DJ VTB Group announces IFRS results for 3Q 2020
JSC VTB Bank (VTBR)
VTB Group announces IFRS results for 3Q 2020
09-Nov-2020 / 07:59 CET/CEST
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VTB Group announces IFRS results for 3Q 2020
VTB Bank ("VTB" or "the Bank"), the parent company of VTB Group ("the
Group"), today publishes its Interim Condensed Consolidated Financial
Statements for the three months and nine months ended 30 September 2020 with
the independent auditor's report on review of these statements.
Andrey Kostin, VTB President and Chairman of the Management Board, said:
"VTB Group has achieved good performance against key operating metrics in 9M
2020. While we delivered sizeable growth in net interest and commission
income, expenses rose at a modest pace. Against the backdrop of a recovery
in business and consumer activity following the spring decline caused by the
pandemic, we achieved strong growth in our loan portfolio and client base.
"Following the inevitable deterioration of the financial condition of some
types of borrowers due to the restrictive measures, we have significantly
increased loan loss provisions, which put strong pressure on the bottom
line. VTB Group's net income in January-September 2020 amounted to RUB 59.1
billion, having decreased by 54% year-on-year.
"The unprecedented circumstances that have impacted the entire world have
confirmed we have been pursuing the right strategy of accelerated
digitalisation and transformation of the business and processes. Over the
past several months, VTB team has made remarkable progress on further
improving our services and applications and strengthening customer relations
as a bank of first choice. This bodes well for profitability to get back in
line with strategic targets in the foreseeable future."
FINANCIAL HIGHLIGHTS
RUB billion 30 30 June 31 Change in Change in
September December 9M 2020, 3Q 2020, %
% or bps or bps
2020
2020 2019
Total assets 17,425.7 16,346.9 15,516.1 12.3% 6.6%
Loans and 12,936.6 11,947.2 11,461.5 12.9% 8.3%
advances to
customers,
including
pledged under
repurchase
agreements
(gross), as
reported
Legal entities 9,188.5 8,347.0 8,096.2 13.5% 10.1%
Individuals 3,748.1 3,600.2 3,365.3 11.4% 4.1%
Customer 12,369.1 11,852.4 10,974.2 12.7% 4.4%
funding
Legal entities 6,824.1 6,583.5 5,932.6 15.0% 3.7%
Individuals 5,545.0 5,268.9 5,041.6 10.0% 5.2%
NPL ratio 5.7% 5.1% 4.7% 100 bps 60 bps
LDR ratio 97.5% 94.1% 98.2% -70 bps 340 bps
VTB Group achieved strong growth in core banking income and business volumes
in 9M 2020
The total loan book grew by 12.9% in 9M 2020
? For 9M and 3Q 2020, the Group's total loan book increased by 12.9% and
8.3%, respectively, to RUB 12,936.6 billion. Adjusted for the effect of
foreign currency revaluation, the increase in the total loan book amounted
to 6.1% and 4.7%, respectively.
? Loans to legal entities have increased by 13.5% since the beginning of
the year (4.2% adjusted for the effect of currency revaluation), mainly
due to the expansion of corporate lending in 3Q 2020 amid a general
recovery in economic activity.
? Loans to individuals have increased by 11.4% since the beginning of the
year, mainly due to a 16.8% increase in mortgage lending, which was
partially offset by a decrease in the volume of car loans. In 3Q 2020 the
Group's mortgage portfolio grew by a record RUB 96.8 billion, driven by
VTB's active participation in the subsidised mortgage programme launched
in April 2020. Since the state programme was launched, VTB has issued over
45 thousand mortgages at a preferential rate with a total value of RUB 140
billion. The state support programme consistently represents up to a
quarter of VTB's mortgage issuance.
? As of 30 September 2020, secured loans (mortgages and car loans)
accounted for 53.5% of total retail lending, an increase of 50 bps in 3Q
and 170 bps for 9M 2020.
? The Group's market share in retail lending in Russia was 17.8%, an
increase of 40 bps since the beginning of the year; the Group's share in
corporate lending was 17.3%, a decrease of 90 bps since the beginning of
the year.
Customer funding increased by 12.7% in 9M 2020
? Customer funding for 9M and 3Q 2020 grew by 12.7% and 4.4%,
respectively, to RUB 12,369.1 billion. Adjusted for the effect of foreign
currency revaluation, the increase in the total customer funding amounted
to 3.7% and -0.2%, respectively.
? Customer funding from legal entities increased by 15.0% and 3.7% in 9M
and 3Q 2020 (excluding the effect of currency revaluation, 6.7% and
-0.5%), respectively. Customer funding from individuals increased by 10.0%
and 5.2% (excluding the effect of currency revaluation, 0.2% and 0.2%),
respectively.
? As of the end of 9M 2020, the share of current accounts in the total
amount of customer funding had increased considerably, from 25.2% as of 31
December 2019 to 35.1% as of 30 September 2020.
