Bank Vozrozhdenie reports 2012 full year comprehensive income of Rub 2.36 bln under International Financial Reporting Standards

  Bank Vozrozhdenie reports 2012 full year comprehensive income of Rub 2.36
  bln under International Financial Reporting Standards

Business Wire

MOSCOW -- March 27, 2013

Bank Vozrozhdenie (Moscow Stock Exchange: VZRZ) reported 2012IFRS financial
results today:

  *Net incomeof Rub 2.3billion ($77million) grew 1.5 times compared to
  *Assets reached Rub 209.1 billion ($6.9 billion) up 14% from the previous
  *Operating profit before provisions grew YoY by 15% to Rub 14.8billion
    ($487 million)
  *Return OnEquity (ROE) increased to11.9% exceeding 10% for the first time
    since 2008

“In 2012, notwithstanding the deterioration of the real economy growth trends
and consumer demand decline the bank managed to achieve stable growth. We
improved our positions in the key market segments – SME and retail banking –
enhancing lending to our clients on the basis of stable inflow of customers’
funds. In order to ensure balanced growth on both assets and liabilities side
the bank pursued moderate deposit pricing policy that positively contributed
to operating income progress. During the year we succeeded in active cost
management and maintained expenses at the same level as in the 2011 improving
the bank’s cost efficiency,” said Alexander Dolgopolov, the Chairman ofthe
Management Board, about the financial statements. “In 2013, amid modest
economic growth we’ll keep an eye on the credit portfolio quality dynamics and
continue adding up provisions at the adequate level. The bank will move
forward in development of operating model optimization project. On top of it
we expect a tangible effect from remote channels of banking products sale
becoming popular among clients, particularly mobile banking,” commented Mr.

Assets of the bank grew by 14% duringthe past twelve months to Rub 209.1
billion as of December 31, 2012. Liquid assets and net loan portfolio were the
main driving force rising by Rub 6.5 billion and Rub 17.3 billion respectively
(+14% both). Stable inflow of corporate and retail customers’ funds elevating
by 13% over the year to Rub 163.9 billion supported the funding base
enhancement. The growth intensified in Q4 driven by liquidity improvement in
the banking system and seasonal top-up of current accounts balances. Retail
deposits peaked twice – in Q2 and Q4 2012 - resulting from interest rates
increase at the end of Q1 and getting annual bonuses by individuals
respectively. At the year-end retail term deposits totaled Rub 81.0 billion
(+3.6% QoQ, +12.3% YoY). Amid the modest loan growth the loan-to-deposit ratio
stayed at 95.4% as of the end of 2012 preserving the base for the future
business expansion.

Equity of Bank Vozrozhdenie was up 12.7% to Rub 20.8 billion ($ 685 million)
versus 2011 by retaining earnings. Capital adequacy ratio stood at 14.9% while
Tier 1 CAR was equal to 12.3% comparing to 13.8% and 11.9% respectively in
2011. In 2012, the Bank raised 2 tranches of 8-year subordinated deposit
amounted to Rub 2 billion at the rate of 9.25%. It strengthened the bank’s
capital position on the threshold of toughening of the Bank of Russia
regulation over capital adequacy calculationand expected implementation of
Basel III standards. The third tranche of subordination was raised at the end
of February, 2013.

Loan portfolio before provisions rose 13.8% in 2012 to Rub 156.4 billion ($
5.1 billion) due to the corporate loan book expansion by 9.3% and climb in
retail lending (+34.8% over 2012). Growing macroeconomic concerns, in
particular owing to Russia’s joining WTO made SMEs to reduce their loan demand
in the second half of the year. Thus large corporate loans became the main
contributor to the growth of the corporate loan book. Its sectoral structure
remained stable in the past twelve months with largest segments related to
manufacturing (28%) including food industry, machinery construction, metals,
chemicals etc. and wholesale and retail trade (23%). The bank’s core client
base of SMEs comprises 63% of corporate loans. In 2012 the bank experienced
gradual expansion of retail lending with the peak of growth in Q3 resulting
from a new mortgage program launch that drew particular interest of our retail
clients. By the end of 2012 loans to individuals made up 21% of the total loan
portfolio. In total the retail loan book was up 34.8% in 2012 driven by
significant boost in mortgage lending which added 44.5% over the year to Rub
22.3 billion. Consumer loans dynamics remained positive (+27.1%) as well
bringing them to Rub 8.1 billion by the end of the reporting period.

