Annual report 2011 - VTB

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VTB Group is a leading Russian financialgroup. The Bank’s universal business modeland scale of operations enable the Group tobe a successful competitor both in Russia andabroad. VTB Group has an international network,which is unique for Russian banks, comprisingover 30 banks and financial companies in 21countries all over the globe.More options:wider growth opportunities
VTB Annual Report 20114. Management report54Net fee and commission income(in RUB, billion) 2010 2011 ChangeCommission on settlement transactions 15.4 24.8 61.0%Commission on guarantees issued and trade finance 3.9 6.6 69.2%Commission on cash transactions 2.9 5.3 82.8%Commission on operations with securities and capital markets 4.5 5.9 31.1%Other 2.1 4.8 128.6%Total fee and commission income 28.8 47.4 64.6%Commission on settlement transactions (2.2) (5.0) 127.3%Commission on cash transactions (1.0) (1.9) 90.0%Other (0.9) (1.3) 44.4%Total fee and commission expense (4.1) (8.2) 100.0%Net fee and commission income 24.7 39.2 58.7%Source: VTB Group’s IFRS consolidated financial statements for 2010 and 2011.guarantees. Revenues for this item were up by69.2% to RUB 6.6 billion in 2011, driven by the rapiddevelopment of the trade finance business.In 2011, the Group’s fee and commission expensesdoubled to RUB 8.2 billion, compared toRUB 4.1 billion in 2010. In parallel with this,commission expenses on settlement and cashtransactions amounted to RUB 6.9 billion, up by115.6% compared to 2010. This increase is relatedto the growing volume of operations conducted byVTB.Gains less losses / (losses net of gains) arising fromfinancial instrumentsProvision charge for impairment of debtfinancial assetsDuring the reporting period, VTB Group was ableto reduce significantly the provision charges forimpairment of its debt financial assets, due to theimproved financial stability of its corporate clients.In 2011, the provision charge for impairment of debtfinancial assets decreased to RUB 31.6 billion fromRUB 51.6 billion a year earlier. During the reportingperiod, due to an improvement in the economicconditions in Russia, the amount of the provisioncharge for loan impairment was 0.9% of the averagegross loan portfolio, compared to 1.9% 1 in 2010.loan impairment to the total loan portfolio reduced to6.3% from 9.0% at the end of 2010.Staff costs and administrative expensesVTB Group’s staff costs and administrative expensesincreased by 48.8% in 2011 to RUB 141.5 billion,primarily due to the consolidation of TransCreditBankand the Bank of Moscow, as well as the intensivedevelopment of VTB24’s retail network. The cost-toincomeratio before provisions grew to 49.4% in thereporting period, compared to 43.0% in 2010.Net profitFor the second consecutive year the Group generateda record net profit, which was RUB 90.5 billion,compared to RUB 54.8 billion for the previousyear. Substantial income growth in the Group’score businesses and a significant reduction in theprovision charge for loan impairment were key inachieving this positive financial result for 2011.AssetsAnalysis of VTB Group’s financial positionVTB Group’s total assets in 2011 stood atRUB 6,789.6 billion, compared to RUB 4,290.9 billionat the end of 2010. Asset growth in the reportingperiod was driven by organic growth and theconsolidation of the Bank of Moscow.The Group’s gross loan portfolio (loans and advancesto customers before allowance) increased by 50.0%to RUB 4,590.1 billion in 2011.VTB’s corporate loan portfolio increased by 49.6%to RUB 3,776.0 billion due to the organic growth oflending in this segment, caused by a higher demandfor loans in the second half of the year.In 2011, the growth in retail lending was slightlyhigher than in corporate lending. As at the year-end,the retail loan portfolio had increased by 52.2%and had reached RUB 824.1 billon. The key growthdrivers of the retail loan portfolio were mortgagesand consumer loans, which increased by 42.3% and62.5% respectively over the year.(in RUB, billion) 31.12.2010 31.12.2011 ChangeCash and short-term funds 275.5 407.0 47.7%Mandatory reserve deposits with central banks 26.4 71.9 172.3%Financial assets at fair value through profit or loss 344.6 571.5 65.8%Financial assets pledged under repurchase agreements and loaned financial assets 16.9 198.6 1075.1%Due from other banks 349.9 424.6 21.3%Loans and advances to customers 2,785.4 4,301.6 54.4%Assets of disposal group held for sale – 10.3 –Financial assets available-for-sale 55.9 167.7 200.0%Investments in associates and joint ventures 15.7 32.5 107.0%Investment securities held-to-maturity 34.2 32.4 –5.3%Premises and equipment 113.2 116.8 3.2%Investment property 102.2 122.5 19.9%Intangible assets and goodwill 30.5 141.2 363.0%Deferred tax asset 37.9 42.7 12.7%Other assets 102.6 148.3 44.5%55The Group’s losses net of gains arising from financialinstruments amounted to RUB 26.7 billion for thereporting period, compared to a gains less lossesfigure of RUB 14.7 billion in the previous year.This negative financial result for transactions withsecurities is related to the volatility of the globalcapital markets.The total allowance for loan impairment increased toRUB 288.5 billion in 2011, from RUB 274.2 billion in2010. The biggest contributor to this is the allowancefor corporate loan impairment, which decreased to84.5% of the total allowance for loan impairment in2011, compared to 86.3% in 2010.As a result of the lower provision charge for loanimpairment in 2011, the ratio of the allowance forTotal assets 4,290.9 6,789.6 58.2%1 Calculated excluding the effect of TCB consolidation.Source: VTB Group’s IFRS consolidated financial statements for 2010 and 2011.
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