? As of 30 September 2020, the loans-to-deposits (LDR) ratio was 97.5%,
compared with 94.1% as of 30 June 2020 and 98.2% as of 31 December 2019.
? The Group's market share in Russia in corporate and retail funding was
19.4% (down 80 bps since the beginning of the year) and 14.9% (down 20 bps
since the beginning of the year), respectively.
Income statement
RUB 9M 9M Change 3Q 3Q Change,
billion , % %
2020 2019 2020 2019
Net 387.5 323.8 19.7% 135.5 110.2 23.0%
interest
income
Net fee 84.7 67.3 25.9% 31.8 22.4 42.0%
and
commissio
n income
Operating 450.4 425.0 6.0% 159.9 155.2 3.0%
income
before
provision
s
Provision -185.9 -77.8 138.9% -72.0 -32.4 122.2%
charge(1)
Staff -192.1 -184.3 4.2% -63.0 -58.7 7.3%
costs and
administr
ative
expenses
Net 59.1 128.0 -53.8% 17.2 51.2 -66.4%
profit
(1) Includes provision charge for credit losses on debt financial assets,
provision charge for credit losses on credit-related commitments and other
financial assets, and provision charge for legal claims and other
commitments.
In 9M 2020, net operating income before provisions increased 6.0% amid
strong growth in net interest and net fee and commission income
? The Group's net profit amounted to RUB 59.1 billion for 9M and RUB 17.2
billion for 3Q 2020, decreasing by 53.8% and 66.4% year-on-year,
respectively, as a result of rising provision charges and the negative
revaluation of non-core assets.
? Net interest income for 9M 2020 increased by 19.7% year-on-year as a
result of growth in interest-bearing assets and an increase in net
interest margin. Net interest margin was 3.8% for 9M and 3Q 2020, up from
3.3% in 9M and 3Q 2019. Net interest margin has benefited during the year
from the easing of monetary policy and the revaluation of liabilities,
which outstripped the revaluation of assets.
? Funding costs stood at 3.8% in 9M 2020, a decrease of 150 bps
year-on-year, which helped drive interest expenses down by 20.7%, while
interest income declined at a slower pace of 4.9%. At the same time, the
return on interest-generating assets decreased by 80 bps year-on-year to
7.6%.
? Net fee and commission income increased by 25.9% year-on-year in 9M 2020
to RUB 84.7 billion. The growth in net fee and commission income was
driven mainly by robust growth in commissions for securities and capital
markets transactions, supported by further expansion of VTB Capital
Investments' business, and steadily increasing commissions from the sale
of insurance products.
External factors, including declining oil prices and the COVID-19 pandemic,
led to an increase in provision charges in 9M 2020
? Cost of risk increased by 100 bps in 9M 2020 to 1.9%. Provision charges
amounted to RUB 185.9 billion, an increase of 138.9% year-on-year. The
increase in provision charges was due to the impact of the COVID-19
pandemic on the state of the Russian economy and the quality of the
Group's loan book.
? The NPL ratio stood at 5.7% of gross customer loans as of 30 September
2020, compared with 5.1% as of 30 June 2020 and 4.7% as of 31 December
2019. As of 30 September 2020, the Group had increased the allowance for
loan impairment as a share of the total loan book to 6.8%, compared with
6.7% as of 30 June 2020 and 6.0% as at 31 December 2019. The NPL coverage
ratio was 119.3%.
VTB Group achieved further operating efficiency improvements in 9M 2020
? Personnel and administrative expenses for 9M 2020 amounted to RUB 192.1
billion, an increase of 4.2% year-on-year.
? Implementing cost-saving initiatives and improving operational
efficiency are key long-term priorities for the Group. As of the end of 9M
2020, the costs-to-income (CIR) ratio had decreased to 42.7% from 43.4% a
year earlier.
Other results
Leader in investment banking
During 3Q 2020, VTB Capital remained #1 in investment banking services in
Russia. The Company was the #1 M&A advisor in Russia and the CIS according
to Dealogic and Mergermarket, and it was also #1 in debt capital markets in
Russia and the CIS according to Dealogic, Refinitiv and Bloomberg.
Continued growth of the investment products sales platform VTB Capital
Investments
? VTB Capital Investments' assets under management increased by 49.4%, or
RUB 949 billion, in 9M 2020 to RUB 2.9 trillion (the increase in assets in
3Q 2020 amounted to RUB 308 billion). The assets of retail and corporate
clients have grown by 60% and 40%, respectively, since the beginning of
the year. VTB Capital Investments' total number of clients increased 1.5x
to more than 1 million individuals and legal entities. Fee and commission
income for 9M 2020 more than doubled year-on-year to RUB 13.5 billion.
Total trading volume exceeded RUB 14 trillion in 9M 2020, which is 1.8x
higher than for all of 2019.
