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Financial results 

In 1H2017 the Group recorded net income of RUB 26.2 bn. Total comprehensive income, including revaluation of non-trading investments and exchange differences on translation of the Group’s foreign operations, accounted for RUB 27.3 bn. By comparison, in 1H2016 net income and net comprehensive income amounted to RUB 14.2 bn and RUB 5.6 bn, respectively. The Group’s ROE stood at 10.2%, up by 4.6 p.p. from the same indicator as at year-end 2016. ROA amounted to 1.0%, up by 0.4 p.p. from year-end 2016.   

The Group’s net interest income in 1H2017 totaled RUB 63.6 bn, up by 6.4% compared to RUB 59.8 bn a year earlier, meanwhile both components of the net interest income decreased: interest income fell by 6.1% to RUB 183.4 bn, and interest expenses drop.p.ed by 11.6% to RUB 119.8 bn. The net interest margin in 1H2017 reached 3.1%, up by 0.1 p.p. from the same indicator in 2016.

The provision charge in 1H2017 amounted to RUB 6.7 bn compared to RUB 17.9 bn in 1H2016. The Group’s cost of risk in 1H2017 totaled 0.3% compared to 0.9% in 1H2016.

Income from operations with securities⁹ totaled RUB 7.0 bn in 1H2017 compared to RUB 13.2 bn in 1H2016. The main reason for the contraction in income from operations with securities was lower income from portfolio investments due to the sale of a number of the Group’s investments. 

Non-banking segments recorded an operating profit of RUB 2.0 bn in 1H2017 compared to RUB 0.3 bn in 1H2016.

The abovementioned developments were factored into the Group’s operating income (before allowance for impairment of interest earning assets) of RUB 74.7 bn, down by 7.1% from 1H2016.

Operating expenses in 1H2017 reached RUB 35.3 bn compared to RUB 34.4 bn in 1H2016. At the same time, the cost-to-income ratio increased in 1H2017 by 4.4 p.p. to 47.2% compared to 1H2016. The change in this ratio was +0.7 p.p. from year-end 2016. 

Business volumes and assets quality

The Group’s total assets amounted to RUB 5,184.4 bn as at 30 June 2017, up by 6.3% from RUB 4,879.2 bn as at year-end 2016. 

Cash and cash equivalents amounted to RUB 689.1 bn as at 30 June 2017 compared to RUB 473.5 bn at year-end 2016.

Loan book before provision for impairment as at 30 June 2017 stood at RUB 3,490.3 bn or almost the same as at year-end 2016 (RUB 3,503.9  bn). 

Loan book contributed 63.1% to the Group’s total assets, down by 3.5 p.p. from year-end 2016. At the same time, the Group’s corporate loans were at RUB 3,152.1 bn as at 30 June 2017, or almost the same indicator as at year-end 2016 (RUB 3,174.8 bn), while retail book amounted to RUB 338.3 bn as at 30 June 2017, up by 2.8% from the year-start, accounting for 9.7% of the gross loan book (compared to 9.4% as at year-end 2016).

The share of non-performing loans (NPLs¹⁰) in the gross loan book reached 3.3% as at 30 June 2017 compared to 3.0% at year-end 2016. 

The provisioning ratio (the ratio of loan loss reserves to the loan book) comprised 6.3% as at 30 June 2017, down by 1.0 p.p. from 7.3% as at year-end 2016. The lower provisions resulted from the inclusion of a number of impaired assets in the non-performing loans (NPL) and their further write-off in the reporting period. At the same time, the loan loss provisions are 1.9 times higher than the non-performing debt (provisioning coverage was 2.5 times as at year end 2016).

The Group’s securities portfolio in 1H2017 expanded by 4.8% to RUB 617.3 bn compared to RUB 589.1 bn as at year-end 2016, mainly due to the acquisition of investment units and government and corporate debt securities in 1Q2017. The share of securities in the Group’s assets stood at 11.9% as of the reporting date compared to 12.1% at year-end 2016. The structure of the Group’s securities portfolio is characterized by the prevalence of fixed income instruments representing investments in Russian government debt instruments, bonds and promissory notes of Russian issuers, their share amounted to 81.5% as at 30 June 2017 compared to 79.2% as at year-end 2016.

Corporate and retail deposits continued to grow in 1H2017; they amounted to RUB 3,566.1 bn as at 30 June 2017, up by 7.1% from RUB 3,330.8 bn as at year-end 2016. In particular, the volume of corporate deposits stood at RUB 2,818.0 bn as at 30 June 2017, up by 6.2% on the year-start. Retail deposits and accounts increased by 10.3% in 1H2017 to RUB 748.0 bn from RUB 678.3 bn at year-end 2016. The share of customer deposits in the Group’s liabilities stood at 77.1% as at 30 June 2017 compared to 76.0% at year-end 2016.

Borrowings from debt capital markets, including Eurobonds and local bonds, stood at RUB 301.2 bn as at 30 June 2017 compared to RUB 317.3 bn at year-end 2016. A CNY 1 bn Eurobonds, issued in 2014, and Eurobonds issued in 2012 with the total nominal value of USD 1,000 mln were redeemed, while RUB 34.2 bn bonds were placed. The share of borrowings on debt capital markets in the resource base declined in 1H2017 from 7.2% to 6.5% on the back of lower borrowings and increased customer funds.

The Group’s Basel I total capital based on consolidated IFRS financials amounted to RUB 694.9 bn in 1H2017 as at 30 June 2017 compared to RUB 620.4 bn at year-end 2016. The capital growth was mainly due to the additional issue of the Bank’s ordinary shares (the effect of RUB 60 bn) and also due increased retained earnings. The Group’s risk weighted assets increased by 3.9% in 1H2017. As a result, the Group’s total capital adequacy ratio increased to 14.6% (13.5% at year-end 2016), while the Tier 1 capital adequacy ratio grew to 11.0% (10.0% at year-end 2016).