OREANDA-NEWS. June 29, 2010. TransCreditBank Group released unaudited Interim Condensed Consolidated Financial Statements under IFRS for the three-month period ended March 31, 2010.

Key items

Profit for Q1:2010 increased two-fold YoY to RUB 1.48 billion 

Operating income before loan loss provisions was up 4.8% YoY to RUB 5.0 billion

Net interest income was down 7.5% YoY to RUB 3.0 billion

Net fee & commission income grew 31.6% YoY to RUB 833 million

In Q1:2010, the Bank made provisions for loan impairment  of RUB 771 million, or 15% of operating income 

Total assets grew 14.0% to RUB 294.6 billion compared to YE 2009

Gross loans to customers were up 11.2% to RUB 172.1 billion from YE 2009

NPLs (>90 days overdue) were 4.6% of gross loans, down from 5.1% at YE 2009 

Net interest margin stood at 5.1% in Q1:2010 vs. 7.6% in Q1:2009

Return on average equity (ROE), on an annualized basis, was 28,2%, up from 16.8% in Q1:2009

Total capital adequacy ratio according to Basel Accord was at 13.5% and Tier 1 capital ratio at 8.0%.

Profit at RUB 1.48 billion

TransCreditBank’s profit for Q1:2010 amounted to RUB 1.48 billion, a two-fold increase YoY and a 2.5 times increase compared with Q4:2009.

The growth of operating income (before loan loss provisions) by 4.8% YoY to RUB 5.0 billion was mainly driven by net fee & commission income (increase of 31.6% YoY) and net gains from trading portfolio. The latter more than tripled to RUB 943 million on the back of the significantly increased portfolio (growth of 86%) and a positive revaluation of securities.

Net interest income was down 7.5% YoY to RUB 3.0 billion (from RUB 3.2 billion) driven by market-wide pressure on lending rates coupled with more slowly decreasing funding costs.  The share of net interest income in operating income (before loan loss provision) was down by 8 p.p. to 59% YoY.

A higher net income resulted in improved profitability ratios. Return on average equity (ROE) calculated on an annualized basis increased to 28.2%, from 16.8% in Q1:2009. Return on average assets (ROA) (annualized) was 2.1% vs. 1.2% in Q1:2009.

Operating expenses rose by 39.0% YoY to RUB 2.4 billion following the Bank’s network extension (over 70 new offices opened during the past year), staff growth (by about 6%) and payroll increase. At the same time, operating expenses fell by 15% from Q4:2009.

Provision charge for loan impairment amounted to RUR 771 million, a significant decrease from RUB 2.2 billion in Q1:2009 due to the stabilizing loan portfolio quality. Provisions amounted to 15% of operating income vs. 45% of operating income in Q1:2009.

Pavel Golenkov, TransCreditBank’s Senior Vice-President and CFO, says: “In 2010, we plan to return to our traditional earnings structure with a higher share of net interest income and a lower share of trading income compared to what we had in 2009 and the 1st quarter this year. We believe that forecasted loan portfolio growth of not less than 20% will make up for decreased interest margins in the market. As for provisions for loan impairment, we believe that most problems with our borrowers already materialized in 2009, and we made sufficient provisions for bad loans by the year-end. As we do not expect any significant deterioration of the loan portfolio quality this year, the growth in provisions in the coming quarters will mainly reflect the growth of the portfolio”. 

Significant asset and loan portfolio growth

TransCreditBank’s total assets grew by 14.0% in the first three months of the year to RUB 294.6 billion. Cash and cash equivalents and securities trading portfolio increased by 52.2% and 86.2%, respectively, following an inflow of customer funds shortly before the reporting date and their short-term placement in respective instruments.

Trading securities portfolio is to 94% comprised of liquid securities that can be refinanced with the CBR: federal and municipal bonds, and RUB bonds of Russian blue chips.

Gross loans to customers increased by 11.2% from YE 2009. In Q1:2010 the Bank continued active lending to corporate clients, with lending to state-owned or state-controlled companies showing the most significant increase of 35%. Utilizing its unique expertise in servicing clients from the transportation sector and enhancing efforts in diversifying the client base, TransCreditBank has been expanding cooperation with companies in other infrastructure industries, including telecom, energy and infrastructure construction, which has been reflected in the industry structure of the portfolio. 

Loans to individuals decreased by 1% following the suspension of some retail lending programs during the crisis. By the beginning of 2010, the Bank resumed most retail lending programs (except for car loans). The plans for the rest of 2010 include improving service quality, attracting new clients (primarily employees of corporate customers implementing payroll card programs), as well as expanding product range (e.g. introducing credit cards). 

Stable loan portfolio quality

Non-performing loans (>90 days overdue) were 4.6% of gross loans, down from 5.1% at YE 2009. Provisions provided coverage for 156% of non-performing loans, up from 150% at YE 2009.

The quality of corporate loan portfolio stabilized: the total amount of non-performing loans remained unchanged from YE 2009 at RUB 5.1 billion, and the share of corporate NPLs was down to 4.4% from 5.1% at YE 2009, thanks to the growing size of the portfolio.  

Retail NPLs rose to 5.1% from 4.7% at YE 2009 on the back of the decreasing retail portfolio, as well as some growth of overdue consumer loans.

Funding and capital

Customer accounts grew by 31.6% to RUB 200.2 billion, mainly driven by inflow of funds from state-controlled entities and insurance companies. Customer funding accounted for 73% of the Bank’s liabilities as at 31 March 2009.

In early 2010, TransCreditBank fully repaid the CBR loans totaling RUB 5.0 billion, which had been provided under guarantees of other banks. 

Shareholders’ equity grew by RUB 1.6 billion to RUB 21.8 billion. Total capital adequacy ratio (CAR) stood at 13.5% (14.6% at YE 2009). Tier 1 ratio was at 8.0% (8.4% as at YE 2009).