VTB Bank announces RAS financial results (standalone) for September and 9M 2021

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

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

"Based on the results of 9 months, the Bank continues to demonstrate a record level of net profit, which for the first time in the Bank's history exceeded RUB 200 billion, and maintains a high level of return on equity.

"A tangible impetus to the Bank's profit is provided by two key sources of banking revenues - net interest income that demonstrates sustainable positive dynamics despite increasing interest rates in the economy coupled with intensifying competition in the retail deposits market, as well as net fee and commission income that grows thanks to the successfulness of VTB's client-centric business model".

Key growth drivers of financial results

- Issuance of loans to individuals grew by 45% year-on-year, including consumer loans issuance having increased by almost 70%.

- Loan portfolio of large legal entities increased by RUB 106 billion in September 2021.

- Funding from Medium and Small Business clients on term and current deposits was steadily growing by more than 11% in 9M 2021.Taking into account the specifics of Medium and Small Business clients, short-term funds (up to 30 days) act as a growth driver of term deposits.

Revenues and profitability

In 9M 2021, the Bank showed robust growth in profitability metrics. Net profit was RUB 203.7 billion in 9M 2021, including RUB 24.3 billion in September 2021, 3.9 times and 270 times up year-on-year, respectively.

Net interest income amounted to RUB 441.4 billion in the first nine months of 2021 and RUB 51.5 billion in September 2021, up by 28.5% and 34.1%, respectively, compared to the same periods of the previous year. The key driver for the net interest income growth was increased loan portfolio of the Bank.

On the back of the growth in 2021 of the portfolio of federal loan bonds of the Russian Federation, the respective portfolio income for 9M 2021 amounted to RUB 58.2 billion, 4.1 times up year-on-year.

Net fee and commission income continued to grow at a higher rate and amounted to RUB 116.7 billion in 9M 2021 and RUB 12.7 billion in September 2021, an increase of 26.7% and 0.8% respectively, from the same periods of the previous year.

Provision charge amounted to RUB 78.3 billion in 9M 2021 (down by 61.3% year-on-year) and RUB 6.4 billion for September 2021 (down by 86.0% year-on-year).

As of 1 October 2021, the ratio of allowance for loan impairment to total loan portfolio was 5.2% (5.4% as of 1 September and 5.3% as of 1 January).

Staff costs and administrative expenses amounted to RUB 145.4 billion in 9M 2021, up by 8.8% year-on-year on the back of digital transformation costs growth. In September 2021 staff costs and administrative expenses amounted to RUB 17.6 billion, an increase of 31.3% from the same period of the previous year. The acceleration of growth of staff and administrative expenses is proceeding in accordance with the plan and is contiguous with the calendarisation of expenses on digital transformation.

Capital and capital adequacy ratios

As of 1 October 2021, total regulatory capital was RUB 1,840.7 billion, up by 0.5% in September and by 11.9% since the beginning of the year mainly due to the earned profit and issued subordinated bonds.

In 9M 2021, the total amount of RUB 147.7 billion of subordinated bonds issued by the Bank was included in the regulatory capital.

As of 1 October 2021, total regulatory capital included base capital (CET 1) of RUB 1,235.1 billion and main capital (tier 1) of RUB 1,531.8 billion.

Base capital (CET 1) increased by 0.4% or by RUB 5.2 billion from 1 September to 1 October 2021. Main capital (tier 1) increased by 0.1% or by RUB 2.0 billion from 1 September to 1 October 2021.

Capital adequacy ratios are well above the minimum regulatory requirements. As of 1 October 2021, the N1.0 (total capital) ratio was equal to 11.59% (minimum regulatory threshold 8.0%), N1.1 (common equity) - 7.76% (minimum regulatory threshold 4.5%) and N1.2 (tier 1 capital) - 9.63% (minimum regulatory threshold 6.0%).

Total risk-weighted assets (denominator of total capital adequacy ratio N1.0) amounted to RUB 15,887.3 billion as of 1 October 2021, increasing by 1.8% in September 2021 and by 8.9% since the beginning of the year.

Total capital adequacy ratio (N1.0) increased by 0.31 p.p. in 9 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 September, total capital adequacy ratio (N1.0) was down by 0.14 p.p. mostly owing to the growth of loan portfolio of individuals and legal entities.

Balance sheet

Total assets amounted to RUB 19.1 trillion as of 1 October 2021, an increase of 16.7% in 9M and 1.8% in September 2021.

Total loan portfolio reached RUB 13.4 trillion, an increase of 13.0% in 9M and 1.7% in September 2021. Loans to individuals were RUB 4.1 trillion, an increase of 25.2% and 2.1% since the beginning of the year and in September 2021 respectively, while loans to legal entities were RUB 9.3 trillion, an increase of 8.4% since the beginning of the year and 1.5% in September 2021.

In 9M 2021 VTB Bank showed robust growth of loan portfolio of Medium and Small Business clients, the increase was 11.3% as of 1 October 2021

In line with VTB Bank strategy the share of retail in total loan portfolio of the Bank continues to grow reaching 30.5% compared with 27.6% at the beginning of the year.

Securities portfolio grew by 46.6% year-to-date to RUB 3.1 trillion, decreasing by 1.4% due to redemption of several issues of federal loan bonds of the Russian Federation (OFZs).

Total customer funding was RUB 16.5 trillion as of 1 October 2021, an increase of 22.0% in 9M and 2.0% in September 2021.

Customer funding from legal entities increased by 3.2% in September and by 31.1% from the beginning of 2021 reaching RUB 11.1 trillion.

Customer funding from Medium and Small Business clients amounted to circa RUB 2 trillion. More than 90% of deposits are opened by clients via internet and mobile banks. The number of Medium and Small Business clients continues to increase, growing by 20% since the beginning of the year.

The main share of term deposits of Medium and Small Business clients continue to comprise retail and wholesale companies (25%) and building construction companies including housing (18.5%).

Customer funding from individuals decreased by 0.4% in September amounting to RUB 5.4 trillion (increasing by 6.6% year-to-date).

Customer funding structure remained unchanged: 67.4% were deposits of legal entities and 32.6% deposits of individuals.

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.