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VTB Group announces IFRS results for 3Q 2020

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 
Dissemination of a Regulatory Announcement, transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
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 
 
 
1: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=781695fbc077ae686d21bdec5bf10c10&application_id=1146375&site_id=vwd&application_name=news 
 

(END) Dow Jones Newswires

November 09, 2020 02:00 ET (07:00 GMT)

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