CREDIT BANK OF MOSCOW’s IFRS net income for 2018 increased by 31.5% to RUB 27.2 bln

07.03.2019

<p><strong>Key results</strong></p> <ul> <li>Net income increased by 31.5% yoy to RUB 27.2 bln ($391.9 mln<sup>1</sup>).</li> <li>Return on equity grew to 19.9% compared to 17.8% one year ago. Return on assets was 1.4% compared to 1.2% as at end-2017.</li> <li>Operational efficiency remained at a high level, cost-to-income ratio was 29.8%.</li> <li>Assets increased by 13.6% to RUB 2.1 tln ($30.9 bln).</li> <li>Ratio of NPLs (90+ days) to gross loan portfolio fell from 2.4% to 1.6%.</li> <li>Cost of risk (COR) decreased from 2.5% as at end-2017 to 1.0% as at end-2018.</li> <li>Customer deposits increased by 35.1% ytd to RUB 1.3 tln ($18.3 bln).</li> <li>Basel III capital grew by 8.4% ytd to RUB 297.4 bln ($4.3 bln).</li> </ul> <p> </p> <p><strong>Key financial results</strong></p> <p> </p> <table border="0" cellpadding="0" cellspacing="0" style="width:100%"> <tbody> <tr> <td style="width: 50%; height: 22px;"> <p><strong>Balance sheet</strong></p> </td> <td style="w idth: 142px; height: 22px;"> <p><strong>2018</strong></p> </td> <td style="w idth: 132px; height: 22px;"> <p><strong>2017</strong></p> </td> <td style="w idth: 100px; height: 22px;"> <p><strong>change, %</strong></p> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Assets, RUB bln</p> </td> <td style="width: 142px; height: 19px;"> <p>2,145.9</p> </td> <td style="width: 132px; height: 19px;"> <p>1,888.2</p> </td> <td style="width: 100px; height: 19px;"> <p>+13.6%</p> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Gross loan portfolio, RUB bln</p> </td> <td style="width: 142px; height: 19px;"> <p>740.1</p> </td> <td style="width: 132px; height: 19px;"> <p>818.8</p> </td> <td style="width: 100px; height: 19px;"> <p>-9.6%</p> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Liabilities, RUB bln</p> </td> <td style="width: 142px; height: 19px;"> <p>1,954.8</p> </td> <td style="width: 132px; height: 19px;"> <p>1,710.6</p> </td> <td style="width: 100px; height: 19px;"> <p>+14.3%</p> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Customer deposits, RUB bln</p> </td> <td style="width: 142px; height: 19px;"> <p>1,272.2</p> </td> <td style="width: 132px; height: 19px;"> <p>941.7</p> </td> <td style="width: 100px; height: 19px;"> <p>+35.1%</p> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Equity, RUB bln</p> </td> <td style="width: 142px; height: 19px;"> <p>191.2</p> </td> <td style="width: 132px; height: 19px;"> <p>177.6</p> </td> <td style="width: 100px; height: 19px;"> <p>+7.6%</p> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Capital (Basel), RUB bln</p> </td> <td style="width: 142px; height: 19px;"> <p>297.4</p> </td> <td style="width: 132px; height: 19px;"> <p>274.4</p> </td> <td style="width: 100px; height: 19px;"> <p>+8.4%</p> </td> <td> <p> </p> </td> </tr> <tr> <td colspan="4" style="width: 705px; height: 19px;"> <p><strong><em>Key financial ratios, %</em></strong></p> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>90+ NPL ratio (before provisions)</p> </td> <td style="width: 142px; height: 19px;"> <p>1.6%</p> </td> <td style="width: 132px; height: 19px;"> <p>2.4%</p> </td> <td style="width: 100px; height: 19px;"> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Cost of risk (COR)</p> </td> <td style="width: 142px; height: 19px;"> <p>1.0%</p> </td> <td style="width: 132px; height: 19px;"> <p>2.5%</p> </td> <td style="width: 100px; height: 19px;"> <p> </p> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Provisioning ratio</p> </td> <td style="width: 142px; height: 19px;"> <p>4.2%</p> </td> <td style="width: 132px; height: 19px;"> <p>6.1%</p> </td> <td style="width: 100px; height: 19px;"> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Net loans / deposits</p> </td> <td style="width: 142px; height: 