MKB earned 28 bln roubles of IFRS net income in 9M2024

15.11.2024

<p><strong>Key Results</strong></p> <ul> <li>Net income was RUB 28.1 bln.</li> <li>Return on equity (ROAE) was 12.5% and cost-to-income (before provisions) ratio (CTI) was 32.7%.</li> <li>Net interest margin stood at 2.5%.</li> <li>Assets expanded by 9.3% to RUB 5,099 bln as total loan portfolio grew by 14.9%.</li> <li>Net corporate loan portfolio expanded by 15.5% driven by quality borrowers in various sectors.</li> <li>Ratio of non-performing loans (NPL[1]) to gross loan portfolio was 2.9%.</li> <li>Retail deposits expanded by substantial 29.2%, in line with MKB’s strategic liquidity management goals and market trends.</li> <li>Basel III total capital adequacy ratio stood at 12.4%.</li> <li>NRA affirmed AA-|ru| credit rating with stable outlook in October 2024.</li> <li>ACRA affirmed A+(RU) credit rating with stable outlook in October 2024.</li> <li>MKB arranged 63 domestic DCM transactions. Total face value of placed bonds exceeded equivalent of RUB 1.2 tln. MKB's market share is 5.6%[2].</li> <li>Number of active large and medium-sized corporate customers (holdings) rose by 14%.</li> <li>Overall active retail customer base rose by 7.4%, and number of premium retail customers by 23.5%.</li> <li>MKB issued first RUB 5 bln 15-year state-supported investment loan (for purchase of railway carriages). The Bank continues to develop long-term subsidised support for key sectors and enhance its role in making agribusinesses more competitive.</li> </ul> <p><strong>Income Statement Analysis</strong></p> <table border="0" cellpadding="0" cellspacing="0" style="width:579px"> <tbody> <tr> <td style="height:37px; width:344px"> <p><strong>RUB bln, unless specified otherwise</strong></p> </td> <td style="height:37px; width:111px"> <p><strong>9</strong><strong>M2024</strong></p> </td> <td style="height:37px; width:124px"> <p><strong>9</strong><strong>M2023</strong></p> </td> </tr> <tr> <td style="height:37px; width:344px"> <p>Net interest income before charge for credit losses</p> </td> <td style="height:37px; width:111px"> <p>85.9</p> </td> <td style="height:37px; width:124px"> <p>83.9</p> </td> </tr> <tr> <td style="height:37px; width:344px"> <p>Net fee and commission income</p> </td> <td style="height:37px; width:111px"> <p>9.0</p> </td> <td style="height:37px; width:124px"> <p>12.1</p> </td> </tr> <tr> <td style="height:37px; width:344px"> <p>Operating income before credit loss allowances</p> </td> <td style="height:37px; width:111px"> <p>86.7</p> </td> <td style="height:37px; width:124px"> <p>111.7</p> </td> </tr> <tr> <td style="height:37px; width:344px"> <p>Operating expense</p> </td> <td style="height:37px; width:111px"> <p>(28.4)</p> </td> <td style="height:37px; width:124px"> <p>(28.5)</p> </td> </tr> <tr> <td style="height:37px; width:344px"> <p>Provisioning charges for debt financial assets</p> </td> <td style="height:37px; width:111px"> <p>(23.1)</p> </td> <td style="height:37px; width:124px"> <p>(19.7)</p> </td> </tr> <tr> <td style="height:37px; width:344px"> <p><strong>Net income</strong></p> </td> <td style="height:37px; width:111px"> <p><strong>28.1</strong></p> </td> <td style="height:37px; width:124px"> <p><strong>48</strong><strong>.</strong><strong>3</strong></p> </td> </tr> <tr> <td style="height:37px; width:344px"> <p>Net interest margin (NIM)</p> </td> <td style="height:37px; width:111px"> <p>2.5%</p> </td> <td style="height:37px; width:124px"> <p>2.8%</p> </td> </tr> <tr> <td style="height:37px; width:344px"> <p>Cost-to-income ratio (CTI)</p> </td> <td style="height:37px; width:111px"> <p>32.7%</p> </td> <td style="height:37px; width:124px"> <p>25.5%</p> </td> </tr> <tr> <td style="height:37px; width:344px"> <p>Return on equity (ROAE)</p> </td> <td style="height:37px; width:111px"> <p>12.5%</p> </td> <td style="height:37px; width:124px"> <p>26.2%</p> </td> </tr> <tr> <td style="height:22px; width:344px"> <p>Return on assets (ROAA)</p> </td> <td style="height:22px; width:111px"> <p>0.8%</p> </td> <td style="height:22px; width:124px"> <p>1.5%</p> </td> </tr> </tbody> </table> <p> </p> <p><strong>Net income </strong>for 9 months 2024 fell by 42% yoy to RUB 28.1 bln mainly due to negative revaluation of the securities portfolio as the Bank of Russia toughened its monetary policy. As at 30 September 2024, 82% of the securities portfolio was on the CBR's Lombard List. Further pressure on the profits came from provisioning charges and lower foreign exchange gains.