|31 Dec 2016||31 Dec 2015||% change|
|Assets||4 879.2||5 122.2||-4.7%|
|Cash and cash equivalents||473.5||633.5||-25.3%|
|Loans to customers ||3 174.8||3 198.0||-0.7%|
|Retail loans ||329.1||314.4||+4.7%|
|Customer accounts||2 652.5||2 623.0||+1.1%|
|Retail customer accounts||678.3||658.7||+3.0%|
|Capital markets funding ||317.3||475.3||-33.2%|
|12 month ended 31 Dec 2016||12 month ended 31 Dec 2015||% change|
|Net income / (loss)||29.0||(47.7)||-|
|Comprehensive income / (loss)||8.1||(24.9)||-|
|31 Dec 2016/ 12 month ended 31 Dec 2016||31 Dec 2015/ 12 month ended 31 Dec 2015||Change, pp.|
|Total Capital Adequacy Ratio ||13.5%||14.2%||-0.7 p.p.|
|Tier 1 Capital Adequacy Ratio ||10.0%||10.2%||-0.2 p.p.|
|Non-performing loans  (NPL) % gross loans||3.0%||2.0%||+1.0 p.p.|
|Allowance for impairment to gross loans to customers||7.3%||8.9%||-1.6 p.p.|
|Loans-to-deposit ratio1||105.2%||107.0%||-1.8 p.p.|
|Net Interest Margin ||3.0%||2.5%||+0.5 p.p.|
|Cost of risk ||0.1%||3.7%||-3.6 p.p.|
|Cost-to-income ratio ||46.5%||41.8%||+4.7 p.p.|
In 2016 the Group recorded net income of RUB 29.0 bn. Total comprehensive income including revaluation of non-trading investments and exchange differences on translation of the Group’s foreign operations accounted for RUB 8.1 bn. In 2015 net loss and net comprehensive loss amounted to RUB 47.7 bn and RUB 24.9 bn, respectively.
In 2016 the Group’s income was mainly driven by increase of net interest income, demonstrating 27.1% growth to RUB 122.0 bn, as well as by partial recovery of impairment allowance of interest earning assets (that was accumulated during 2014-2015 crisis) as the Group has restructured a number of large individually impaired loans. As a result impairment of interest earning assets went down to RUB 2.0 bn in 2016 from its peak of RUB 139.5 bn in 2015. The Group’s cost of risk leveled to 0.1% 2016 down from 3.7% a year before.
The Group’s net interest income growth was supported by 2.5% increase of its interest income to RUB 380.1 bn as well as by 6.1% decline in its interest expenses to RUB 258.1 bn. Interest income recovery was mainly driven by higher returns from fixed income securities, while interest expenses decreased on the back of partial repayment of the Central Bank of Russia’s funding. As a result the Group’s net interest margin improved to 3.0% in 2016 demonstrating 0.5 pp. increase from 2015.
The Group’s recurring core banking income, including net interest income before impairment of interest earning assets and net commission income, accounted for RUB 136.7 bn - 22.1% up from 2015. Share of core earnings in the Group’s operating income reached 87.5% - 23.8 pp growth from 2015 - and was supported by increase of net interest income coupled by lower impact of trading and investment gains to the Group’s operating income.
Combined income from operations with securities  contracted by 25.6% to RUB 37.4 bn in 2016 and was largely driven by ongoing slowdown of the Group’s investments growth.
Non-banking segments recorded operating losses of RUB 15.0 bn compared to RUB 5.3 bn income in 2015.
The abovementioned developments factored in the Group’s operating income (before allowance for impairment of interest earning assets) of RUB 156.3 bn – 11.2% down from 2015 results.
In 2016, operating expenses amounted to RUB 72.8 bn relative to RUB 73.6 bn a year before. Despite 1.1% contraction of operating expenses, the Group’s cost-to-income ratio increased to 46.5% in 2016 (4.7 pp up from 2015 level) on the back of the abovementioned non-proportional drop of the Group’s operating income.