19px;"> <p>55.7%</p> </td> <td style="width: 132px; height: 19px;"> <p>81.6%</p> </td> <td style="width: 100px; height: 19px;"> <p> </p> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Basel capital adequacy ratio (CAR)</p> </td> <td style="width: 142px; height: 19px;"> <p>21.9%</p> </td> <td style="width: 132px; height: 19px;"> <p>23.4%</p> </td> <td style="width: 100px; height: 19px;"> </td> <td> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 20px;"> <p><strong>Income statement</strong></p> </td> <td style="width: 142px; height: 20px;"> <p><strong>2018</strong></p> </td> <td style="width: 132px; height: 20px;"> <p><strong>2017</strong></p> </td> <td colspan="2" style="width: 101px; height: 20px;"> <p><strong>change, %</strong></p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Net interest income (before provisions), RUB bln</p> </td> <td style="width: 142px; height: 19px;"> <p>48.4</p> </td> <td style="width: 132px; height: 19px;"> <p>45.3</p> </td> <td colspan="2" style="width: 101px; height: 19px;"> <p>+6.9%</p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Fee income, RUB bln</p> </td> <td style="width: 142px; height: 19px;"> <p>15.8</p> </td> <td style="width: 132px; height: 19px;"> <p>15.5</p> </td> <td colspan="2" style="width: 101px; height: 19px;"> <p>+2.1%</p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Net income, RUB bln</p> </td> <td style="width: 142px; height: 19px;"> <p>27.2</p> </td> <td style="width: 132px; height: 19px;"> <p>20.7</p> </td> <td colspan="2" style="width: 101px; height: 19px;"> <p>+31.5%</p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Earnings per share, RUB</p> </td> <td style="width: 142px; height: 19px;"> <p>0.89</p> </td> <td style="width: 132px; height: 19px;"> <p>0.79</p> </td> <td colspan="2" style="width: 101px; height: 19px;"> <p>+12.7%</p> </td> </tr> <tr> <td colspan="5" style="width: 707px; height: 19px;"> <p><strong><em>Key financial ratios, %</em></strong></p> </td> </tr> <tr> <td style="width: 331px; height: 19px;"> <p>Net interest margin (NIM)</p> </td> <td style="width: 142px; height: 19px;"> <p>2.6%</p> </td> <td style="width: 132px; height: 19px;"> <p>2.9%</p> </td> <td colspan="2" style="width: 101px; height: 19px;"> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 20px;"> <p>Net interest income as percentage of average RWA (NII/ARWA)</p> </td> <td style="width: 142px; height: 20px;"> <p>4.4%</p> </td> <td style="width: 132px; height: 20px;"> <p>4.5%</p> </td> <td colspan="2" style="width: 101px; height: 20px;"> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 20px;"> <p>Cost-to-income ratio (CTI)</p> </td> <td style="width: 142px; height: 20px;"> <p>29.8%</p> </td> <td style="width: 132px; height: 20px;"> <p>26.8%</p> </td> <td colspan="2" style="width: 101px; height: 20px;"> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 20px;"> <p>Return on average equity (ROAE)</p> </td> <td style="width: 142px; height: 20px;"> <p>19.9%</p> </td> <td style="width: 132px; height: 20px;"> <p>17.8%</p> </td> <td colspan="2" style="width: 101px; height: 20px;"> <p> </p> </td> </tr> <tr> <td style="width: 331px; height: 20px;"> <p>Return on average assets (ROAA)</p> </td> <td style="width: 142px; height: 20px;"> <p>1.4%</p> </td> <td style="width: 132px; height: 20px;"> <p>1.2%</p> </td> <td colspan="2" style="width: 101px; height: 20px;"> <p> </p> </td> </tr> </tbody> </table> <p> </p> <div class="footnotes"> <div class="footnotes__item" > <p><sup>1</sup>$1 = RUB 69.4706, CBR’s exchange rate as at 31.12.2018</p> </div> <br> <p><strong>Net income</strong> grew by 31.5% yoy to RUB 27.2 bln. This was driven by the growth of business volumes coupled with a notable improvement of the loan portfolio quality.