? VTB Capital Investments remains focused on the development of the
digital investment platform VTB My Investments. The number of users of the
VTB My Investments mobile application has doubled since the beginning of
2020 to 465 thousand; more than 200 thousand customers use the mobile
application every day. The volume of monthly transactions made through the
application exceeds RUB 1 trillion, which is an increase of more than 2.5x
from the beginning of the year.
? VTB My Investments won an Investfunds Award in the category Best
Brokerage Company Mobile Application 2019.
? In 2020, VTB Capital Investments launched Russia's first funds for
retail investors to include environmental, social, and corporate
governance (ESG) factors in the investment selection process: the open-end
VTB - Equity Fund. Responsible investment, and the open-end VTB - Bond
Fund Responsible investment.
Key projects and initiatives of VTB Group's global business lines in 3Q 2020
Medium and Small Business global business line
Projects to increase transaction activity:
? A new version of VTB Business Lite mobile banking for entrepreneurs was
launched with new functionality and an updated design.
? As part of the development of the Universal Business Card, an automated
top-up service was launched that allows clients to set a minimum balance
for their card account; once that balance is reached, the Bank will
automatically transfer the required amount from the client's current
account to their card account.
Product and customer experience digitalisation projects:
? In Q3 2020, a new mobile application was launched called VTB Business
QR, which enables businesses to accept payments from individuals through
the Faster Payments System using only a smartphone and a QR code.
? The business registration service at www.start.vtb.ru has been updated.
Medium and Small Business clients now have access to completely free
online business registration without paying state fees and without going
through the Federal Tax Service.
? A new conveyor is being piloted for corporate clients that will make it
possible to start offering new pre-approved loans, express loans and
guarantees for small and medium-sized enterprises in 4Q 2020.
Retail Business global business line
A number of initiatives were implemented in 3Q 2020 to drive customer base
growth and expand customer reach in the market. As a result, as of 30
September 2020 the number of active Bank clients reached an all-time high of
13.5 million. The increase in customer activity was due to a record number
of new customers (561 thousand as the end of the quarter) and a considerable
increase in the number of clients who carried out operations during the
quarter (878 thousand). The biggest increase was seen in payroll accounts,
reflecting the revival of business activity in 3Q 2020.
As part of efforts to improve the efficiency of customer service, a new
office format was launched in 3Q 2020 that will reduce customer waiting
times by a third and increase work efficiency by 40%. Beginning in 2021, VTB
plans to launch every new branch in this format.
Projects to increase transaction activity:
? VTB Bank's flagship product - the debit Multicard - has been relaunched.
Multicards are now being issued and serviced at no charge, with rewards of
up to 3%, depending on the selected loyalty option, which can be changed
at any time.
? In July 2020, VTB became one of the first banks in the market to enable
customers to receive transfers from legal entities by telephone number
through the Faster Payments System.
Funding cost reduction projects:
? In August 2020, an automated top-up function was launched for savings
accounts in mobile and online banking, and an advertising campaign was
launched to promote the Kopilka savings account.
Product digitalisation projects:
? VTB has started implementing the first credit conveyor in Russia based
on a microservice platform that uses advanced analytics. As part of the
project, a new technology was launched for the development of pre-approved
offers for cash loans and credit cards.
? A pilot project was started to enable digital car purchases. Customers
can access a catalogue on the Bank's website, where they can choose the
vehicle they like, get online approval for a loan in a few minutes and
reserve a car from the dealer's showroom. During the first phase, the
pilot will be carried out in Moscow and St. Petersburg.
Customer experience improvement projects:
? Robots have been set up to make payments to customers. Now the robots
not only make decisions on applications but also process payments
independently, which enables VTB clients to receive money the same day.
? A WhatsApp virtual assistant has been launched that knows everything
about VTB products and services and will be able to answer more than 1,300
questions.
? Remote restructuring of car loans was launched.
In Q3 2020, VTB Group developed a number of important IT initiatives
? As part of efforts to improve the efficiency of intra-bank processes, a
consolidated automated personnel management system is being piloted.
? The first stage in upgrading the data processing centre in Perovo has
been completed. The functions of the data processing centre include
improving the disaster recovery and reliability of VTB Bank's IT systems,
communication channels and the entire IT infrastructure.
? The Bank continues to systematically improve the reliability of its IT
services and systems. The reliability index from the beginning through the
end of September 2020 increased by more than 30 bps, from 99.40% to
99.74%. The time needed to carry out follow-up remedial action was reduced
by 67%, and the response time to IT-related incidents was cut in half.
Attachment
File: VTB 9M IFRS REPORT [1]
ISIN: US46630Q2021
Category Code: MSCM
TIDM: VTBR
LEI Code: 253400V1H6ART1UQ0N98
Sequence No.: 87433
EQS News ID: 1146375
End of Announcement EQS News Service
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November 09, 2020 02:00 ET (07:00 GMT)
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