VTB Group announces IFRS financial results for August and 8M 2021

VTB Bank, the parent company of VTB Group (the "Group"), today publishes its unaudited consolidated financial results in accordance with IFRS for August and eight months of 2021.

Dmitry Pianov, member of the Management Board and Chief Financial Officer of VTB Bank, said:

"Strong August results bring the Group closer to meeting its annual profit and business growth targets. The Group earned RUB 231 billion in 8M 2021, which corresponds to a return on equity of 18.2%. Profitability continues to be supported by the sustained net interest margin level. The share of net commission income in operating income is steadily growing, which corroborates the success of our initiatives to increase the share of transactionally active customers and improve customer experience.

"In the second half of the year, on the back of a planned acceleration of investments in digital transformation, staff costs and administrative expenses increased by 8% in August. Every month we continue to expand the capabilities of our online services. In August, VTB launched a new Internet bank for entrepreneurs on a unique omnichannel platform that enhances our seamless customer service. VTB Online added personal accounts for the self-employed and set a record in terms of the number of digital credit cards issued".

Loan book growth driven by increased demand for retail and business loans

As of 31 August 2021, total gross loans amounted to RUB 14.4 trillion, an increase of 9.1% since the beginning of the year (adjusted for currency revaluation, the increase was 9.8%).

August saw steady growth in lending to individuals and legal entities. Retail lending continued to grow at a faster pace in 8M 2021. Loans to individuals increased by 1.8% in August and by 14.6% since the beginning of the year to RUB 4.4 trillion. Loans to legal entities increased by 1.8% in August and by 6.8% since the beginning of the year to RUB 9.9 trillion (adjusted for currency revaluation, the increase was 7.8% in 8M 2021). Thus, the share of loans to individuals in the Group's total loan book increased to 31% in 8M 2021, up from 29% at the end of 2020.

As of 31 August 2021, total customer funding increased by 17.2% to RUB 15.0 trillion (adjusted for currency revaluation, the increase was 17.8%).

Customer funding from legal entities increased by 0.6% in August and by 27.6% since the beginning of 2021 to RUB 9.1 trillion, amid strong growth in current-account balances. Adjusted for currency revaluation, the increase in customer funding from legal entities amounted to 28.2% in 8M 2021. Customer funding from individuals increased by 0.7% in August and by 4.4% since the beginning of the year to RUB 6.0 trillion, as a result of a substantial increase in savings-account balances along with a decrease in funds invested in term deposits (adjusted for currency revaluation, individual customer funding increased by 4.8%).

The share of customer funding in the Group's total liabilities increased in 8M 2021 to 82.7% (up from 78.1% as of 31 December 2020).

The loans-to-deposits (LDR) ratio decreased to 89.3% as of 31 August 2021, down from 95.6% at the end of 2020.

The Group's profitability improved significantly on the back of strong growth in core banking revenues and stable loan book quality

VTB Group's net profit was RUB 231.4 billion in 8M 2021 and RUB 30.5 billion in August 2021, increasing 4.4x and 3.1x, respectively, year-on-year. Return on equity was 18.2% in 8M 2021 and 17.4% in August 2021, up from 4.6% and 6.8% year-on-year, respectively.

Net operating income before provisions amounted to RUB 539.3 billion in 8M 2021 and RUB 64.6 billion in August 2021, up 31.2% and 29.5%, respectively, year-on-year. Net interest income and net fee and commission income accounted for 98.5% of net operating income.

Net interest income amounted to RUB 418.8 billion in 8M 2021 and RUB 57.8 billion in August 2021, increasing by 22.0% and 25.9% year-on-year, respectively. Net interest margin showed resilience to changes in the key rate, amounting to 3.8% in August and 8M 2021.

Net fee and commission income amounted to RUB 112.5 billion in 8M 2021 and RUB 13.8 billion in August 2021, increasing by 34.4% and 26.6% year-on-year, respectively. The considerable increase in net fee and commission income was driven by the expansion of the Group's transactional business and a steadily increasing volume of commissions from the sale of insurance products and commissions from the brokerage business. In 8M 2021, net fee and commission income accounted for 20.9% of net operating income before provisions, up from 20.4% a year earlier.

The Group's cost of risk was 0.8% in 8M 2021 and 0.3% in August 2021, down from 2.1% and 1.8% in the respective periods of 2020. At the same time, the provision charge amounted to RUB 69.7 billion in 8M 2021 and RUB 6.2 billion in August 2021, decreasing by 61.7% and 67.7% year-on-year, respectively.

The Group's NPL ratio decreased by 90 b.p. to 4.8% as of 31 August 2021. The NPL coverage ratio was 134.8% as of 31 August 2021, up from 120.6% as of the end of 2020.

Staff costs and administrative expenses amounted to RUB 180.7 billion in 8M 2021 and RUB 21.8 billion in August 2021, increasing by 6.0% and 7.9% year-on-year, respectively, driven by a planned increase in digital transformation costs.

Higher profitability supported a considerable improvement in operating efficiency: the ratio of costs to pre-provision operating income decreased 8.0 p.p. in 8M 2021 to 33.5%.