OREANDA-NEWS. May 29, 2012. Renaissance Credit, one of the leading consumer finance banks, has announced financial results for the first quarter 2012.

Net profit for the first quarter 2012 reached RUR 457 mln (2.8 times above 1Q2011 level). Steady growth of revenue base combined with a stable asset quality, improving efficiency of the business and lower funding costs were the key contributing factors.

 Renaissance Credit demonstrated an impressive growth despite the pronounced seasonality of retail lending business with the first quarter representing its trough. During the first three months of 2012 the Bank issued new loans totaling RUR 11.8 bn, which is 1.7 times above 1Q2011 level. Net credit portfolio as at 31 March 2012 reached RUR 52.4 bn (growth of 5% vs 2011EY) while credit portfolio quality has been maintained at a high level. High-margin products (general purpose loans and credit cards) constitute 73% of the credit portfolio (70% as at 31 December 2011).

The share of non-performing loans (NPL) reached 5.6%, which is below the 1Q2011 level (6.1%), but above the one achieved at the end of 2011 (4.6%). A traditional increase of this indicator in the first quarter is due to considerable seasonality of retail lending with the first quarter representing the trough of the cycle and the fourth quarter – its peak. By the end of the first quarter some loans issued during the peak-season become past due, and respectively, NPL ratio deteriorates, while the portfolio growth in the first quarter lags behind that in the fourth quarter. In the second quarter, given stable loan origination, NPL ratio improves.

 It’s important to stress that the quality of new loans remains stable. E.g. for general-purpose loans which constitute the major part of the credit portfolio the level of first payment defaults in 1Q2012 equals 2.7% of loans issued during the period.

 In the first quarter of 2012, the Bank’s equity capital increased by 3.4% to RUR 14.1 bn. The capital adequacy ratio is 22.0% - still far above the generally accepted levels.

Retail and corporate deposits and accounts remain the key source of funding for the Bank. During 1Q2012 they increased by 24.5% up to RUR 39.5 bn and reached 71.5% of liabilities as at 31 March 2012 (66.1% as at 31 December 2011). Retail term deposit portfolio increased up to RUR 34.1 bn (RUR 27.3 bn as at 31 December 2011), while corporate deposit portfolio – up to RUR 2.9 bn (RUR 1.9 bn as of December 31, 2011).

 Return on average assets (ROAA) and return on average equity (ROAE) for the first quarter of 2012 were 2.8% and 13.2% respectively which is far above the level achieved in the first quarter of 2011 (ROAA – 1.5%, ROAE – 5.6%). ‘Cost to average assets ratio’ also improved up to 11.9% as at 31 March 2012 (13.7% as at 1 January 2011, 13.5% as at 31 March 2011).

 As at 31 March 2012, the Bank’s network comprised 104 branches and 16 866 point of sales.  To improve operating efficiency the Bank changed the principle of work with its partners, having shifted the focus away from inactive points of sale to the effective ones. In 2012 the bank intends to selectively develop its distribution network, concentrating on operating efficiency. In 2012 Renaissance Credit plans to open about 20 new branches.

 On 19 March 2012 Moody's rating agency upgraded the long-term local and foreign currency debt and deposit ratings of Renaissance Credit to B2 from B3. The outlook on the rating is stable. In its report the agency notes that the rating action was driven by an improved funding mix which enhances the Banks’s liquidity position; growth of the bank’s loan book to almost pre-crisis levels, which has enabled it both to restore revenue generation power and to improve profitability; and stronger underwriting standards which resulted in an improvement in the bank’s asset quality.

Alexey Levchenko, Chief Executive Officer of Renaissance Credit: ‘I would like to point out that despite the low season we have reached all our objectives and strongly outperformed vs 1Q2011. Moody’s rating agency recognised our achievements and upgraded the Bank’s rating to B2/Stable while Forbs magazine ranked our new transparent credit card No 1 in its banking cards rating. During 1Q2012 we successfully promoted sales and developed serviced via the internet channel – now our upgraded website allows the customers to take advantage of new on-line services. We shall maintain the focus on operating efficiency and asset quality meanwhile steadily improving the servicing standards’.