OREANDA-NEWS. June 16, 2011. Operating income before total provisions increased by 6.7% y-o-y for 5 months of 2011.

Net interest income was up by 4.3% y-o-y on higher income from retail lending expansion and reduced interest expense, the latter due to lower funding costs on customer accounts and amounts due to other banks.

Net fee and commission income increased by 3.7%, primarily from growth in the number of issued banking cards and related operations as well as agent fees from stronger sales of insurance contracts.

Net gain from trading on financial markets amounted to RUB1.3 bn for 5 months of 2011, which favorably compares to net loss of RUB5.4 bn for the same period a year ago. This was the result of income growth from investment in securities and precious metals.

The Bank booked a RUB13.8 bn gain from total provision release for 5 months of 2011 vs. a provision charge of RUB74.9 bn a year ago. The provision release ensued from restructuring of several big-ticket loans (mainly in April) as part of planned work with distressed assets. Furthermore, there was a pronounced reduction in losses from assignment sales: RUB6.3 bn for 5 months of 2011 vs. RUB49.0 bn for the same period a year ago.

Operating income after total provisions grew 1.6 times y-o-y.

Operating expenses rose by 24.5% y-o-y, which was mainly due to higher staff costs on the planned salary adjustments which commenced in early 2010 and an increase in general and administrative expenses related to business expansion. Cost to income ratio printed at 41.0%.

Profit before tax totaled RUB170.3 bn, twice as high as that of a year ago. Net profit came in at RUB136.9 bn, which is 2.4 times higher than for 5 months of 2010. Both figures made historical record highs for the first five months of a year.

The Bank’s assets increased by RUB282 bn to RUB8,829 bn for five months of 2011. The balance sheet was significantly affected by negative foreign currency revaluation as a result of ruble strengthening relative to US dollar.

In May assets grew by RUB187 bn led by loan portfolio expansion:

The Bank lent Russian companies more than RUB380 bn in May and about RUB1.8 trln in loans year-to-date. As of 1 June 2011, the balance of corporate loan portfolio amounted to RUB5,065 bn.

The Bank issued more than RUB90 bn retail loans in May and about RUB390 bn year-to-date. The retail loan portfolio stood at RUB1,405 bn as of 1 June 2011.

The quality of the loan portfolio continued to improve: the overdue loans as a percentage of the total book decreased from 5.04% in the beginning of the year to 4.64%. The Bank retains adequate coverage ratio. As of 1 June 2011, loan-loss provisions amounted to RUB641 bn, which exceeds overdue loans 2.1 times.

Investment portfolio contracted by RUB13 bn in May to RUB1,687 bn, which was mainly due to redemption of OFZ bonds. However, the breakdown of government bonds account for 63% and corporate bonds - for 24% of the portfolio.

The retail deposits balance increased by RUB2 bn to RUB4,945 bn. The weak retail funds inflow was due to seasonal factors. In the meantime, corporate accounts and deposits saw a more pronounced increase of RUB180 bn, which took the balance to RUB1,905 bn. This reflected growth of current accounts and term deposits of large corporate clients.

Regulatory capital (under CBR regulation No. 215-P) rose by RUB24 bn in May to RUB1,380 bn, due to higher retained earnings. Regulatory capital increased by 11.1% year-to-date.

Capital adequacy ratio remained at 18% as of 1 June 2011.