OREANDA-NEWS. July 11, 2012. TransCreditBank Group today released unaudited Interim Condensed Consolidated Financial Statements under IFRS for the three-month period ended March 31, 2012.

1Q:2012 Financial Highlights

- TransCreditBank’s profit for Q1:2012 was RUB 2.6 billion, up 67% compared with Q1:2011 driven by a significant growth of all sources of income

- Operating income before loan loss provisions was RUB 8.8 billion, up 47% YoY

- Net interest margin was 5.2%, ROE was 25.8% and ROA was 2.1%

- Gross loan portfolio rose 7% to RUB 360.0 billion, with corporate loans increasing 8% to RUB 266.0 billion and retail loans increasing 6% to RUB 93.9 billion

- Total assets amounted to RUB 489.0 billion, down 3% from YE 2011 due to reduced trading securities portfolio and interbank loans

- Shareholders’ equity expanded 28% to RUB 46.3 billion from YE 2011 due to the additional share issue completed in Q1:2012 and retained earnings

- Capital adequacy ratios (according to Basel Accord I) improved: Tier 1 ratio grew to 11.3% from 9.3% at YE 2011 and total capital ratio to 15.4% from 15.2%.

“The Bank had a strong first-quarter performance. Robust loan portfolio expansion was reflected in increased interest income, which drove the Bank’s net earnings to RUB 2.6 billion and allowed it to significantly exceed profit target. In 2012, the Bank continues to position its business for growth, which is supported by the new capital injection from our main shareholder received in February,” said Alexey Krokhin, TransCreditBank’s President.

Income statement review

In Q1:2012 the Bank increased core income from banking activities compared with the same quarter in 2011.

Net interest income rose strongly by 40% YoY to RUB 6.0 billion. Increased interest income from customer lending, which stood for 76% of income, was the key driver. The share of net interest income in operating income was 69%.

Net interest margin was 5.2% compared to 5.6% in Q1:2011, reflecting market-driven lending and funding interest rates adjustment.

Net fee & commission income was 26% higher compared with the same quarter in 2011 and amounted to RUB 1.3 billion. Bank card business contributed 52% to the gross income. The share of net fee & commission income in operating income was 14%.

Operating income before loan impairment charges increased by 47% YoY to RUB 8.8 billion. In addition to the sizable core income growth, operating income also benefited from higher non-interest income. The latter was up x2.2 YoY to RUB 1.5 billion, driven in part by realized net gains from securities.

The increase in revenue was partly offset by higher loan impairment charges, which were up x3.2 compared with Q1:2011 and amounted to RUB 1.8 billion following the rise in lending balances. Provisions-to-gross portfolio ratio was broadly unchanged at 4.3% compared with 4.2% at YE 2011.

Operating expenses rose 5% YoY to RUB 3.5 billion. Expenses increased at a slower rate relative to operating income resulting in improved cost efficiency. Cost-to-income ratio was 41.9%, down from 57.6% in Q1:2011 and 45.1% in Q4:2011.

Net profit for the first quarter was RUB 2.6 billion, up 67% compared with the same period of 2011.

Profitability ratios improved: ROA rose to 2.1% from 1.5% in Q1:2011, and ROE increased to 25.8% from 21.5% in Q1:2011.

Assets structure

On the assets side of the Bank’s balance sheet net loan portfolio was the largest item at 70% of total assets, up 6 percentage points from YE 2011.

In Q1:2012, gross loan portfolio rose 7% to RUB 360.0 billion. Corporate loan book grew 8% to RUB 266.0 billion thanks to new lending to existing and new borrowers, primarily in infrastructure construction, trade, manufacturing, and food industries. Loans to Russian Railways Group were 7.8% of the corporate portfolio, compared with 6.7% at YE 2011.

Retail portfolio increased 6% to RUB 93.9 billion from YE 2011 thanks to expanded consumer lending. The share of consumer loans in the portfolio consequently rose to 62% from 60% at YE 2011. The share of consumer and mortgage loans extended to Russian Railways employees remained unchanged at 85% of the portfolio.

The share of non-performing loans (>90 days overdue) in total loan portfolio was 2.4%, in line with the level at YE 2011. Corporate NPLs were 2.2% of the portfolio, unchanged from YE 2011, and retail NPLs increased somewhat to 3.0% from 2.9% at YE 2011. Allowance for loan impairment was RUB 15.5 billion, an increase of 11% during the quarter. Provision coverage was 179,3% of non-performing loans, up from 173,8% at YE 2011.

Trading securities portfolio and amounts due from credit institutions were 9% of total assets each. Trading portfolio decreased 24% to RUB 43.1 billion following the change in portfolio strategy involving reduction in the volume of securities trading operations. The decrease of the securities portfolio was mainly attributed to diminished holdings of Russian state bonds (OFZ) with short maturities, as well as corporate domestic bonds. At the same time, holdings of OFZ remained the largest component of the trading portfolio with the share of 65% (YE 2011: 63%).

Investment securities available-for-sale grew x6 to RUB 10.1 billion as part of the same strategy, following increased holdings of RUB bonds of several largest Russian corporates.

Amounts due from credit institutions were RUB 44.7 billion, down 40% from YE 2011. Peak values at the end of 2011 were due to excessive client funds received by the Bank shortly before the reporting date and placed into short-term inter-bank loans.

Liabilities and Equity structure

Total liabilities were RUB 442.7 billion, and their structure remained virtually unchanged from YE 2011. Corporate customer funding was 54% of liabilities, or RUB 239.1 billion, and remained the Bank’s main funding source. Deposits and current accounts of Russian Railways Group amounted to 47% of corporate funding compared with 50% at YE 2011. Retail deposits and current accounts were 17% of liabilities, or RUB 75.6 billion, and interbank loans were 14% of liabilities, or RUB 62.5 billion.

Net loan-to-deposit ratio increased to 109% compared to 94% at YE 2011.

Total shareholders’ equity increased 28% to RUB 46.3 billion thanks to additional share issue of RUB 7.6 billion finalized in February, as well as retained earnings. As a result, Tier 1 capital ratio (under Basel 1 accord) strengthened to 11.3% from 9.3% at YE 2011. Total capital ratio improved to 15.4% from 15.2% at YE 2011. In Q1:2012 TransCreditBank prepaid RUB 5.5 billion subordinated loan received from VTB Bank last year.