OREANDA-NEWS. July 21, 2011. TransCreditBank Group today released unaudited Interim Condensed Consolidated Financial Statements under IFRS for the three-month period ended March 31, 2011.

1Q:2011 Financial Highlights

TransCreditBank’s profit stood at RUB 1.6 billion, up 4.9% from RUB 1.5 billion in Q1:2010

Operating income before loan loss provisions grew 14.9% YoY

Operating income growth was driven by the increased net interest income (up 43.6%) and net fee & commission income (up 21.0%)

Total assets grew 5.9% from YE 2010 to RUB 413.8 billion

Gross loans to customers increased 14.0% from YE 2010 to RUB 246.1 billion mainly thanks to increased corporate lending

NPLs (>90 days overdue) were down to 3.4% of gross loans from 3.6% at YE 2010

Shareholders’ equity rose 4.7% to RUB 29.5 billion

Net interest margin stood at 5.6%

ROE was 21.5% (annualized), and ROA was 1.5%

Total capital adequacy ratio according to Basel Accord stood at 10.7% and Tier 1 capital adequacy ratio at 7.1%.

“Our shareholders set quite challenging financial targets for the year of 2011 and we are pleased to report that in the first quarter the Bank exceeded its profit target by over 70%. Furthermore, we earned almost all of our operating income from core activities, primarily, from lending to customers. Our net interest income surpassed both income earned in the previous quarter and in the first quarter of 2010 thanks to expanded loan book and declining customer funding costs,” said Oleg Panarin, TransCreditBank’s Vice President.

Increased core income

TransCreditBank increased income from core operations in Q1:2011. Interest income grew significantly by 24.0% to RUB 8.1 billion from RUB 6.5 billion in Q1:2010; with income from lending operations amounting to 72% of interest income. Interest expense increased at a much lower 7.1% to RUB 3.8 billion from RUB 3.5 billion in Q1:2010, thanks to almost unchanged customer funding expense following decreasing cost of new customer deposits. Consequently, net interest income was up 43.6% to RUB 4.3 billion YoY.

The share of net interest income in operating income rose to 74% from 59% in Q1:2010 and 71% in Q4:2010, in line with management expectations.

Net interest margin, calculated using average daily balances, improved to 5.6% (Q1:2010: 5.1%).

Net fee & commission income rose 21.0% YoY to RUB 1.0 billion. Income from bank card and cash operations, and documentary business were the largest sources of income.

Charge for impairment of interest-earning assets was RUB 364 million, down 52.8% YoY.

Operating expenses were up 46.2% YoY driven primarily by retail business expansion, which was planned in Q3:2010. At the same time, expenses fell 15.5% QoQ. Operating expense growth is projected by the Bank’s management at under 11%. 

Net profit for the period was RUB 1.55 billion, up 4.9% YoY; it exceeded the planned profit by 73%.

Return on average assets was 1.5% (Q1:2010: 2.1%), and ROE was 21.5% (Q1:2010:  28.3%). 

Assets dynamics

Total assets were up 5.9% to RUB 413.8 billion from YE 2010.

Trading portfolio was down 6.5% to RUB 54.2 billion. The share of Russian state bonds in the portfolio increased by 13% to 66% of the portfolio. 

Gross loans to customers increased 14.0% to RUB 246.1 billion, driven primarily by the strong growth of corporate portfolio. Corporate portfolio rose 18.9% to RUB 178.0 billion. Lending to companies in manufacturing, leasing, financial services, food industry and infrastructure construction sectors showed the biggest growth. 

Retail loan book increased 3.0% to RUB 68.1 billion following a significant rise in consumer loans. Portfolio growth reflected the Bank’s efforts to update product offering and improve sales channels, which were undertaken last year. As at Q1:2011, TransCreditBank was ranked #10 Russian bank by retail portfolio, according to the Interfax Center for Economic Analysis.  

Non-performing loans (>90 days overdue) were at 3.4% of gross loans, down from 3.6% at YE 2010. The share of corporate NPLs declined to 3.0% from 3.4% at YE 2010. The share of retail NPLs increased to 4.4% from 4.1% at YE 2010, or by RUB 263 million. The rise in retail NPLs did not result in increased provisions, as these loans had already been provisioned at a very conservative rate. 

The share of renegotiated loans (loans that had been renegotiated due to financial difficulties or potential future difficulties of the borrower) was 0.8% of the total loan portfolio. 

Allowance for loan impairment was RUB 12.3 billion, up 3.0% from YE 2010. Provisions secured coverage for 148.4% of non-performing loans (YE 2010: 154.1%). Provisions / Gross loans ratio was at 5.0% compared to 5.5% at YE 2010.

Funding and capital

Non-equity funding structure remained practically unchanged compared to YE 2010. The share of amounts due to customers in total liabilities was 77.4% (YE 2010: 76.2%). Deposits and current accounts from individuals rose 7.6% and from public companies by 16.2% at the end of Q1:2011, while funding from private companies decreased by 9.8%.

Gross loan to deposit ratio improved to 82.8% from 78.1% at YE 2010.

Total equity was up 4.7%, or RUB 1.3 billion, to RUB 29.5 billion thanks to retained earnings. Total capital adequacy ratio (under Basel Capital Accord) stood at 10.7% (YE 2010: 10.8%), and tier 1 capital ratio was 7.1%, unchanged from YE 2010. 

Main events in Q1:2011 and after the reporting period

On April 15, 2011, the Government of RF issued a Resolution, which approved the sale of TransCreditBank’s shares, currently held by Russian Railways, to Bank VTB.

On July 15, Russian Railways and VTB Bank signed a shareholder agreement and sale and purchase agreement for a 54.39% stake in TransCreditBank, of which the 29.39% share is to be acquired by VTB Bank by the end of July 2011. VTB may purchase the remaining share from Russian Railways from July 1, 2012 to December 31, 2013.   

In February 2011, Mr. Dmitry Olyunin joined TransCreditBank as First Vice President and member of the Management Board. He oversees integration of TransCreditBank into Bank VTB, as well as financial planning and reporting, risk management, treasury, IT, and legal departments.

At the end of April 2011, TransCreditBank received a subordinated loan from Bank VTB in the amount of RUB 5.5 billion with the maturity of 10.5 years. The subordinated loan is included in the capital adequacy calculation, which will allow TransCreditBank to further expand its business in 2011. The loan from Bank VTB is an evidence of the new shareholder’s willingness to support further development of TransCreditBank.