisions 1.8 times exceeding the level of loans past due.

We are pleased to have the confidence of our retail and corporate customers - funding from deposits makes up 85% of the Bank’s liabilities. In the current environment of some uncertainty in international capital markets earlier this year we had accessed capital markets for longer term resources. The bank has no capital market obligations maturing in 2007.

Adjusting for the timing of the bank’s 20th share issue registered in the second quarter, our return on equity was 20.0%, slightly exceeded last year’s average ROE of 19.1%. Market capitalization of the bank currently stands at $1.5 billion

 “We feel that our careful approach to expansion and attention to balance and domestic funding creates the stable base for our activities in support of our customers. Knowing our customers, and building a relationship with them, provides a solid base of funding and revenue from services as well as lending. We see continued strength in the expansion of small and medium business across Russia and are pleased to support our customers in their growth,” said Dmitry Orlov, Chairman of the Management Board of Vozrozhdenie.

Pre-tax profit for the nine months was a record 1,600 million rubles, more than twice the previous year. After taxes of 384 million rubles, net income was 1,216 million rubles ($48.7 million) which compares to 615 million rubles ($23.0 million) in the same period of 2006. Earnings per share rose to 55 rubles in the nine months compared to 32 rubles for the first nine months of 2006.

Net Interest Income grew 66% compared to the first nine months of 2006 exceeding the growth of average assets of 60%, due to a slightly more profitable mix of assets and funding this year. Although the level of problem loans in both the retail and commercial portfolios remained very low, 1.9% of total loans, we have been increasing provisions for possible losses on a regular basis. In the first nine months we set aside 754 million rubles. Total provisions were 2.7 billion rubles, or 3.4% of total loans, a cushion of 1.8 times over the volume of past due loans.

Operating income grew 56% to 5,562 million rubles ($223 million). Increase in transaction volumes provided a 33% growth in fee and commission revenue from bank’s core business. Non-interest revenue provided 43% of total operating revenue in the first nine months of 2007 and net fees and commissions constituted 85% of non-interest revenue.

Operating expenses grew 43% reflecting the growth of both retail and corporate business transactions. We have widened our sales network by 15 new sales outlets since the end of 2006. The Bank continued its work on increasing the efficiency of operations: the cost to income ratio going down to 62.7% from 68.0% in the same period last year and an average of 72.3% for all of 2006; as expenses have grown less than the growth in assets or loan volumes and less than the rise in operating income.

Assets exceeded 100 billion rubles for the first time, growing 58% over the past year to reach 100.3 billion, or $4.0 billion. Loans to individuals and families continue to grow rapidly and now make up 19% of our total lending. This includes mortgages, now 2.5 times more than at the same time last year, reaching 7.9 billion rubles or $315 million. Mortgages make up just over 50% of our loans to individuals with very few problem ones in the Bank’s portfolio. Our consumer loans increased almost 70% in the last twelve months. Credit card use has also accelerated with balances now at 2,424 million rubles, triple the volume of this time last year.

Equityrose to 11,202 million rubles ($449 million) at the end of September 2007. This includes the 4,583 million rubles ($177 million) which has come from our recent issue of three million new shares and earnings in the past 9 months have contributed 1,216 million rubles ($49 million).

The bank's full IFRS reports are available at: www.vbank.ru/en