VTBR.L Regulatory News (VTBR)

VTB Bank announces RAS financial results (standalone) for July and 7M 2021

VTB Bank (PJSC) (hereinafter referred to as the Bank) publishes its standalone key RAS financial results for July and seven months of 2021.

Mikhail Kovalenko, Senior Vice-President, Head of Accounting and Reporting Department, noted:

"Our July results mark a continuation of the Bank's successful performance in the first half of the year, combining high profitability with strong organic business growth. Core banking revenues demonstrated high growth rates; provision charges remained at normal levels on the back of stable loan book quality. Costs increased as expected in July, reflecting considerable spending on our digital transformation.

"We see our July results as confirmation of our updated guidance on profit and other key metrics for the Group for FY 2021."

Revenues and profitability

In 7M 2021, the Bank showed robust growth in profitability metrics. Net profit was RUB 154.3 billion in 7M 2021, including RUB 24.8 billion in July 2021, 3.0 times and 460 times up year-on-year, respectively.

Net interest income amounted to RUB 334.9 billion in the first seven months of 2021 and RUB 47.8 billion in July, up by 26.3% and 13.5%, respectively, compared to the same periods of the previous year. The key drivers for the net interest income growth was the increase of interest-earning assets - loan book and debt securities of the Russian Federation. The income from the debt securities of the Russian Federation increased 3.6 times year-on-year and amounted to RUB 41.2 billion in 7M 2021.

Net fee and commission income continued to grow at a higher rate and amounted to RUB 92.1 billion in 7M 2021 and RUB 14.3 billion in July 2021, an increase of 34.1% and 23.3% respectively, from the same periods of the previous year. The considerable increase in net fee and commission income was driven by a steadily increasing volume of commissions from the sale of insurance products and commissions from the brokerage business.

Provision charge amounted to RUB 70.7 billion in 7M 2021 (down 48.5% year-on-year) and RUB 12.2 billion for July 2021 (down 65.1% year-on-year). As of 1 August 2021, the ratio of allowance for loan impairment to total loan portfolio was 5.5% (5.6% as of 1 July and 5.3% as of 1 January).

Staff and administrative expenses amounted to RUB 112.1 billion and RUB 17.0 billion in 7M 2021 and in July 2021 respectively, up by 7.5% and 22.3% year-on-year on the back of digital transformation costs growth. Month-on-month increase of administrative expenses in July 2021 was the result of higher base rate of deposit insurance contributions payable by banks - members of Deposit Insurance System to Mandatory Deposit Insurance Fund.

Capital and capital adequacy ratios

As of 1 August 2021, total regulatory capital was RUB 1,813.2 billion, up by 0.1% in July and 10.2% since the beginning of the year mainly due to earned profit and issued subordinated bonds.

In 7M 2021, the total amount of RUB 147.7 billion of subordinated bonds issued by the Bank was included in the regulatory capital (subordinated bonds amounting to RUB 8.4 billion were included in the regulatory capital in July 2021).

Total regulatory capital includes Base capital (CET 1) of RUB 1,226.6 billion and main capital (Tier 1) of RUB 1,525.2 billion.

Capital adequacy ratios are well above the minimum regulatory requirements. As of 1 August 2021, the N1.0 (total capital) ratio was equal to 11.75%, N1.1 (common equity) - 7.94% and N1.2 (Tier 1 capital) - 9.88%.

Capital adequacy ratio N1.0 increased mainly due to the growth of total equity and transition to the Standardised Measurement Approach (SMA) in accordance with Regulation of the Bank of Russia #744-П. Transition to the new Standardised Measurement Approach starting from financial results as of 1 April 2021 allowed to the Bank to improve its capital adequacy ratio by 0.4 p.p.

At the beginning of the year N1.0 ratio was 11.28%.

Total risk-weighted assets amounted to RUB 15.4 trillion as of 1 August 2021, increasing by 2.6% in July and by 5.7% since the beginning of the year.

Balance sheet

Total assets amounted to RUB 18.6 trillion as of 1 August 2021, an increase of 13.6% in 7M and 2.4% in July 2021.

Total loan book reached RUB 12.9 trillion, an increase of 9.1% in 7M and 2.3% in July 2021. Loans to individuals were RUB 3.9 trillion, an increase of 19.2% and 2.3% since the beginning of the year and in July 2021 respectively, while loans to legal entities were RUB 9.0 trillion, an increase of 5.2% since the beginning of the year and 2.3% in July. Subsequently the share of retail in total loan portfolio of the Bank increased to 30.2% (27.6% at end-2020).

The key growth drivers of the retail loan portfolio were anticipated higher mortgage and consumer loan issuance, the cession of debt, as well as the seasonal slowdown in loan prepayments during the summer holiday period.

Securities portfolio grew by 42.4% YTD to RUB 3.0 trillion, including 0.7% growth in July. This growth was driven by the Bank's investments into federal loan bonds of the Russian Federation (OFZs).

Total customer funding was RUB 16.0 trillion as of 1 August 2021, an increase of 17.9% in 7M and 2.4% in July 2021. Customer funding structure remained unchanged: 67.1% were deposits of legal entities and 32.9% deposits of individuals.

The share of customer funding denominated in foreign currencies continued to decrease while the Ruble funding share grew further. Balances on escrow accounts demonstrated further growth against the backdrop of an anticipated increase in the issuance of mortgage loans.

The unaudited financial performance indicators of VTB Bank presented above are collated based on the following forms 0409101 "Turnover balance sheet of credit organization" and 0409102 "Report on financial results of credit organization" as well as operational management reports as part of adjustments to the published forms. Capital adequacy ratios were calculated based on the operational financial data. The reported financial indicators are preliminary; hence, they can be supplemented and changed in the process of preparation of publishable financial reports of VTB Bank. As a result of such changes, final values may differ from the preliminary financial indicators presented above.