VTB Bank announces RAS financial results (standalone) for August and 8M 2021

VTB Bank (PJSC) (hereinafter referred to as the Bank) publishes its standalone key RAS financial results for August and eight months of 2021.

Mikhail Kovalenko, Senior Vice-President, Head of Accounting and Reporting Department, noted:

"VTB Bank maintains solid business growth rates and continues to demonstrate a high level of profitability. The Bank achieved a record net profit earning RUB 25 billion in August and RUB 179 billion in the first eight months of 2021.

"The Bank actively finances borrowers in such sectors as construction industry, infrastructure and project financing and technological development. Retail business showed solid growth dynamics.

"Sustainable business profitability is ensured by a significant increase in key banking revenues, normalisation of asset quality and control over expenses."

Revenues and profitability

In 8M 2021, the Bank showed robust growth in profitability metrics. Net profit was RUB 179.4 billion in 8M 2021, including RUB 25.1 billion in August 2021, 3.4 times and 93 times up year-on-year, respectively.

Net interest income amounted to RUB 389.9 billion in the first eight months of 2021 and RUB 55.0 billion in August, up by 27.8% and 38.2%, respectively, compared to the same periods of the previous year. The key drivers for the net interest income growth was the increase of interest-earning assets - loan book and debt securities of the Russian Federation. The income from the debt securities of the Russian Federation increased 3.8 times year-on-year and amounted to RUB 49.8 billion in 8M 2021.

Net fee and commission income continued to grow at a higher rate and amounted to RUB 104.0 billion in 8M 2021 and RUB 11.9 billion in August 2021, an increase of 30.8% and 10.2% respectively, from the same periods of the previous year. The considerable increase in net fee and commission income was driven by a steadily increasing volume of commissions from the sale of insurance products and commissions from the brokerage business.

The number of new clients increased due to new settlement and cash services packages such as Most Important Things and Headstart that are simple, convenient and have savings options. As a result, profit from the services increased by 26% compared to the same period of the previous year, profit from settlement and cash services to legal entities rose by 31% and to individuals by 11% compared to eight months of 2020.

Provision charge amounted to RUB 71.9 billion in 8M 2021 (down 54.1% year-on-year) and RUB 1.2 billion for August 2021 (down 93.8% year-on-year). As of 1 September 2021, the ratio of allowance for loan impairment to total loan portfolio was 5.4% (5.5% as of 1 August and 5.3% as of 1 January).

Staff and administrative expenses amounted to RUB 127.8 billion in 8M 2021, up by 6.2% year-on-year on the back of digital transformation costs growth. In August 2021 Staff and administrative expenses amounted to RUB 15.7 billion, a decrease of 1.9% from the same period of the previous year.

Capital and capital adequacy ratios

As of 1 September 2021, total regulatory capital was RUB 1,831.6 billion, up by 1.0% in August and 11.3% since the beginning of the year mainly due to earned profit and issued subordinated bonds.

In 8M 2021, the total amount of RUB 147.7 billion of subordinated bonds issued by the Bank was included in the regulatory capital.

Total regulatory capital includes base capital (CET 1) of RUB 1,229.9 billion and main capital (tier 1) of RUB 1,529.8 billion.

Base capital (CET 1) increased by 0.3% or by RUB 3.3 billion from 1 August to 1 September 2021.

Main capital (tier 1) increased by 0.3% or by RUB 4.6 billion from 1 August to 1 September 2021.

Capital adequacy ratios are well above the minimum regulatory requirements. As of 1 September 2021, the N1.0 (total capital) ratio was equal to 11.74% (minimum regulatory threshold 8.0%), N1.1 (common equity) - 7.87% (minimum regulatory threshold 4.5%) and N1.2 (tier 1 capital) - 9.79% (minimum regulatory threshold 6.0%).

Total risk-weighted assets (denominator of total capital adequacy ratio N1.0) amounted to RUB 15,605.3 trillion as of 1 September 2021, increasing by 0.7% in August and by 6.9% since the beginning of the year.

Total capital adequacy ratio (N1.0) increased by 0.46 p.p. in the first 8 months of 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.

In August, total capital adequacy ratio (N1.0) was up by 0.04 p.p. mostly owing to the growth of total equity.

Balance sheet

Total assets amounted to RUB 18.7 trillion as of 1 September 2021, an increase of 14.6% in 8M and 0.9% in August 2021.

Total loan portfolio reached RUB 13.2 trillion, an increase of 11.1% in 8M and 1.9% in August 2021. Loans to individuals were RUB 4.0 trillion, an increase of 22.6% and 2.8% since the beginning of the year and in August 2021 respectively, while loans to legal entities were RUB 9.2 trillion, an increase of 6.8% since the beginning of the year and 1.5% in August 2021.

In line with VTB Bank strategy the share of retail in total loan portfolio of the Bank continues to grow reaching 30.4% compared with 27.6% at the beginning of the year.

The key growth driver of the retail loan portfolio was an increased demand on consumer lending: the issuance of consumer lending amounted to RUB 892 billion in eight months of 2021, an increase of 71% compared to the same period of the previous year. Mortgage issuance increased by 27% reaching almost RUB 690 billion, up by 27% from the same period of the last year. Car loans issuance exceeded RUB 62 billion, an increase of 41% from the same period last year. Issuance of lending products grew almost 1.5 times in eight months of 2021 compared to the same period of the previous year. The key growth drivers were the attractive interest rates on loans, special season offerings, as well as the development of digital services enabling a simplified way for the client to receive a loan.

Securities portfolio grew by 48.7% year-to-date to RUB 3.1 trillion, including 4.4% growth in August. This growth was driven by the Bank's investments into federal loan bonds of the Russian Federation (OFZs) in the first eight months of 2021.

Total customer funding was RUB 16.2 trillion as of 1 September 2021, an increase of 19.6% in 8M and 1.4% in August 2021. Customer funding from legal entities increased by 0.8% in August and by 27.1% from the beginning of 2021 reaching RUB 10.8 trillion. Customer funding from individuals increased by 2.8% in August and by 7.0% from the beginning of the year reaching RUB 5.4 trillion.

Customer funding structure remained unchanged: 66.6% were deposits of legal entities and 33.4% deposits of individuals.

In 2021, VTB significantly increased the number of small and medium business clients. The growth amounted almost to 20% since the beginning of the year and the number of clients exceeded 750 thousand. Due to wider product line of deposits, the growth of funding from small and medium business clients in term and current accounts amounted to 11.9% in eight months of 2021 and 3.9% in August.

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.