VTB Group announces IFRS financial results for August and 8M 2020

VTB Group announces IFRS financial results for August and 8M 2020

VTB Bank, the parent company of VTB Group (the "Group"), today publishes its unaudited consolidated financial results in accordance with IFRS for August and the first eight months of 2020.

Andrey Kostin, President and Chairman of the Management Board of VTB Bank, said: "VTB Group's net profit in August amounted to RUB 9.9 billion, which corresponds to a return on equity of 6.8%. The increase in net profit in August was due to continued growth in core banking income against the backdrop of stabilising cost of risk and a moderate uptick in costs. While the pandemic had a significant negative impact on the Group's profitability in the first eight months of the year, we have been surefooted in traversing what has been a difficult market situation, and we have seen brisk growth in our client base, an acceleration in our technological transformation and a reduction in the time needed to introduce new products and services."

The Group demonstrated strong business growth in 8M 2020 despite the impact of the COVID-19 pandemic

• Loans and advances to customers (hereinafter before provisions) amounted to RUB 12.7 trillion as of 31 August 2020, up 10.7% since the beginning of the year; adjusted for the effect of currency revaluation, the increase was 5.3%. In August 2020, the total loan portfolio increased by 1.5%; adjusted for the effect of currency revaluation, the increase was 0.9%.
• Loans to individuals increased by 1.4% in August to RUB 3.7 trillion (29% of the total loan portfolio), an increase of 10.1% from the beginning of the year. Mortgage lending continued to grow at a faster pace, with the mortgage loan portfolio increasing by 1.6% in August and by 14.6% for 8M 2020.
• Loans to legal entities increased by 1.5% in August; adjusted for the effect of currency revaluation, loans to legal entities increased by 0.7%. In total, loans to legal entities increased by 10.9% in 8M 2020 and amounted to RUB 9.0 trillion as of 31 August 2020; adjusted for the effect of currency revaluation, the increase was 3.4%.
• VTB Group's share of corporate and retail lending in Russia stood at 17.5% and 17.9%, respectively.
• As of 31 August 2020, customer funding totalled RUB 12.2 trillion. In August 2020, total customer funding increased by 1.1%; adjusted for the effect of currency revaluation, customer funding increased by 0.5%. Since the beginning of the year, customer funding has grown by 11.6%; adjusted for the effect of currency revaluation, the increase was 4.8%.
• Funding from legal entities increased by 1.7% in August; adjusted for the effect of currency revaluation, funding from legal entities increased by 1.2%. Since the beginning of the year, funding from legal entities has increased by 15.3% and amounted to RUB 6.8 trillion as of 31 August 2020; adjusted for the effect of currency revaluation, the increase was 9.2%.
• Funding from individuals increased by 0.3% in August; adjusted for the effect of currency revaluation, funding from individuals decreased by 0.4%. Since the beginning of the year, funding from individuals has increased by 7.2%, amounting to RUB 5.4 trillion as of 31 August 2020; adjusted for the effect of currency revaluation, funding from individuals decreased by 0.2%.
• The share of customer funding in the Group's total liabilities increased in 8M 2020 to 80.0% (79.2% as of 31 December 2019). VTB Group's market share in corporate and retail funding in Russia amounted to 20.3% and 14.9%, respectively.
• As a result of the faster growth in customer funding, the loans to deposits ratio (LDR) decreased to 96.4% as of 31 August 2020 (98.2% as of 31 December 2019).

Profitability metrics were under pressure in the context of the COVID-19 pandemic against a backdrop of higher provisions and a revaluation of investment properties, while core banking income continued to grow steadily

• VTB Group's net profit amounted to RUB 52.9 billion and RUB 9.9 billion, decreasing by 54.1% and 45.0% year-on-year, respectively, in 8M and August 2020.
• Net interest income was RUB 343.3 billion for 8M 2020 and RUB 45.9 billion in August 2020, up 19.2% and 26.4% year-on-year, respectively.
• Net interest margin was 3.8% for 8M 2020 and in August 2020 (an increase of 50 bps and 60 bps year-on-year, respectively). The net interest margin has risen amid the easing of monetary policy and the fast-paced revaluation of liabilities.
• Despite the pressure caused by the decrease in business activity, net fee and commission income showed strong organic growth and amounted to RUB 73.6 billion for 8M (up 21.5% year-on-year) and RUB 9.8 billion in August 2020 (up 21.0% year-on-year). The increase in net fee and commission income was driven by robust growth in commissions on trade finance and steadily increasing commissions from the sale of insurance products.
• The cost of risk was 2.1% for 8M 2020 and 1.8% in August 2020, up from 0.8% and 1.2% year-on-year, respectively. Provision charge amounted to RUB 181.8 billion for 8M 2020 and RUB 19.2 billion in August 2020, increases of 185.4% and 52.4% year-on-year, respectively.
• The allowance for loan impairments was 7.0% of the total loan book (before provisions) as of 31 August 2020, an increase of 10 bps in August and 100 bps since the beginning of the year.
• The non-performing loans (NPL) ratio was 5.4% as of 31 August 2020 (up 70 bps since the beginning of the year). The NPL coverage ratio remained stable at 128.7% as of 31 August 2020 (it was also 128.7% as of 31 December 2019).
• Staff costs and administrative expenses amounted to RUB 170.4 billion for 8M 2020 and RUB 20.2 billion in August 2020, increases of 3.7% and 3.6% year-on-year, respectively. Due to the faster pace of growth in operating income in 8M 2020, the cost-to-income ratio improved to 41.5%, compared with 43.8% a year earlier.