</p> <p><strong>Net interest income </strong>rose 6.9% to RUB 48.4 bln on the back of development of the Bank’s business segments. <strong>Net interest margin </strong>decreased to 2.6% as the percentage of highly liquid assets on the Bank’s balance sheet expanded. <strong>Net interest income as percentage of average RWA</strong><sup>2</sup> was 4.4%. <strong>Net interest income after provisions</strong> rose 73.1% to RUB 46.2 bln as the Bank’s loan portfolio quality improves.</p> <p><strong>Fee and commission income</strong> increased by 2.1% compared to 2017 and reached RUB 15.8 bln. That growth was notably driven by cash operations, including cash handling, that increased by 24.1% to RUB 2.6 bln.</p> <p><strong>Operating income </strong>(before provisions) grew by 4.5% to RUB 65.2 bln. <strong>Operating expense</strong> was RUB 19.4 bln having grown by 15.9% yoy due to the growth of staff costs. Operational efficiency remained at a high level <strong>with the cost</strong><strong>-</strong><strong>to</strong><strong>-</strong><strong>income</strong><strong> (</strong><strong>CTI</strong><strong>) </strong><strong>ratio</strong> being 29.8%.</p> <p>The Bank’s <strong>total assets</strong> rose 13.6% to RUB 2,145.9 bln through diversification of sources of growth. <strong>Deposits in banks and other financial institutions</strong> grew by 28.8% to RUB 1,088.2 bln, and <strong>securities portfolio </strong>composed of high-grade issuers’ bonds expanded by 61.7% to RUB 230.1 bln.</p> <p><strong>Gross loan portfolio</strong> expanded by 5.2% in 4Q2018, however it decreased by 9.6% to RUB 740.1 bln as at end-2018, due to repayments and, to a great extent, settlement of loans to several large corporate borrowers which are impaired but not overdue (stage 3). Retail loan portfolio expanded by 10.1% to RUB 96.6 bln due to an increase in unsecured loans by 14.2% to RUB 72.2 bln. The share of corporate loans in the gross loan portfolio was 86.9%, its retail portion being 13.1%. The ratio of NPL90+ to gross loan portfolio decreased from 2.4% to 1.6% due to repayment of several big problem loans. The improving loan portfolio quality was also evidenced by a reduction in the cost of risk by 1.5 pp to 1.0%. The NPL90+ coverage ratio remained at the 2017YE level of 260.0%.</p> <p><strong>Customer deposits </strong>rose 35.1% to RUB 1,272.2 bln or 65.1% of the Bank’s total liabilities. That growth was mainly driven by corporate deposits which increased by 37.9% to RUB 897.1 bln. Retail deposits reached RUB 375.1 bln, having grown by 28.8% in 2018, in particular due to the assignment of Sovetsky Bank’s retail deposits in July 2018. Net loans to deposits ratio decreased to 55.7% owing partly to the Bank's conservative approach to lending and partly to the accelerated deposit base growth.</p> <p>The Basel III<strong> capital adequacy ratio </strong>was 21.9% and the Tier I capital ratio was 14.1% as at end-2018. The Bank’s total capital according to the Basel III standards increased by 8.4% to RUB 297.4 bln, mostly due to its net income.</p> <p><strong>Capital markets activity</strong></p> <p>In February 2018, the Bank placed a senior 5-year USD 500 mln 5.55% Eurobond issue.</p> <p>In July 2018, the Bank issued RUB 5 bln perpetual subordinated bonds series 15 with the proceeds qualified as Tier I capital. The interest rate for the first 12 coupon periods is 12%.</p> <p>In October 2018, in order to optimise its capital structure, the Bank partially bought back USD 70 mln in aggregate of its USD 600,000,000 7.500% subordinated loan participation notes due 2027 and USD 700,000,000 8.875% subordinated perpetual callable loan participation notes.</p> <p>In February 2019, the Bank placed its debut euro-nominated senior 5-year EUR 500 mln 5.15% Eurobond issue.</p> <p> </p> <div class="footnotes"> <div class="footnotes__item" > <p><sup>2</sup>The ratio of net interest income to average risk-weighted assets classified into banking and trading books </p> </div>