OREANDA-NEWS. October 2, 2012. TransCreditBank Group today released reviewed Interim Condensed Consolidated Financial Statements under IFRS for the six—month period ended June 30, 2012.

H1:2012 Financial Highlights

—Net profit for H1:2012 was RUB 5.2 billion, which was 69% higher than net profit earned in H1:2011. Second-quarter profit was RUB 2.6 billion, up 71% compared with Q2:2011

—The result reflected a substantial increase in net interest income – by 39% YoY to RUB 12.5 billion, and net fee & commission income – by 25% to RUB 2.8 billion. In total, core income accounted for 95% of the Bank’s operating income

—Profitability ratios improved: net interest margin was 5.6%, up 0.6 pp versus prior year period. ROE was 24.0% compared with 21.1% in H1:2011; the ratio reflected higher shareholders’ equity following additional share issue in Q1:2012; and ROA was 2.1% compared with 1.5% in H1:2011

—Loan portfolio continued to expand: gross loans rose 12% to RUB 377.8 billion, thanks to corporate loan book growth by 11% to RUB 274.9 billion and retail loan book growth by 16% to RUB 102.9 billion

—Loan quality remained good with a low share of non-performing loans of 2.3% and a high coverage ratio for NPL of 182%

—Shareholders’ equity grew 35% to RUB 48.8 billion thanks to profit retention and additional share issue in Q1:2012

—Total capital adequacy ratio according to Basel Accord was 15.4% and Tier 1 ratio was 11.4%.

“In the first half of 2012 TransCreditBank continued to reap the benefits of expanded loan portfolio, acquisition of new clients, new retail products offer and cost control. This allowed us to earn a profit RUB 5.2 billion, which exceeded our target net earnings by 15%,” said Alexey Krokhin, TransCreditBank’s President.

Income statement review

In the first six months of 2012 net interest income rose 39% YoY to RUB 12.5 billion. Interest income received from customer lending was the main source of gross income, fuelled by expanded loan portfolio and the latter’s increased share in assets. Net interest income remained the largest component of operating income at 77%.

Net fee & commission income grew 25% YoY to RUB 2.8 billion. Bank card business, which traditionally secured the largest part of gross income, was 50% of gross income in H1:2012. Fees and commissions earned on settlements and documentary business operations were strongest-growing income components, at 71% and 62%, respectively. The share of net fee & commission income in operating income stood at 18%.

Non-interest income was RUB 886 million, down 51% from H1:2011, mainly due to the result of one-off deals with investment and leasing property. Net result from trading securities and dealing in foreign currencies are comparable to each other in both periods, yet have a different structure, which reflects reporting requirements to transactions with RUB-denominated securities carried out in FX.

Operating income before loan impairment charges was RUB 16.2 billion, up 24% YoY.

Provisions for loan impairment rose 7% YoY to RUB 2.6 billion, following expansion of loan portfolio. TransCreditBank’s ’s total allowance for loan losses was RUB 15.5 billion at the second quarter end, or 4.1% of total loans, broadly unchanged from 4.2% at YE 2011.

Non-interest expenses were RUB 7.1 billion, up 6% YoY. In their structure, salaries and other employee benefits were the largest component at RUB 4.2 billion and increased faster relative to other expenses – by 10% YoY, driven by headcount increase (3% in the past four quarters) and investments in employee training and development. At the same time, cost efficiency improved to 43.9% from 48.9% in H1:2011, reflecting increased revenues and the considerably lower rate of growth of all expenses, including personnel expenses, compared to previous periods.

Assets structure

End of period gross loan portfolio grew 12% versus YE 2011 to RUB 377.8 billion, primarily thanks to sizable growth in corporate loans and consumer loans.

In H1:2012, corporate loan book expanded 11% to RUB 274.9 billion. Clients from traditionally most important sectors for the Bank continued to dominate the industry structure of the loan book: transportation sector was 26% of the portfolio, construction was 20%, trading was 17%, and manufacturing was 14%. Lending to these industries grew strongest in the first six months of the year, along with lending to real estate sector (4% of the portfolio), leasing and information technology companies (2% each). Loans to Russian Railways Group amounted to RUB 18.3 billion and were 6.7% of the corporate portfolio, unchanged from YE 2011.

Loans to retail customers increased 16% to RUB 102.9 billion, reflecting growth in consumer lending balances by 25% in the first six months of the year. The Bank continued to improve its product range and offered retail customers debit card overdraft services, well-received by the clients. The share of consumer loans in retail portfolio rose to 65% from 60% at YE 2011. The share of all retail loans extended to Russian Railways employees was 85% of the portfolio, unchanged from YE 2011.

At the end of the second quarter, net loan portfolio represented 73% of total assets compared with 64% at YE 2011 and remained the largest balance sheet item.

Asset quality continued to improve. The share of non-performing loans (>90 days overdue) fell to 2.3% of gross loans compared to 2.4% at YE 2011 on the back of increased portfolio. Overdue and other impaired corporate loans declined to 2.1% from 2.2% of the portfolio at YE 201. Overdue (>90 days) retail loans decreased to 2.7% from 2.9%. Allowance for loan impairment increased 11% to RUB 15.5 billion. Provision coverage rose to 182% of non-performing loans from 174% at

YE 2011.

Securities portfolio was 11% of total assets as at June 30, 2012. Portfolio decrease of 10% to RUB 53.2 billion from YE 2011 and reclassification of securities from trading portfolio to available-for-sale portfolio was carried out as part of the Bank’s new portfolio strategy of reduced volume of active trading operations. Holdings of Russian state bonds (OFZ) were 47% of the total portfolio.

Liabilities structure

Total liabilities declined 5% to RUB 445.4 billion, while their structure remained stable.

Corporate deposits and current accounts remained the Bank’s main funding source at 56% of liabilities, little changed from 55% at YE 2011. In absolute terms, corporate deposits amounted to RUB 251.5 billion, down 3% from December 31, 2011 due to excessive client funding received by the Bank shortly before the year-end. Funding from Russian Railways Group was 53% of corporate funding compared with 50% at YE 2011.

Retail deposits and current accounts stood for 18% of liabilities, compared with 17% at YE 2011. Retail funding was RUB 81.6 billion, almost unchanged compared to YE 2011.

Net loan-to-deposit ratio was 109% compared to 94% at YE 2011.

TransCreditBank’s capital levels continued to increase versus YE 2011. Shareholders’ equity grew 35% to RUB 48.8 billion thanks to retained earnings and additional share issue earlier in the year. Tier 1 capital ratio (under Basel 1 accord) improved to 11.4% from 9.3% at YE 2011. Total capital ratio rose to 15.4% from 15.2% at YE 2011.