The Group’s total assets reached RUB 4 879.2 bn as at 31 December 2016 - 4.7% down from RUB 5 122.2 bn as at year end 2015. The decline was delivered by a downward adjustment of the Group’s foreign currency assets in RUB terms amid local currency appreciation as well as by reduction of cash and cash equivalents by RUB 160.0 bn to 473.5 bn, which were channeled for repayment of facilities from the Central Bank of Russia, Eurobonds and syndicated loans.
Gross loan book totaled to RUB 3 503.9 bn as at year end 2016 - close to its 2015 levels. Downward pressure from Ruble appreciation was well compensated by a stable flow of new lending volumes.
Loan book contributed 66.6% to total assets as at year-end 2016 - 4.1 pp up. At the same time, the Group’s corporate loans remained stable at RUB 3 174.8 bn, while retail book demonstrated 4.7% increase to RUB 329.1 bn and equaled to 9.4% of gross loan book (year-end 2015: 9.0%).
The Group’s securities portfolio contracted by 16.8% to RUB 589.1 bn as at 31 December 2016. The decline derived from a partial sale of the Group’s long-term investments and redemption of securities from held-to-maturity and trading portfolios. As a result, a share of securities contracted by 1.7 pp in course of 2016 and accounted to 12.1% of total assets as at 31 December 2016. Fixed income instruments retained its historical dominance in portfolio: Russian government bond and corporate debt securities cumulatively accounted for 79.2% of portfolio as at year-end 2016 (2015: 78.8%).
Corporate and retail accounts remain the core source of the Group’s funding amounting to RUB 3 330.8bn as at year-end 2016 - 1.5%. up from RUB 3 281.7 bn a year before. In particular, the volume of corporate deposits increased by 1.1% and totaled to RUB 2 652.5 bn as at year-end 2016. Corporate deposits inflow intensified in 4Q2016 demonstrating 5.6% increase. Retail accounts growth accelerated in late 2016 as well and reached 3% in annual terms contributing to RUB 678.3 bn closing balance as at year-end 2016. In aggregate terms customer deposits comprised 76.0% of the Group’s liabilities as at 31 December 2016 relative to 71.5% a year before.
In 2016, borrowings from debt capital markets, including eurobonds, local bonds and syndicated loans declined by 33.2% following repayments upon maturity. These facilities amounted to RUB 317.3bn or 7.2% of total liabilities. In particular, the Group timely repaid USD 500mn syndicated loan, CNY 500mn, USD 120mn, CHF 200mn, RUB 40bn Eurobonds and RUB 40bn local bonds, at the same time, the Group has issued RUB 45bn local bonds. Ruble appreciation resulted in negative adjustment of international wholesale funding and also factored in overall decline of this position in the balance-sheet.
As at 31 December 2016, borrowings from the CBR backed by corporate loan amounted to RUB 95.5bn demonstrating 21.0% decline during the year to 2.2% of the Group’s total liabilities.
The share of non-performing loans (overdue 90+ days and defaulted loans) amounted to 3.0% of gross loans as at 31 December 2016 compared to 2.0% a year before.
Impairment allowances covered 7.3% of gross loans, decreasing by 1.6 p.p. relative to year-end 2015. Partially due to recovery of provisions in late 2016. At the same time, non-performing loans were by 2.5 times covered by impairment allowances.
As at 31 December 2016, the Group’s Basel I total capital - based on consolidated IFRS financials - amounted to RUB 620.4bn down by 10.0% from year-end 2015. The decrease was attributable to revaluation of capital instruments denominated in foreign currency and disposal of investments that resulted in decline of minority interest accounted in the Group’s capital before as well as by dividends distributed to holders of preferred shares.
At the same time, risk weighted assets contracted by only 5.6%. This resulted in a modest decrease in capital adequacy ratios: as at 31 December 2016, Tier 1 capital adequacy ratio stood at 10.0% as compared to 10.2% a year before, while total capital adequacy ratio amounted to 13.5% (2015: 14.2%).
“We can regard 2016 as a successful year for the Bank. Despite challenging market conditions, the Bank posted net profit, retained its core banking business volumes, improved quality of a number of loans and successfully managed changes in operating expenses. At the same time operating environment remain unstable, which affects financial position of our clients and constrains development of our international business”, Deputy Chairman of the Management Board Mr. Alexander Sobol said.