VTB Group announces IFRS results for the full year and the fourth quarter of 2016

1 march 2017

VTB Bank ("VTB" or "the Bank"), the parent company of VTB Group ("the Group"), today publishes its Consolidated Financial Statements with the Independent Auditors’ Report on these Statements for the year ended 31 December 2016.

Andrey Kostin, VTB President and Chairman of the Management Board, said: “VTB Group maintained a firm trajectory towards increased profitability throughout 2016, delivering RUB 51.6 billion of net profit for the full year and continuing to strengthen core revenue generation despite a prolonged challenging market environment.

“The management team remains focused on strict control over costs even as business activity accelerates. In addition to measures being implemented across business lines we are delivering synergies from the completed integration of Bank of Moscow. This had a positive impact on our performance, as revenue outgrew costs.

“The launch of Post Bank in January 2016 has been an all-around success, and the bank recorded a profit in its first year of operations. By the end of the year Post Bank had achieved an impressive rapid roll-out of over 6,300 outlets.

“VTB Capital remains the number one investment bank in Russia, once again leading DCM, ECM and M&A league tables in 2016.

“We adopted a new strategy for 2017-2019 that focuses on increasing efficiency and profitability, achieving greater scale in Retail banking and a large-scale technological transformation. The announced integration of VTB24 into VTB Bank will help optimise the structure of the Group’s retail business as well as create significant costs synergies.

“With Russia’s economic outlook turning positive, I have full confidence that VTB Group is in an excellent position to benefit as we continue to grow and adapt our business, providing the full spectrum of banking services to our clients across all business segments.”

FINANCIAL AND OPERATING HIGHLIGHTS

Income Statement

RUB billion

FY 2016

FY 2015

Change, %

4Q 2016

4Q 2015

Change, %
Net interest income 415.0 289.1 43.5% 104.6 93.1 12.4%
Net fee and commission income 81.8 76.2 7.3% 25.9 22.2 16.7%
Operating income before provisions 510.6 412.3 23.8% 149.5 118.5 26.2%
Provision charge* (211.2) (178.1) 18.6% (64.5) (41.2) 56.6%
Staff costs and administrative expenses (233.9) (221.9) 5.4% (62.3) (60.5) 3.0%
Net (loss) / profit 51.6 1.7 x30 17.5 12.6 38.9%

*Includes provision charge for impairment of debt financial assets and provision charge for impairment of other assets, credit related commitments and legal claims.

  • FY 2016 net profit was RUB 51.6 billion, reflecting strong core revenue generation (including a 43.5% year-on-year rise in net interest income for the full year) and acceleration in growth of net fee and commission income, which was up by 16.7% year-on-year in 4Q 2016, and up 7.3% in FY 2016.
  • Net interest income was RUB 415.0 billion in FY 2016 as repricing of assets and liabilities, as well as renewed growth in higher-margin retail lending brought the FY 2016 net interest margin up to 3.7% from 2.6% in FY 2015. Net interest margin for FY 2016 was unchanged from 9M 2016 at 3.7%.
  • The Group’s Retail business and Transaction banking (as part of Corporate-Investment banking and Mid-Corporate banking) were the two main drivers of 7.3% year-on-year growth in net fee and commission income, which reached RUB 81.8 billion.
  • The Group's cost of risk including provisions for credit related commitments was 2.0% in FY 2016 compared to 1.7% in FY 2015. The provision charge for FY 2016 amounted to RUB 211.2 billion, an increase of 18.6% year-on-year.
  • In 2016, on top of ongoing cost management efforts, the Group kept in check its staff costs and administrative expenses, which grew just 5.4% year-on-year to RUB 233.9 billion, in line with price inflation, despite one-off costs from the integration of Bank of Moscow.
  • The Group improved its cost efficiency in 2016: the ratio of costs to operating income before provisions decreased to 45.8% for FY 2016 versus 53.8% for FY 2015.

