VTB Group announces IFRS results for November and 11 months of 2019

VTB Bank, the parent company of VTB Group, publishes its unaudited consolidated IFRS results for November 2019 and the 11 months ended 30 November 2019.

Dmitry Olyunin, First Deputy President and Chairman of VTB Management Board, said:

"In November we saw continuation of core profitability growth trend on the backdrop of net interest margin expansion, slowing down of costs growth, improvement of asset quality and further strengthening of balance sheet structure. The Group's net profit in November 2019 was RUB 17.8 billion which corresponds to ROE of 13.3%. The results of November and 11M 2019 support our full year net profit guidance of RUB 200 billion".

In 11M 2019 VTB Group achieved measured growth of the key balance sheet ratios with focusing on the Retail business and SMB in line with the Group's strategy

• Total assets amounted to RUB 15.7 trillion as of 30 November 2019, up 6.2% year-to-date, including growth of loans and advances to customers (hereafter before provision charge for credit losses and other provisions) of 3.8% year-to-date to RUB 11.9 trillion.
• Retail lending increased by 14.4% year-to-date, and decreased by 1.2% in November on the backdrop of general slowdown of consumer lending.
• In 11M 2019 loan portfolio to legal entities remained flat year-to-date and increased by 0.4% in November.  At the same time the Group achieved robust loan growth in SME segment where the loan book grew by 13.0% year-to-date.
• Deposits from legal entities increased by 10.9%, while deposits from individuals increased by 11.0% year-to-date significantly outperforming the average market indicators.
• The share of customer funding in the Group's total liabilities reached 82.2% as of 30 November 2019 (31 December 2018: 78.6%). Out of total funding from customers 42.4% was raised from individuals as of 30 November 2019.
• As a result of accelerated growth of customer funding in 2019 the ratio of loan portfolio to customer funding (LDR ratio) dropped to 96.4% as of 30 November 2019 (31 December 2018: 102.8%).
• As of 30 November 2019 the Group's market share in Russia in corporate and retail funding was 21.5% (up 80 bps year-to-date) and 15.1% (up 110 bps year-to-date), respectively.

VTB Group improved its profitability metrics on the backdrop of stable asset quality,  slowing down of costs growth and further strengthening of balance sheet structure

• In November 2019 net profit amounted to RUB 17.8  billion, up 39.1% year-on-year. For 11M 2019 net profit reached RUB 165.4 billion.
• Net interest income was RUB 37.8 billion in November 2019 (up 6.2% year-on-year) and RUB 399.4 billion in 11M 2019. The net interest margin was 3.4% in November and 3.3% in 11M 2019. Net fee and commission income was RUB 88.4 billion in 11M 2019 and RUB 7.5 billion in November 2019, up 9.8% year-on-year.

Strong asset quality and reduction of cost of risk supported the bottom line result

• Cost of risk was 0.6% in November and 0.9% in 11M 2019, down 90 bps and 60 bps respectively. Total provision charge for credit losses and other provisions amounted to RUB 6.8 billion in November 2019 and RUB 95.0 billion in 11M 2019, down 50.4% and 26.8% year-on-year, respectively. The reduction of cost of risk and total provision charge reflects the improving asset quality across all business lines.
• The Group's NPL ratio decreased to 4.7% of gross customer loans as of 30 November 2019 (down 100 bps year-to-date).The Group has significantly increased the NPL coverage ratio to 129.0% as of 30 November 2019 (up 17.0 ppt year-to-date).

Cost growth in 11M 2019 was caused by the consolidation of recently acquired banks and uneven calendarisation, while the growth rate continued to slow down in November 2019

• Staff costs and administrative expenses amounted to RUB 226.4billion in 11M 2019, up 15.9% year-on-year. The increase in staff costs and administrative expenses was largely caused by acquisition and subsequent consolidation of three banks (Bank Vozrozhdenie, West Siberian Commercial Bank and Sarovbusiness Bank) as well as strengthening of IT team. Additionally VAT increase in 2019 contributed to the growth of operating expenses.
• Staff costs and administrative expenses increased by 1.0%  year-on-year in November  and by 15.9% year-on-year  in 11M 2019. In H2 2019 costs growth sharply slowed down as a result of uneven year-by-year calendarisation of variable personnel costs.
• On the backdrop of improving profitability and slowing down of costs growth the ratio of staff and administrative cost to operating income before provisions (CIR) continued to decline and was 40.4% in November 2019 versus 42.6% in 11M 2019.

The P&L statement components have been compared with modified financial results for 11 months 2018 for the purposes of accuracy of the year-on-year analysis (revenue and expenses of VTB Bank (Belgrade) JSC, "Post Bank", PJSC,"Multicarta", LLC,VTB Bank, (Ukraine) PJSC and of all companies within VTB Insurance Group have been excluded as if these companies have not been consolidated by the Group during 2018; gain/loss recognised on disposal of subsidiaries reflected in the line "Gains from disposal of subsidiaries and associates" have not been adjusted).