</p> <p><strong>Return on equity and assets</strong> was 12.5% and 0.8% as at the end of the reporting period, respectively.</p> <p><strong>Provisioning charges for debt financial assets </strong>amounted to RUB 23.1 bln, which corresponds to the cost of risk of 110 bps.</p> <p><strong>Net interest income</strong> was RUB 85.9 bln ytd, a growth of 2.4% yoy mainly driven by the corporate loan portfolio. <strong>Net interest margin</strong> was 2.5%. Banking margins demonstrate stability, despite interest rate-sensitivity.</p> <p><strong>Net fee and commission income </strong>was RUB 9.0 bln for 9M2024.</p> <p><strong>Operating expense </strong>stayed at the same level of RUB 28.4 bln, and consisted mainly of employment benefits and administrative expenses. MKB stably demonstrates a high level of operational efficiency: its <strong>cost-to-income ratio (CTI)</strong> for the first nine months of 2024 was 32.7%, in line with the target.</p> <p><strong>Balance Sheet Analysis</strong></p> <table border="0" cellpadding="0" cellspacing="0" style="width:100%"> <tbody> <tr> <td style="height:19px; width:198px"> <p><strong>RUB bln, unless specified otherwise</strong></p> </td> <td style="height:19px; width:95px"> <p><strong>30.09.2024</strong></p> </td> <td style="height:19px; width:85px"> <p><strong>30.06.2024</strong></p> </td> <td style="height:19px; width:85px"> <p><strong>31.03.2024</strong></p> </td> <td style="height:19px; width:85px"> <p><strong>31.12.2023</strong></p> </td> <td style="height:19px; width:104px"> <p><strong><em>Change ytd</em></strong><strong>,%</strong></p> </td> </tr> <tr> <td style="height:30px; width:198px"> <p><strong>Assets</strong></p> </td> <td style="height:30px; width:95px"> <p>5,099.1</p> </td> <td style="height:30px; width:85px"> <p>4,796.4</p> </td> <td style="height:30px; width:85px"> <p>4,826.9</p> </td> <td style="height:30px; width:85px"> <p>4,667.0</p> </td> <td style="height:30px; width:104px"> <p>+9.3%</p> </td> </tr> <tr> <td style="height:30px; width:198px"> <p><strong>Total net loan portfolio</strong></p> </td> <td style="height:30px; width:95px"> <p>2,690.2</p> </td> <td style="height:30px; width:85px"> <p>2,505.9</p> </td> <td style="height:30px; width:85px"> <p>2,466.6</p> </td> <td style="height:30px; width:85px"> <p>2,349.9</p> </td> <td style="height:30px; width:104px"> <p>+14.5%</p> </td> </tr> <tr> <td style="height:30px; width:198px"> <p><strong>Net corporate loan portfolio</strong></p> </td> <td style="height:30px; width:95px"> <p>2,483.0</p> </td> <td style="height:30px; width:85px"> <p>2,303.1</p> </td> <td style="height:30px; width:85px"> <p>2,266.1</p> </td> <td style="height:30px; width:85px"> <p>2,149.3</p> </td> <td style="height:30px; width:104px"> <p>+15.5%</p> </td> </tr> <tr> <td style="height:30px; width:198px"> <p><strong>Net retail loan portfolio</strong></p> </td> <td style="height:30px; width:95px"> <p>207.2</p> </td> <td style="height:30px; width:85px"> <p>202.8</p> </td> <td style="height:30px; width:85px"> <p>200.5</p> </td> <td style="height:30px; width:85px"> <p>200.6</p> </td> <td style="height:30px; width:104px"> <p>+3.3%</p> </td> </tr> <tr> <td style="height:30px; width:198px"> <p><strong>Liabilities</strong></p> </td> <td style="height:30px; width:95px"> <p>4,742.3</p> </td> <td style="height:30px; width:85px"> <p>4,442.3</p> </td> <td style="height:30px; width:85px"> <p>4,469.0</p> </td> <td style="height:30px; width:85px"> <p>4,319.1</p> </td> <td style="height:30px; width:104px"> <p>+9.8%</p> </td> </tr> <tr> <td style="height:30px; width:198px"> <p><strong>Due