VTB Group announces IFRS financial results for 2 months of 2020

30 March 2020

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

Andrey Kostin, President and Chairman of VTB Management Board, said: "The Group's net profit in January and February 2020 increased by 11% year-on-year and amounted to RUB 38.8 billion, which corresponds to a ROE of 14.1%. We saw growth in terms of our key banking revenues and business development in line with our strategic priorities. We also continued to work on the comprehensive transformation of our processes and technologies in an effort to further expand our customer base, improve the customer experience and increase operational efficiency.

"Based on our results from last year and the first two months of this year, VTB Group expanded its capital and customer base, bolstered liquidity and improved both its balance sheet structure and cost-effectiveness, which has further strengthened our position and our ability to withstand current market volatility and threats to economic development caused by the spread of COVID-19.

"Under the current circumstances, we have ensured full business continuity and the uninterrupted operation of all systems and processes. At the same time, our top priority remains the health and safety of all our employees, customers and partners, and we are taking every necessary measure to protect them.

"We welcome the initiatives of the President, the Government and the Central Bank of the Russian Federation to support the economy, including small and medium-sized enterprises and individual borrowers who face lower incomes, as well as regulatory measures to support the banking sector, and we expect that initiatives that have already been announced and possible new initiatives will help to significantly mitigate the negative impact of the COVID-19 pandemic on consumers, the corporate sector and the financial industry. For our part, in recognition of our responsibility to society, we at VTB Group are implementing a wide range of measures to support our customers who find themselves in a difficult situation. 

"Crises always offer opportunities. I am certain that the current situation will speed up the transformation of our business and will lead to more thoroughgoing digitalisation of our products and services, and it will enable us to strengthen our market position and relations with our customers as their first choice for banking."   

Based on the results of the first two months of 2020, VTB Group continued to develop its business in line with its strategic priorities, focusing on optimising its funding structure and expanding its retail and SME business.

• As of 29 February 2020, VTB Group's gross loans and advances to customers increased by 0.3% to RUB 11.5 trillion since the beginning of 2020.
• Loans to individuals have increased by 1.7% since the beginning of 2020, amounting to RUB 3.4 trillion, with mortgage lending being the main driver of this growth (up 2.4% since the beginning of the year). Total loan portfolio to legal entities for the first two months of 2020 decreased by 0.3% from the beginning of the year. At the same time, the loan portfolio of the SME segment increased by 0.9% since the beginning of the year. VTB Group's market share in corporate and retail lending in Russia stood at 17.6% and 17.4%, respectively.
• Since the beginning of 2020, customer funding from legal entities increased by 2.1%, while funds from customers in the SME segment increased by 2.5% since the beginning of the year. Stronger growth was seen in retail funding, which increased by 3.6% since the beginning of the year, outstripping the growth in deposits and balances from individual customers in the Russian banking sector overall. At the same time, the key driver behind the growth in VTB Group customer funding has been current and savings accounts, which, coupled with an increase in the share of funds from individuals in the Group's liabilities, has resulted in further optimisation of the Group's funding structure. 
• The share of customer funding in the Group's total liabilities increased in the first two months of 2020 to 82.9% (compared with 79.2% as of 31 December 2019). At the same time, the share of retail deposits in terms of the Group's total liabilities increased to 38.4% from 36.4% at the beginning of the year. VTB Group's market share in Russia in corporate and retail funding stood at 19.7% and 15.5%, respectively.
• As a result of faster growth in customer funding, the Group's LDR ratio decreased to 95.5% as of 29 February 2020 (compared with 98.2% as of 31 December 2019).

The Group improved profitability on the back of a higher net interest margin and accelerated growth in terms of key sources of revenue.

• For the first two months of 2020, VTB Group's net profit amounted to RUB 38.8 billion, an increase of 10.5% year-on-year.
• Net interest income amounted to RUB 76.5 billion for the first two months of 2020, an increase of 11.0% year-on-year. Net interest margin was 3.6% for the first two months of 2020, an increase of 30 bps year-on-year.

• Net fee and commission income amounted to RUB 14.8 billion for the first two months of 2020, an increase of 31% year-on-year. Retail business of VTB Group was the main driver for the growth of net fee and commission income.
• The cost of risk was 1.0% for the first two months of 2020 (up 80 bps year-on-year), returning to normal levels compared to the same period last year, which saw a one-off release of provisions for a number of large borrowers. Provision charges amounted to RUB 18.0 billion for the first two months of 2020, increasing 6 times year-on-year on the back of a low base.

• The Group's NPL ratio amounted to 4.8% as of 29 February 2020 (up 10 bps from the beginning of the year). As of 29 February 2020, the NPL coverage ratio remained high at 128.8% (compared with 128.7% as of 31 December 2019).
• Staff and administrative expenses amounted to RUB 43.8 billion for the first two months of 2020, an increase of 9.2% year-on-year, which was driven by, among other factors, costs related to IT, digitalisation and the transformation of VTB Group business processes.
• Rising profitability supported a significant improvement in operating efficiency: the costs to net operating income before provisions ratio decreased by 6.9 pps year-on-year and amounted to 38.6%.