2 Sep 2010 11:05

VTB posts 25.1 bln rubles H1 profit, on forecast; NPL down to 9.5% in Q2

MOSCOW. Sept 2 (Interfax) - VTB closed H1 2010 with record half-year net profit of 25.1 billion rubles to International Financial Reporting Standards (IFRS), compared with losses of 31.5 billion rubles in the same period of last year, Russia's No.2 bank said in an earnings report.

Analysts predicted in a consensus forecast that VTB would turn profit of 25.334 billion rubles.

Non-performing loans (NPL) fell to 10.2% from 9.5% of the loan book in Q2 compared with Q1 2010. This was the NPL ratio's first decline since the start of the crisis.

The continued improvement in the quality of the Group's loan portfolio was reflected in the further decrease in its cost of risk, VTB said. Provisioning fell to 9.3% from 9.8% of the portfolio. The provision charge was 27.2 billion rubles or 2.1% (annualized ratio) of its average loan book on provisions for loan impairment in H1 2010, down from 96.6 billion rubles or 6.9% of the loan book in H1 2009.

VTB channeled 9.8 billion rubles into provisions in Q2 2010 - way below the 17.4 billion rubles that analysts forecast.

Operating income before provisions rose 12% to 105.4 billion rubles, from 93.8 billion rubles in H1 2009.

Net interest income before provisions rose 23% to 86.4 billion rubles in H1 2010, from 70.3 billion rubles in H1 2009.

"VTB has achieved record net profit for the first half of the year. We continue to derive value from our unique business model, identifying new opportunities for profitable growth across our core businesses, corporate, retail and investment banking, and we have started to implement the Group's new strategy under the leadership of our industry-leading management team," said Andrei Kostin, VTB President and Chairman of the Management Board.

In the first half of 2010, Russia saw an economic recovery with an acceleration in industrial production, lower inflation and an increase in retail sales and real wages. The recovery, however, remains fragile and the second quarter was marked by very challenging market conditions on the back of European sovereign debt problems, VTB said.

Despite a difficult environment, VTB performed strongly in the reporting period and continued to deliver on the Group's new strategy focused on profitable growth, it said.

The Group's operating income before provisions was 105.4 billion rubles, up 12% year-on-year from 93.8 billion in the first half of 2009. Net interest income before provisions reached 86.4 billion rubles, up 23% from RUB 70.3 billion in the first six months of 2009. With funding costs continually improving, VTB managed to maintain a strong net interest margin (NIM) over the last three quarters. In the first half of 2010, NIM stood at 5.3% versus 4.2% in the first six months of 2009. In the second quarter, VTB posted a record quarterly net interest margin of 5.5%.

Net fee and commission income was RUB 11.8 billion, up 22% from 9.7 billion rubles in the first six months of the last year, with a very strong contribution from retail and investment businesses. The share of these businesses in the Group's net fee and commission income reached 54%, compared to 39% in the first half of 2009.

A steep correction in the Russian equity market in the second quarter of 2010 had a negative impact on the net result from financial instruments. Nevertheless, in the first half of 2010, net gains from financial instruments amounted to 2.8 billion rubles, up from a loss of 14.5 billion rubles in the same period last year.

In the first half of 2010, total gross loans increased by 11% to 2.816 trillion rubles, up from 2.545 trillion rubles at the end of 2009. Corporate loans were up 13% to 2.374 trillion rubles from 2.12 trillion rubles at the beginning of the year.

Retail loans reached 441.9 billion rubles, up 2% from 435.3 billion rubles at the end of 2009. In the second quarter of 2010, the Group saw the first signs of recovery in demand for credit both from corporate and retail customers with corporate and retail loans up by 12% and 5% respectively. However, lending growth remained unstable while competition for quality borrowers intensified.

The first half of 2010 saw a healthy inflow of both retail and corporate customer funds, with total deposits up by 8% to RUB 1,688.8 billion. Corporate deposits increased by 4% in the first half of 2010, reaching RUB 1,137.8 billion. Retail deposits reached RUB 551 billion, up 16% from the end of 2009. The share of customer deposits in the Group's total liabilities remained stable at 54%.

VTB continues to take measures to further optimise liability costs, including by diversifying funding sources across geographies, currencies and the Group's investor base. In the first quarter of 2010, the Group favourably priced a $1.25 billion Eurobond offering at 6.465% which resulted in a tightening of the VTB secondary curve. In August, VTB successfully placed its inaugural Singapore dollar 400 million eurobond issue at a 4.2% coupon rate, which was the largest transaction in Singapore dollars in 2010 by a foreign issuer. In the same month the Group placed a CHF 400 million issue under its LPN programme with a favourable coupon rate set at 4%.

Staff costs and administrative expenses were at 43.9 billion rubles in the first six months of 2010 versus RUB 35.7 billion in the first half of 2009. This increase was mainly due to a significant expansion of VTB's business operations as compared to the last year. In the second quarter of 2010, the Group's staff and administrative costs declined for the second consecutive time on quarter-on-quarter basis. Staff and administrative costs were at 21.7 billion rubles in the second quarter of 2010 down from 22.2 billion rubles in the first quarter and from 23.9 billion rubles in the last quarter of 2009.

As of June 30, 2010, capital ratios remained strong with the Group's Tier 1 ratio at 14.1% and total BIS ratio at 19.3%.