VTB Bank

Earnings Release • Feb 26, 2018

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JSC VTB Bank (VTBR)

VTB Group announces IFRS results for the full year and the fourth quarter of 2017

26-Feb-2018 / 09:12 CET/CEST

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VTB Group announces IFRS results for the full year and the fourth quarter of 2017

VTB Bank ("VTB" or "the Bank"), the parent company of VTB Group ("the Group"), today publishes its Consolidated Financial Statements with the Independent Auditors' Report on these Statements for the year ended 31 December 2017.

Andrey Kostin, President and Chairman of the Management Board, said: "In 2017 VTB Group recorded net income of RUB 120.1 billion and achieved its key annual targets, making tangible progress on our three-year strategic plan. We have improved our market share in the growing retail business, strengthened our funding structure, and delivered robust growth in fee and commission income.

"Today VTB is a leaner and more streamlined company following the successful and seamlessly executed reorganisation, with the merger of Bank of Moscow completed in 2016, the reshuffle of our European operations in 2017, and the merger of VTB24 completed on 1 January 2018; this has allowed us to achieve sizeable cost savings and business synergies.

"In retail banking we benefitted from the changing market landscape as customers continued to move funds to trusted market leaders like VTB. We expanded our retail lending on the back of Russia's macro recovery, and our nationwide reach enabled us to grow retail loans and deposits faster than the industry average. We have also significantly widened our retail customer franchise through the continued roll-out of the cost-efficient Post Bank network, bringing our total network size to around 14 thousand outlets.

"In Corporate-Investment banking we started to see a pickup in loan demand as the economy continued to improve, as well as increased activity in the capital markets where VTB Capital remains the undisputed market leader in Russia.

"We have introduced the unified VTB brand, which stands for greater efficiency combined with technological transformation and innovation, and reflects VTB's strive for operational excellence, as well as our capacity to further enhance the Bank's product offering and customer experience across all categories of clients.

"The strong financial and strategic performance in 2017 gives us full confidence in the Bank's ability to accomplish all of our key goals under the 2017-2019 strategy, including net profit."

FINANCIAL AND OPERATING HIGHLIGHTS

Income Statement

RUB billion	FY 2017	FY 2016	Change, %	4Q 2017	4Q 2016	Change, %
Net interest income	460.2	415.0	10.9%	116.5	104.6	11.4%
Net fee and commission income	95.3	81.8	16.5%	28.3	25.9	9.3%
Operating income before provisions	592.5	510.6	16.0%	188.3	149.5	26.0%
Provision charge*	(171. 9)	(211.2)	(18.6%)	(53.7)	(64.5)	(16.7%)
Staff costs and administrative expenses	(260.9)	(233.9)	11.5%	(75.9)	(62.3)	21.8%
Net profit	120.1	51.6	132.8%	44.8	17.5	156.0%

*Includes provision charge for impairment of debt financial assets and provision charge for impairment of other assets, credit related commitments and legal claims.

• Net profit for FY 2017 grew by 132.8% year-on-year to RUB 120.1 billion, driven by higher net interest income and net fee and commission income, and strengthened by lower provision charges as asset quality continued to improve.
• Net interest income rose by 10.9% year-on-year to RUB 460.2 billion in FY 2017, primarily driven by improvements in the Group's funding structure. The net interest margin was 4.1% for FY 2017 and 4Q 2017, up from 3.7% in FY 2016 and 3.8% in 4Q 2016.
• Net fee and commission income grew by 16.5% year-on-year to RUB 95.3 billion in FY 2017, supported by the strong performance of the Retail business and Transaction banking (as part of Corporate-Investment banking and Mid-Corporate banking).
• The cost of risk stood at 1.6% for FY 2017, compared to 1.5% in FY 2016. The cost of risk in 4Q 2017 was 1.5%, compared to 2.0% in 4Q 2016. The provision charge for FY 2017 amounted to RUB 171.9 billion, down by 18.6%% year-on-year.
• The Group improved its cost efficiency in FY 2017: the ratio of costs to operating income before provisions decreased to 44.0% for FY 2017, versus 45.8% for FY 2016. Staff costs and administrative expenses in FY 2017 grew by 11.5% year-on-year to RUB 260.9 billion, as VTB Group continued to maintain strict control over expenses, while one-off reorganisation costs were partly offset by cost synergies from the completion of the merger of Bank of Moscow into VTB Bank during 2016.