Statement of financial position

RUB billion

31-Dec-16 30-Sep-16 31-Dec-15 Change in FY 2016, % or p.p. Change in 4Q 2016, % or p.p.
Total assets 12,585.5 12,359.2 13,641.9 (7.7%) 1.8%
Loans and advances to customers, including pledged under repurchase agreements (gross) 9,487.0 9,409.7 10,110.0 (6.2%) 0.8%
Gross loans to legal entities 7,311.4 7,288.3 8,150.0 (10.3%) 0.3%
Gross loans to individuals 2,175.6 2,121.4 1,960.0 11.0% 2.6%
Mortgage loans 997.7 953.9 875.1 14.0% 4.6%
Consumer loans 953.4 937.4 854.9 11.5% 1.7%
Credit cards 127.6 132.7 124.1 2.8% (3.8%)
Car loans 89.5 89.2 100.2 (10.7%) 0.3%
Other loans 7.4 8.2 5.7 29.8% (9.8%)
Customer deposits 7,346.6 8,000.9 7,267.0 1.1% (8.2%)
Deposits from legal entities 4,342.3 5,077.3 4,383.6 (0.9%) (14.5%)
Deposits from individuals 3,004.3 2,923.6 2,883.4 4.2% 2.8%
NPL ratio 6.4% 7.2% 6.3% 0.1 p.p. (0.8 p.p.)
Tier 1 CAR 12.9% 13.5% 12.4% 0.5 p.p. (0.6 p.p.)
Total CAR 14.6% 15.4% 14.3% 0.3 p.p. (0.8 p.p.)
  • In 4Q 2016, the Group’s loan book grew for the third quarter in a row, increasing 0.8% for the quarter, despite a 1.1% reduction overall for the Russian market during the same period. For FY 2016, the loan book contracted by 6.2% due to a decline in loans to legal entities during the first quarter of 2016 driven by the repayment of several large FX-denominated loans in 1Q 2016, as well as the strengthening of the Russian ruble and the corresponding revaluation of loans denominated in foreign currencies.
  • In FY 2016, the Group’s Retail lending growth of 11.0% significantly surpassed the 1.1% year-on-year growth seen by the Russian retail lending market. In 4Q 2016, loans to individuals increased by 2.6% and stood at RUB 2,175.6 billion as of 31 December 2016. Mortgage loans reached 45.9% of the Group’s gross loans to individuals as of 31 December 2016, versus 44.6% as of 31 December 2015. Consumer loans and credit card loans accounted for 43.8% and 5.9% of the portfolio, respectively, versus 43.6% and 6.3% at 31 December 2015. Car loans decreased to 4.1% of the portfolio as of 31 December 2016, versus 5.1% at the start of the year.
  • The Group’s NPL ratio was 6.4% of gross customer loans including those pledged under repurchase agreements (the “total loan book”) as of 31 December 2016, compared to 7.2% at 30 September 2016 and 6.3% as of 31 December 2015. The allowance for loan impairments was 6.7% of the total loan book as of the end of 4Q 2016, versus 7.5% on 30 September 2016 and 6.7% as of 31 December 2015. The NPL coverage ratio remained at a comfortable 104.6% at 31 December 2016, versus 102.9% as of 30 September 2016 and 105.8% as of 31 December 2015.
  • Customer deposits grew by 1.1% in FY 2016, and decreased by 8.2% in 4Q 2016 primarily due to a substantial but expected outflow of term deposits from government entities amounting to RUB 923.5 billion. Deposits from non-government legal entities grew by RUB 187.5 billion during 4Q 2016 (up 5.0%), and deposits from individuals increased by RUB 80.7 billion during the period (up 2.8%).
  • Customer deposits represented 66% of total liabilities as of 31 December 2016, up from 60% at year-end 2015. As of 31 December 2016 the Group’s market share in Russia in corporate and retail deposits stood at 23.3% and 11.0%, respectively.
  • The Group continued to reduce its reliance on wholesale funding with the share of debt securities issued in total liabilities decreasing to 3.6% as of 31 December 2016, down from 3.9% as of 30 September 2016 and 5.1% as of 31 December 2015. In 2016, VTB and its subsidiaries have made repayments on their international public debt totalling USD 2.8 billion.

Capital adequacy ratios remained strong backed by solid profitability during FY 2016: as of 31 December 2016, the Group’s total and Tier 1 capital adequacy ratios were 14.6% and 12.9%, respectively, versus 15.4% and 13.5% as of 30 September 2016, and 14.3% and 12.4% as of 31 December 2015.



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