JSC VTB Bank (VTBR)
VTB Bank announces RAS financial results (standalone) for October and 10M 2021
VTB Bank (PJSC) (hereinafter referred to as the Bank) publishes its standalone key RAS financial results for October and ten months of 2021.
Mikhail Kovalenko, Senior Vice-President, Head of Accounting and Reporting Department, noted:
"In October VTB Bank demonstrated record high levels of profitability. In 10 months 2021 the Bank's net profit grew 4.5 times year-on-year to RUB 237.5 billion due to impressive growth of core banking revenues and improved asset quality.
"VTB Bank keeps delivering impressive positive dynamics of key income lines. Net interest income and net fee and commission income increased by 28% and 22% respectively in 10M 2021.
"The growth rate of net operating income before provisions exceeded costs growth in spite of their significant acceleration due to planned investments in technological transformation and enhancing the customer experience. We managed to ensure a high level of operational efficiency - cost to income ratio was 31.5% in 10M 2021, which measures up with the relevant period of 2020, while cost to average assets ratio remained at historically low levels for VTB Bank amounting to 1.1% as of 10M 2021.
"Along with strong financial results, VTB Bank achieved robust business growth: VTB Bank's loan portfolio increased by 13% since the beginning of the year, while the share of loans to individuals amounted to 31%, up by 4 percentage points year-to-date.
"The results of the reporting period confirm our estimates and forecasts and ensure the delivery of record high financial results for the full year".
Revenues and profitability
In 10M 2021, the Bank showed robust growth in profitability metrics. Net profit was RUB 237.5 billion in 10M 2021, including RUB 33.9 billion in October 2021, 4.5 times and 212 times up year-on-year, respectively.
Net interest income amounted to RUB 493.3 billion in the first ten months of 2021 and RUB 51.9 billion in October 2021, up by 27.6% and 19.9%, respectively, compared to the same periods of the previous year. The key driver for the net interest income growth was increased loan portfolio of the Bank against the backdrop of stable marginal business thanks to further optimisation of the funding structure and an increase in the share of higher-margin loans to individuals in the total loan book.
Net fee and commission income continued to grow at a higher rate and amounted to RUB 127.0 billion in 10M 2021 and RUB 10.3 billion in October 2021, an increase of 22.4% and a decrease of 12.0% respectively, from the same periods of the previous year.
Provision charge amounted to RUB 79.9 billion in 10M 2021 (down by 67.8% year-on-year) and RUB 1.6 billion for October 2021 (down by 96.5% year-on-year). As of 1 November 2021, the ratio of allowance for loan impairment to total loan portfolio was 5.3% (5.2% as of 1 October and 5.3% as of 1 January).
Staff costs and administrative expenses amounted to RUB 165.8 billion in 10M 2021, up by 13.2% year-on-year. In October 2021 staff costs and administrative expenses amounted to RUB 20.4 billion, an increase of 59.4% from the same period of the previous year. The substantial acceleration of growth of staff and administrative expenses has a temporary effect, proceeds in accordance with the plan and is contiguous with the calendarisation of expenses on digital transformation.
Total assets amounted to RUB 18.8 trillion as of 1 November 2021, an increase of 15.1% in 10M 2021 and a decrease of 1.4% in October 2021 against the backdrop of the strengthening of the national currency.
Total loan portfolio reached RUB 13.3 trillion, an increase of 12.5% in 10M 2021 and a decrease of 0.5% in October 2021 against the backdrop of the strengthening of the Russian ruble. Loans to individuals continues to grow reaching RUB 4.2 trillion, an increase of 28.1% and 2.3% since the beginning of the year and in October 2021 respectively, while loans to legal entities were RUB 9.1 trillion, an increase of 6.6% since the beginning of the year and a decrease of 1.7% in October 2021.
In 10M 2021 VTB Bank showed robust growth of loan portfolio of Medium and Small Business clients, the increase was 12,8% (the growth was 1,3% in October and 0,8% in September 2021).