Statement of financial position

RUB billion	31-Dec-17	30-Sep-17	31-Dec-16	Change in FY 2017, % or p.p.	Change in 4Q 2017, % or p.p.
Total assets	13,009.3	12,893.7	12,588.2	3.3%	0.9%
Loans and advances to customers, including pledged under repurchase agreements (gross)	9,772.8	9,626.5	9,487.0	3.0%	1.5%
Gross loans to legal entities	7,286.5	7,200.4	7,311.4	(0.3%)	1.2%
Gross loans to individuals	2,486.3	2,426.1	2,175.6	14.3%	2.5%
Customer deposits	9,144.7	9,065.8	7,346.6	24.5%	0.9%
Deposits from legal entities	5,523.1	5,735.3	4,342.3	27.2%	(3.7%)
Deposits from individuals	3,621.6	3,330.5	3,004.3	20.5%	8.7%
NPL ratio	5.7%	6.4%	6.4%	(0.7 p.p.)	(0.7 p.p.)
Tier 1 CAR	13.1%	12.9%	12.9%	0.2 p.p.	0.2 p.p.
Total CAR	14.8%	14.5%	14.6%	0.3 p.p.	0.2 p.p.

• In FY 2017 the Group's loan book grew by 3.0% to RUB 9,772.8 billion as gross loans to individuals increased by 14.3% during the year. Gross loans to legal entities, while down by 0.3% in FY 2017 to RUB 7,286.5 billion, grew by 1.2% in 4Q 2017.
• VTB Group's retail lending continued to gain speed, up by 14.3% in FY 2017 and by 2.5% in 4Q 2017, while the Russian retail lending market grew by 12.7% in FY 2017. The Group's market share as of 31 December 2017 was 18.8%. Consumer loans, mortgages and car lending increased by 20.8%, 9.7% and 15.0%, respectively, during 2017.
• The Group's NPL ratio was 5.7% of gross customer loans including those pledged under repurchase agreements (the "total loan book") as of 31 December 2017, down from 6.4% as of 31 December 2016. The allowance for loan impairment was 6.2% of the total loan book as of 31 December 2017, down from 6.6% on 30 September 2017, and from 6.7% on 31 December 2016. The NPL coverage ratio was 107.7% at 31 December 2017, versus 104.6% as of 31 December 2016.
• The Group continues to increase the share of customer deposits, while minimising reliance on wholesale funding: as of 31 December 2017, the Group's Loans-to-Deposits Ratio was 100.3%, down by 20.2 p.p. during the year (120.5% of 31 December 2016). As of 31 December 2017, the Group's market share in Russia in corporate and retail funding stood at 22.2% and 12.6%, respectively. Customer deposits represented 79.3% of total liabilities as of 31 December 2017, up from 79.2% as of 30 September 2017 and 65.7% at year-end 2016. Customer deposits grew by 24.5% to RUB 9,144.7 billion in FY 2017. Deposits from legal entities grew by 27.2% in FY 2017, while deposits from individuals grew by 20.5%.
• Post Bank plays an important role in the development of VTB Group's retail banking operations: In 2017 Post Bank acquired 3.2 million new clients and the total client base grew to 6.3 million. The regional network grew by 95% to over 12,300 outlets in more than 4,400 localities. 
• The Group continued to maintain a low reliance on wholesale funding, with the share of debt securities issued in total liabilities falling to just 2.8% as of 31 December 2017, compared to 3.6% as of 31 December 2016.
• VTB Capital delivered strong performance during the year, and once again led the DCM, ECM and M&A league tables in FY 2017. VTB Capital was also named "Best Investment Bank in Russia" for the fifth year running by Euromoney Awards for Excellence in July 2017.
• Capital adequacy ratios remained sound, backed by solid profitability during FY 2017: as of 31 December 2017, the Group's total and Tier 1 capital adequacy ratios were 14.8% and 13.1%, respectively, versus 14.6% and 12.9% as of 31 December 2016.

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Attachment

Document title: VTB Group IFRS Consolidated Financial Statements as of December 31, 2017

Document: http://n.eqs.com/c/fncls.ssp?u=UPDXOJKOTD

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ISIN:	US46630Q2021
Category Code:	MSCM
TIDM:	VTBR
LEI Code:	253400V1H6ART1UQ0N98
Sequence No.:	5239

End of Announcement	EQS News Service

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657503  26-Feb-2018