OREANDA-NEWS. June 17, 2010. Home Credit & Finance Bank (“HCFB” or “the Bank”), rated Moody’s Ba3/NP/D-, S&P B+/B, and one of the largest Russian retail banks with leading positions in certain segments of the consumer lending market, announces its unaudited financial results for the three month period ended 31 March 2010 in accordance with International Financial Reporting Standards (IFRS), reported the press-centre of HCFB.

'HCFB completed the first quarter of 2010 with record-breaking financial results. Under macroeconomic instability, HCFB continues confident growth in full accordance with its strategy, which has proven to be efficient. The Bank’s performance remains one of the strongest in the Russian banking sector due to continuing improvements of customer service and focus on POS loans and cash loans as the two core business lines. We offer a full range of world-class banking products and services. High capitalisation, stable liquidity position, and support of the parent company are the  key pillar to our operating stability.'
Ivan Svitek,
HCFB Chief Executive Officer and Chairman of the Management Board
 
Highlights
As of 31 March 2010 the net profit reached RUB 2,479 million (which comprised 48% of overall net profit made in 2009) and thus significantly exceeded the results of three month period of 2009 (31 March 2009: net profit RUB 229 million)

The gross loan portfolio for the three month period ended 31 March 2010 reached RUB 64,692 million. Thus, the gross loan book decreased by 4.6% from the turn of the year (31 December 2009: gross loan portfolio RUB 67,802 million)

Operating income for the three month period of 2010 reached RUB 6,327 million, demonstrating year-on-year increase of 6% (31 March 2009: operating income RUB 5,974 million)

HCFB maintains a well balanced and highly liquid position to effectively manage its liabilities and continue business development. As of 31 March 2010 cash and cash equivalents totalled RUB 9.4 billion, the highly liquid AFS bond portfolio of RUB 11.1 billion

The share of retail deposits together with current accounts in the total liabilities comprised 23.6% compared to 17.1% as of 31 December 2009

Strong liquidity cushion is also supported by EUR 500 million standby liquidity facility from the PPF Group which was opened in 2008 and extended till May 2011. As of June 2010, the Bank has not utilized the facility

Shareholders’ equity reached RUB 29,406 million, growing by 34.6% year-on-year basis (as compared to RUB 21,851 million as of 31 March 2009). HCFB posted a risk-weighted capital adequacy ratio (CAR) of 40.2% as of 31 March 2010 (31 December 2009: CAR 36.4%) which is the highest in the banking system

Bank’s efficient risk-management policy enabled to substantially improve the quality of the loan portfolio. The current NPLs level is 11.1% of the gross loan book (12.9% as of 31 December 2009).Risk-cost indicator as of 31March 2010 is 5.4% annualized (12.1% as of 31 December 2009)

One of the key competitive advantages for HCFB is its well developed network of 82 representative offices and 181 banking offices, and over 33,000 points-of-sale at retailers across 80 regions of Russia. The Bank also possesses a well developed ATM network, which consists of 251 ATMs as of 31 March 2010

HCFB is one of the most successful Russian banks in consumer lending with almost 28% market share in POS segment and a 7.2% market share in credit cards segment

In May HCFB successfully placed its seventh domestic bond issue of RUB 5 billion with the coupon set for 2 years at 9% p.a.

In June 2010, Standard and Poor’s, the International rating agency, confirmed the Bank’s current ratings at B+/B with Negative outlook. In January 2010 Moody’s also affirmed ratings and outlook for HCFB at the current levels Ba3/NP/D-, with Negative outlook.

Business
HCFB’s gross loan portfolio remains well diversified and comprises RUB 64,692 million as of 31 March 2010. The POS loans comprised 42.9% (RUB 27,749 million) of the gross loan book; credit cards – 25.0% (RUB 16,202 million), cash loans – 15.0% (RUB 9,699 million), mortgage loans – 11.7% (RUB 7,561 million), car loans – 2.8% (RUB 1,821 million), and corporate loans – 2.6% (RUB 1,660 million).

In March 2010, the Bank entered the payroll market in line with its strategy to expand the product line and its services, such as deposit opening, accrual of interest on the clients’ account balances, supported by additional benefits and discount programmes, free Internet banking, and SMS notification.

HCFB’s well developed banking infrastructure enables the Bank to provide its services across the country. The Bank is currently represented in 80 Russian regions and 1200 cities with 181 banking offices, 82 representing offices, and more than 33,000 points-of-sale at retailers and 251 ATMs. In 2010 the Bank continued its infrastructure development by extending its banking network with new format offices which are low-cost and mobile and enable the Bank to operate in less penetrated areas. By the end of 2010 HCFB intends to extend this network up to 50 offices.

One of HCFB’s advantages is its client base which exceeded 18.2 million people as of 31 March 2010 and enables the Bank to effectively cross-sell its products and services. In line with its strategy HCFB intends to widen its client base using the payroll project as an additional client acquisition vehicle. Enhancing client services and further diversification of product range will remain the priority for the Bank going forward.

Results
HCFB is continuing to demonstrate strong business and financial performance. The first quarter of 2010 was extraordinary from P&L perspective. Pre-tax profit amounted to RUB 3,133 million with a net profit of RUB 2,479 million, demonstrating a substantial  increase compared to corresponding period of last year with RUB 304 million and RUB 229 million, respectively. Growing efficiency of HCFB’s business demonstrates the Bank’s well-thought strategy, supported by financial stability, dynamic business development, efficient management in the current macroeconomic conditions, and world-class risk management.

The operating income for the three month period ended 31 March 2010 reached RUB 6.3 million, which is 6% higher compared to corresponding period of the last year in spite of the general decrease of the loan portfolio, which demonstrates the improvement made in quality of the loan portfolio.

The credit portfolio is continuing to improve due to stricter underwriting procedures, adjusted prevention measures, and enhanced collections, which enabled the Bank to attract better quality customers and minimise its risks.

The level of NPLs decreased substantially this year to RUB 7,156 million. Thus the level of NPLs as a percentage of the gross loan book is 11.1%.

The Bank historically maintains a conservative approach towards provisions. The NPLs are sufficiently covered by provisions at a level of 104%.

HCFB seeks to maintain a well balanced and highly liquid position with RUB 9.4 billion of Cash and Cash equivalents and RUB 11.1 billion in a highly liquid bond portfolio, and a cumulative net liquidity position of RUB 23.1 billion for 12 months. In May HCFB successfuly placed its seventh domestic bond issue of RUB 5 billion with the coupon set at a level of 9% p.a. for 2 year period. As for today HCFB refinanced its obligation in the domestic bond market of the aggregate amount of RUB 10.1 billion.

The historically high capital position of the Bank, boosted by its high profitability resulted in HCFB posting a risk-weighted capital adequacy ratio and Tier I of 40.2% as at 31 March 2010, making HCFB the highest capitalized Bank in Russia.

HCFB’s strong liquidity and capital position are supported by the parent company PPF Group, which extended its stand-by liquidity facility line of EUR 500 million till May 2011. This line has not to date been utilized and serves as addtional liquidity cushion for the Bank.

In June 2010, Standard and Poor’s, the International rating agency, confirmed the Bank’s current ratings at B+/B with Negative outlook. In January 2010 Moody’s also affirmed ratings and outlook for HCFB at the current levels Ba3/NP/D-, with Negative outlook.