In line with VTB Bank strategy the share of retail in total loan portfolio of the Bank continues to grow reaching 31.4% compared with 27.6% at the beginning of the year.
The issuance of loans to individuals grew by 43% in 10M 2021 compared to the relevant period of the previous year, including a 66% increase in the issuance of the consumer loans. The growth rate of loan issuance is steadily decreasing due to overall market trend of interest rates growth.
Securities portfolio grew by 44.3% year-to-date to RUB 3.1 trillion, decreasing by 1.5% in October 2021 due to negative revaluation.
Total customer funding was RUB 16.2 trillion as of 1 November 2021, an increase of 19.3% in 10M 2021 and a decrease of 2.2% in October 2021 against the backdrop of the strengthening of the Russian ruble.
Customer funding from legal entities was RUB 10.7 trillion, an increase of 26.5% from the beginning of 2021 and a decrease of 3.5% in October 2021 against the backdrop of the strengthening of the Russian ruble in October 2021. The growth in current accounts of legal entities was 31.4% year to date.
The growth of customer funding from Medium and Small Business clients in term and settlement accounts was 14.6%. Compared to September with neutral growth dynamics, October showed a renewed positive growth dynamics of 2.5%.
Customer funding from individuals was RUB 5.4 trillion as of 1 November 2021, an increase of 0.7% and 7.4% in October 2021 and in 10M 2021 respectively. The growth of balances in current and savings accounts was 15.9% since the beginning of the year, which contributed to the optimisation of the funding structure.
Customer funding structure remained stable: 66.5% was the funding from legal entities and 33.5% was the funding from individuals.
Capital and capital adequacy ratios
As of 1 November 2021, total regulatory capital was RUB 1,844.8 billion, up by 0.2% in October 2021 and by 12.1% since the beginning of the year mainly due to the earned profit and issued subordinated bonds.
In 10M 2021, the total amount of RUB 163.9 billion of subordinated bonds issued by the Bank was included in the tier 1 regulatory capital, including RUB 23.6 billion in October 2021. Additionally, in 2021, the total amount of RUB 4.7 trillion of ruble bonds issued by the Bank in 2020 was included in the tier 2 regulatory capital.
As of 1 November 2021, total regulatory capital included base capital (CET 1) of RUB 1,319.0 billion and main capital (tier 1) of RUB 1,632.2 billion.
Base capital (CET 1) increased by 6.8% or by RUB 83.9 billion from 1 October to 1 November 2021. Main capital (tier 1) increased by 6.6% or by RUB 100.4 billion from 1 October to 1 November 2021. The key growth driver was inclusion of 9M 2021 audited net profit into the base capital (CET 1).
Capital adequacy ratios are well above the minimum regulatory requirements. As of 1 November 2021, the N1.0 (total capital) ratio was equal to 11.66% (minimum regulatory threshold 8.0%), N1.1 (common equity) - 8.33% (minimum regulatory threshold 4.5%) and N1.2 (tier 1 capital) - 10.31% (minimum regulatory threshold 6.0%).
Total capital adequacy ratio (N1.0) increased by 0.38 p.p. in 10M 2021 mainly due to the growth of total equity and transition to the Standardised Measurement Approach (SMA) in accordance with Regulation of the Bank of Russia #744-P. Transition to the new Standardised Measurement Approach starting from financial results as of 1 April 2021 allowed to the Bank to improve its capital adequacy ratio by 0.4 p.p.
The unaudited financial performance indicators of VTB Bank presented above are collated based on the following forms 0409101 "Turnover balance sheet of credit organization" and 0409102 "Report on financial results of credit organization" as well as operational management reports as part of adjustments to the published forms. Capital adequacy ratios were calculated based on the operational financial data. The reported financial indicators are preliminary; hence, they can be supplemented and changed in the process of preparation of publishable financial reports of VTB Bank. As a result of such changes, final values may differ from the preliminary financial indicators presented above.
File: 10M21 VTB Bank Financial Results
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