VTB Group announces IFRS financial results for October and 10M 2021

VTB Bank, the parent company of VTB Group ("the Group"), today publishes its unaudited consolidated financial results in accordance with IFRS for October and 10 months of 2021.

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

"All the main trends that we saw in the first three quarters continued in October: strong growth in key banking revenues, supported by a moderate cost of risk amid favourable macroeconomic dynamics and increased spending, reflecting the successful implementation of our digital transformation.

"Net profit for 10M of the year amounted to RUB 280 billion, which corresponds to a return on equity of 17.3%.

"Our results for October give us reason for optimism in terms of meeting all of our forecasts for the year and achieving record financial performance in 2021."

Business volumes grow accompanied by an increase in the share of retail lending

As of 31 October 2021, the total loan book before provisions amounted to RUB 14.4 trillion, an increase of 9.1% since the beginning of the year (adjusted for currency revaluation, the increase was 11.0%).

Retail lending continued to grow at a faster pace in 10M 2021. Loans to individuals increased by 2.1% in October and by 18.4% since the beginning of the year to RUB 4.6 trillion. Lending to legal entities decreased by 0.7% in October (adjusted for currency revaluation, lending was up by 0.2%), but the cumulative increase over 10 months of the year was 5.3%, reaching RUB 9.8 trillion (adjusted for currency revaluation, the increase since the beginning of the year was 7.9%). Thus, the share of loans to individuals in the Group's total loan book increased to 32% in 10M 2021, up from 29% at the end of 2020.

As of 31 October 2021, total customer funding had increased by 17.1% to RUB 15.0 trillion (adjusted for currency revaluation, the increase was 19.6%). In October, customer funding from legal entities decreased by 1.8% (adjusted for currency revaluation, funding from legal entities decreased by 0.6%). Since the beginning of 2021, customer funding from legal entities increased by 26.8% to RUB 9.0 trillion on the back of strong growth in current-account balances. Adjusted for currency revaluation, the increase in customer funding from legal entities amounted to 29.6% in 10M 2021. Customer funding from individuals increased by 1.1% in October and by 5.1% since the beginning of the year to RUB 6.0 trillion on the back of a considerable increase in savings-account balances along with a decrease in term deposits (adjusted for currency revaluation, customer funding from individuals increased by 7.1%).

The share of customer funding in the Group's total liabilities increased in 10M 2021 to 82.2% (up from 78.1% as of 31 December 2020).

The loans-to-deposits (LDR) ratio decreased to 89.5% as of 31 October 2021, down from 95.6% at the end of 2020.

Substantial improvement in profitability amid a strong increase in key banking revenues and stabilisation of the loan book quality

VTB Group's net profit increased 4.3x year-on-year to RUB 279.9 billion in 10M 2021 and 4.1x year-on-year to RUB 22.3 billion in October 2021. Return on equity was 17.3% in 10M 2021 and 12.5% in October 2021, up from 4.5% and 3.7% year-on-year, respectively.

Net operating income before provisions amounted to RUB 668.7 billion in 10M 2021 and RUB 61.4 billion in October 2021, up 37.1% and 64.2%, respectively, year-on-year. Net interest and net fee and commission income accounted for 99.9% of net operating income in 10M 2021.

Net interest income amounted to RUB 532.9 billion in 10M 2021 and RUB 57.2 billion in October 2021, increasing by 22.5% and 20.7%, respectively, year-on-year. Net interest margin showed resilience to changes in the key rate, amounting to 3.8% in October and in 10M 2021.

Net fee and commission income amounted to RUB 135.1 billion in 10M 2021 (up 24.3% year-on-year) and RUB 11.6 billion in October 2021 (down 9.4% year-on-year). 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.

The Group's cost of risk was 0.7% in 10M 2021 and 0.4% in October 2021, down from 1.8% and 0.8% a year earlier, respectively. At the same time, provision charge amounted to RUB 83.9 billion in 10M 2021 and RUB 5.5 billion in October 2021, down by 57.0% and 40.9% year-on-year, respectively.

The Group's NPL ratio decreased by 140 bp from the beginning of the year, amounting to 4.3% as of 31 October 2021. The NPL coverage ratio was 147.0% as of 31 October 2021, up from 120.6% as of the end of 2020.

Staff costs and administrative expenses amounted to RUB 233.7 billion in 10M 2021 and RUB 27.8 billion in October 2021, increasing by 9.6% and 31.1% 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 operating income before loan loss provisions decreased 8.8 p.p. in 10M 2021 to 34.9%.