OREANDA-NEWS. December 02, 2013. Home Credit & Finance Bank (“HCFB” or ‘the Bank”), announces the consolidated financial results of the Russian and Kazakhstan operations for the nine month period ended 30 September 2013 in accordance with International Financial Reporting Standards (IFRS). HCFB is rated by Moody’s at Ba3, and by Fitch at BB. SB JSC Bank Home Credit (Kazakhstan), a 100% subsidiary of HCFB, is rated by Fitch at BB-.

“Despite the difficult market conditions, our bank continues to be profitable and maintains excellent operational efficiency. Our net income for the first nine months of 2013 was 9.4 billion rubles and return on average equity amounted to 23.8%. The market is changing: retail banking in Russia is becoming more mature and tightening of underwriting standards leads to increased competition in the segment of high quality customers.

The ability to adapt quickly to these market movements is one of our main competitive advantages. We have already adjusted our business model, focusing on the quality of customer service and loan portfolio quality, and we are now going to focus on increasing our share of the credit card market. This is a more sophisticated credit product, which provides us with wider opportunities for customer segmentation and satisfaction. All these changes will enhance the competitiveness of our bank under new market conditions.”
Ivan Svitek, Chairman of the Management Board, HCFB

Highlights

Net profit for the first nine months of 2013 was RUB 9.4 billion, a 23% decrease on the same period last year mainly due to the market trend of asset quality decline in Russia. This is in line with our expectations announced earlier this year. In the third quarter 2013 the Bank earned RUB 1.8 billion. HCFB’s net interest margin was 19.6% and it produced a RoAE of 23.8% for the reporting period. Total assets amounted to RUB 375,8 billion.

Operating income for the reporting period reflected the growth across the business rising 63.9% to RUB 67.5 billion (9M 2012: RUB 41.2 billion).

General administrative and other operating expenses rose 54.8% to RUB 20.0 billion, as the number of employees grew to more than 33,000, up 34.0% year on year, in line with the widening of the branch network. Nevertheless, the Bank continued to manage its operating expenses carefully, with a best-in-class cost-to-income ratio of 29.6% (12M 2012: 32.0%) and cost-to-average-net-loans ratio reaching 10.0% (12M 2012: 12.6%).  

Net loans grew 22.2% to RUB 290.0 billion during the first nine months of 2013 (YE 2012: RUB 237.3 billion), with RUB 262.1 billion new loans granted (9M 2012: RUB 185.9 billion). Cash loans were the key driver of the overall loan portfolio growth. Volumes of new cash loans granted in 9M 2013 rose 24.6% on a year on year basis. Nevertheless the growth rates of cash loan volumes declined in the second half of 2013 as a result of a tightening in underwriting standards and changes in the regulatory environment in Russia. HCFB now serves about 5.0 million active customers through 1,172 bank branches, 8,051 loan offices, over 88,000 points of sale, and 1,323 ATMs across Russia and Kazakhstan. The Bank‘s client base comprised 28.5 million customers at 30 September 2013.

Deposits and current accounts grew 44.3% from YE2012 to RUB 251.5 billion at 30 September 2013, and comprised 78,0% of the Bank’s liabilities. As a result, the loan to deposit ratio decreased from 136.2% at the end of 2012 to 115.3% at the end of 3Q 2013, confirming a declining reliance on wholesale funding.

Non-performing loans (NPL) grew to 9.9% of the total loans (YE2012: 6.5%) as a result of the market trend of asset quality decline. HCFB applied a conservative provisioning policy with NPL provision coverage of 125.6%. The management team has a clear road map regarding the necessary risk management and collection procedures to manage the situation and to improve the risk profile of both existing and future customers.

HCFB remains strongly capitalised with a consolidated capital adequacy ratio (CAR) of 21,0% at 30 September 2013 (YE2012: 21.4%). In October 2013 HCFB Russia issued a Basel III compliant T2 Eurobond of USD 200.0 million. At the beginning of November it was registered with the CBR as subordinate. This allowed HCFB to improve capital adequacy and support the growth in retail finance in Russia.

Note: HCFB acquired a 100% stake in SB JSC “Bank Home Credit” (Kazakhstan) in January 2013, thus this company was not consolidated into Q3 2012 results of HCFB but has been included in Q3 2013 numbers.

For full details of HCFB’s 9M 2013 financial results, please visit: http://www.homecredit.net/.