to customers</strong></p> </td> <td style="height:30px; width:95px"> <p>3,033.4</p> </td> <td style="height:30px; width:85px"> <p>3,058.8</p> </td> <td style="height:30px; width:85px"> <p>3,008.8</p> </td> <td style="height:30px; width:85px"> <p>2,861.1</p> </td> <td style="height:30px; width:104px"> <p>+6.0%</p> </td> </tr> <tr> <td style="height:30px; width:198px"> <p><strong>Corporate accounts</strong></p> </td> <td style="height:30px; width:95px"> <p>2,018.9</p> </td> <td style="height:30px; width:85px"> <p>2,149.7</p> </td> <td style="height:30px; width:85px"> <p>2,149.8</p> </td> <td style="height:30px; width:85px"> <p>2,075.6</p> </td> <td style="height:30px; width:104px"> <p>-2.7%</p> </td> </tr> <tr> <td style="height:30px; width:198px"> <p><strong>Retail deposits</strong></p> </td> <td style="height:30px; width:95px"> <p>1,014.5</p> </td> <td style="height:30px; width:85px"> <p>909.0</p> </td> <td style="height:30px; width:85px"> <p>859.0</p> </td> <td style="height:30px; width:85px"> <p>785.5</p> </td> <td style="height:30px; width:104px"> <p>+29.2%</p> </td> </tr> <tr> <td style="height:30px; width:198px"> <p><strong>Equity</strong></p> </td> <td style="height:30px; width:95px"> <p>356.9</p> </td> <td style="height:30px; width:85px"> <p>354.1</p> </td> <td style="height:30px; width:85px"> <p>357.8</p> </td> <td style="height:30px; width:85px"> <p>347.9</p> </td> <td style="height:30px; width:104px"> <p>+2.6%</p> </td> </tr> <tr> <td style="height:19px; width:198px"> <p><strong>Financial ratios</strong></p> </td> <td style="height:19px; width:95px"> <p> </p> </td> <td style="height:19px; width:85px"> </td> <td style="height:19px; width:85px"> <p> </p> </td> <td colspan="2"> <p> </p> </td> </tr> <tr> <td style="height:19px; width:198px"> <p><strong>Loan-to-deposit ratio (LDR)</strong></p> </td> <td style="height:19px; width:95px"> <p>88.7%</p> </td> <td style="height:19px; width:85px"> <p>81.9%</p> </td> <td style="height:19px; width:85px"> <p>82.0%</p> </td> <td style="height:19px; width:85px"> <p>82.1%</p> </td> <td style="height:19px; width:104px"> </td> </tr> </tbody> </table> <p><strong>Total assets </strong>rose by 9.3% and reached RUB 5.1 tln, mainly because the <strong>loan portfolio</strong> increased by 14.5% (14.1% net of currency revaluation).</p> <p>The net corporate loan portfolio expanded by 15.5% ytd (15.1% net of currency revaluation) to RUB 2,483.0 bln. The Bank continues to focus on its loan portfolio’s sectoral diversification, increasing exposure to such sectors as transport services (+117%), mining of precious metals and ores (+53%); food and agricultural products (+41%), clothes, shoes, textile, sporting goods (+30%), wholesale trade (+15%); cars, motorcycles, spare parts (+9%).</p> <p>As retail customers' preferences shifted toward saving, MKB's retail loan portfolio expanded by moderate 3.3% ytd to RUB 207.2 bln. </p> <p><strong>Customer deposits</strong>, representing 64% of the total liabilities or RUB 3,033.4 bln, expanded by 6.0% ytd.</p> <p>Corporate deposits increased by 2.7% ytd to RUB 2,018.9 bln.</p> <p>Retail deposits rose by 29.2% ytd to RUB 1,014.5 bln. MKB continues to offer highly competitive terms in the retail deposit market, diversifying its funding base and sticking to its strategic liquidity management goals.</p> <p>Loan-to-deposit ratio (LDR) stands at 88.7%.</p> <p><strong>The core Tier 1 capital adequacy ratio </strong>was 8.8% as at 30 September 2024, the <strong>Tier 1 capital adequacy</strong> <strong>ratio</strong> was 10.5%, and the <strong>total capital adequacy ratio</strong> was 12.4%. Given the growth of risk-weighted assets (+10.3%) and the unchanged capital, Basel III capital adequacy ratios declined in the reporting period. </p> <p>MKB enjoys a wide safety margin over the Bank of Russia's regulatory capital adequacy ratios.</p> <p> </p> <hr /> <p>[1] NPL (non-performing loan) means a loan overdue by more than 90 days.</p> <p>[2] According to Cbonds “Bookrunner League Table of Local Russian Bonds, Jan-Sep 2024”.</p>