Securities portfolio stayed almost unchanged over the past year and amounted
to Rub 8.4 billion ($275 million) as of the end of 2012. Historically the bank
used to treat trading securities portfolio as a liquidity management tool so
it includes primarily debt securities with investment ratings and short
maturities. Substantial part of trading securities (Rub 5.4 billion) was
repaid in Q4 2012 resulting in reduction of the portfolio adjusted for new
investments by Rub 2.1 billion (27%) over the quarter. As of December 31,
2012, the bank’s securities portfolio comprised corporate bonds and Eurobonds
(78.8%) and federal and municipal bonds (15.3%).

NPL ratio was up 130 bps to 9.0% of the total loan book or Rub 14.1 billion.
Significant rise of NPLs in the course of the year was caused by the
impairment of one large corporate group exposure amounted to Rub 3.7 billion.
In medium enterprises segment NPL ratio remained virtually the same at 9.3%
(versus 9.8% at the end of 2011) and in small enterprises segment NPL ratio
was 1.8% down during the reporting period. Retail segment also enjoyed some
improvement of the loan book quality. Non-performing mortgages stayed at 1.7%
in 2012 and consumer NPL ratio cooled down to 4.8%. However, anticipating
economic growth slowdown and the global vulnerable environment Bank
Vozrozhdenie continues adding up provisions for loan impairment. In 2012 cost
of risk was equal to 1.8% which looks reasonable to keep for the current year
as well. Total provisions for loan impairment totaled Rub 14.7 billion
ensuring coverage of NPLs 1 day+ overdue of 104.0% and NPLs 90 days+ overdue
of 107.0%.

Net interest income elevated by 21% to Rub 9.1 billion in 2012 due to
accelerating pace of interest income growth. Both loans’ and deposits’ rates
kept surging throughout the year due topersisted liquidity shortage. However,
the Bank pursued balanced interest rates policy and managed to restrain growth
of funding costs to 4.4% versus 4.2% in 2011. Yields on earning assets that
were repriced faster than deposits advanced 88 bps to 11.3% in 2012. A drop of
funding costs by 4 bps in Q4 2012 on the back of expiration of a number of
corporate deposits along with improved yields on retail and corporate loans
contributed to rebound of net interest margin by 10 bps to 4.7% for the
quarter. On the annual basis net interest margin expanded by 46 bps for to
4.7% while net spread added up 60 bps to 6.8%.

Fees and commissions reached Rub 5.5 billion for 2012, up 5.2% for the year
contributed by commissions on settlements (+7.7% for the year) and bank cards
operations (+7.4% for the year). In Q4 2012, net fee income was generated at
the level of Q3 2012 in the environment of relatively low business activity
despite traditional seasonal trends. Growth of fee and commission expenses in
Q4 2012 by Rub 46 billion resulted mainly from non-recurrent commission
associated with the 2^nd securitization deal. Corporate business fees and
commissions accounted for 52% of the non-interest revenue, a significant part
of 27% was delivered by the bank cards’ business, the remainder 16% came from
retail business.

Disciplined cost efficiency approach remains among the bank’s priorities. In
2012, operating expenses added only 3.6% to Rub 8.7 billion that is well below
inflation level in Russia for the same period. Staff costs increased by 4.1%
YoY to Rub 5.1 billion. Moderate growth of administrative expenses was offset
by decrease of amortization charges and advertising costs. Cost-to-income
ratio dropped to 58.5% from 64.8% in 2011, the lowest level for the last three

Profit before taxation in 2012 totaled Rub 3.0 billion, up 47.0% from 2011
driven by positive dynamics of operating income components and tight cost
control. Net profit for 2012 grew by 46% to Rub 2.3 billion from 2011. Return
on equity was 11.9% going to double digits for the first time since 2008.


Bank Vozrozhdenie
Andrey Shalimov, +7 (495) 6209071
Deputy Chairman of the Management Board
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