VTB Group announces IFRS financial results for October and 10M 2020

VTB Group announces IFRS financial results for October and 10M 2020

VTB Bank, the parent company of VTB Group (the "Group"), publishes its unaudited consolidated IFRS financial results for October and 10 months of 2020.

Andrey Kostin, VTB President and Chairman of the Management Board, said: "Our performance in October and for 10 months of the year is fully in line with our expectations and our updated forecast for 2020, taking into account the cumulative negative impact of the coronavirus pandemic.

"The Group's core banking income and business volumes saw good growth, while higher provisions and the revaluation of non-financial assets had a significant negative effect on the Group's profitability metrics. The Group's net profit in October amounted to RUB 5.4 billion. In 10M 2020 the Group earned RUB 64.5 billion, which corresponds to ROE of 4.5%."

The Group demonstrated strong business growth in 10M 2020 despite the impact of the COVID-19 pandemic

• As of 31 October 2020, loans and advances to customers (hereinafter before provisions) amounted to RUB 13.1 trillion, up 14.3% since the beginning of the year (7.6% adjusted for the effect of currency revaluation). In October 2020, the total loan portfolio increased 1.2% (adjusted for the effect of currency revaluation, the increase was 1.3%).
• Loans to individuals increased by 1.2% in October to RUB 3.8 trillion; growth since the beginning of the year was 12.7%. Mortgage lending, which continues to increase at a faster pace, was up 2.0% in October and 19.1% for 10M 2020.
• Loans to legal entities increased by 1.3% in October (adjusted for the effect of currency revaluation, the increase was 1.4%). Loans to legal entities increased by 14.9% in 10M 2020 and amounted to RUB 9.3 trillion as of 31 October 2020 (adjusted for the effect of currency revaluation, the increase was 5.8%).
• The Group's market share in retail lending in Russia was 17.7%, an increase of 30 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.
• As of 31 October 2020, customer funding amounted to RUB 12.8 trillion. In October 2020, total customer funding increased by 3.9% (excluding the effect of currency revaluation, customer funding increased by 4.0%). Since the beginning of the year, customer funding has grown by 17.1% (excluding the effect of currency revaluation, the increase is 8.2%).
• Customer funding from legal entities increased by 7.0% in October (excluding the effect of currency revaluation, funding from legal entities increased by 7.1%). Since the beginning of the year, customer funding from legal entities has grown by 23.1% and amounted to RUB 7.3 trillion as of 31 October 2020 (excluding the effect of currency revaluation, the increase was 14.9%).
• Customer funding from individuals did not change in October (excluding the effect of currency evaluation, it increased by 0.2%). Since the beginning of the year, funding from individuals has increased by 10.0%, amounting to RUB 5.5 trillion as of 31 October 2020 (excluding the effect of currency revaluation, funding from individuals increased by 0.4%).
• The share of customer funding in the Group's total liabilities increased in 10M 2020 to 80.5% (compared with 79.2% as of 31 December 2019).
• The Group's market share in Russia in corporate and retail funding was 20.0% and 15.0%, respectively.
• As a result of the faster growth in customer funding, the loans-to-deposits (LDR) ratio decreased to 95.0% as of 31 October 2020, compared with 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 64.5 billion and RUB 5.4 billion, down 56.3% and 72.4% year-on-year, respectively, in 10M and in October 2020.
• Net interest income was RUB 434.9 billion for 10M 2020 and RUB 47.4 billion in October 2020, up 20.3% and 25.4% year-on-year, respectively.
• Net interest margin was 3.7% for 10M 2020 and in October 2020 (an increase of 40 bps year-on-year). The net interest margin has risen amid the easing of monetary policy and the fast-paced revaluation of liabilities.
• Net fee and commission income showed strong organic year-on-year growth and amounted to RUB 95.9 billion for 10M 2020 (up 18.5% year-on-year), while in October 2020 net fee and commission income of RUB 11.2 billion represented a year-on-year decline of 17.6% due to the high base from October 2019. 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 1.8% for 10M 2020 and 0.8% in October 2020, up from 0.9% and 1.0% year-on-year, respectively. The provision charge amounted to RUB 195.2 billion for 10M 2020 and RUB 9.3 billion in October 2020, an increase of 121.3% and a decrease of 10.6%, year-on-year, respectively.
• The allowance for loan impairments was 6.8% of the total loan book (before provisions) as of 31 October 2020, unchanged in October and up 80 bps since the beginning of the year.
• The non-performing loans (NPL) ratio was 5.5% as of 31 October 2020 (up 80 bps since the beginning of the year). The NPL coverage ratio was 122.8% as of 31 October 2020 (128.7% as of 31 December 2019).
• Staff costs and administrative expenses amounted to RUB 213.3 billion for 10M 2020 and RUB 21.2 billion in October 2020, an increase of 3.2% and a decrease of 5.4% year-on-year, respectively. The cost-to-income ratio (CIR) was 43.7% in 10M 2020, up from 42.8% a year earlier.