Bank Saint Petersburg IFRS YE 2008 results
Bank Saint Petersburg increased its 2008 net income by 38% to RUB 2.8 billion (USD 94.4 million).
Financial highlights for YE 2008*:
- Net income amounted to RUB 2.8 billion (USD 94.4 million) compared to RUB 2.0 billion in 2007 (USD 81.8 million)
- Total assets grew by 70% compared to January 1, 2008 and amounted to RUB 215.7 billion (USD 7.3 billion)
- Shareholders’ equity increased by 25% and amounted to RUB 18.8 billion (USD 637.8 million)
- Net interest income grew by 104% and amounted to RUB 9.5 billion (USD 323.3 million)
- Return on equity (ROE) is 16.4%
- Cost-to-income ratio decreased by 5.5 percentage points to 34.7%
*The RUB-nominated figures are translated into USD at the official exchange rate quoted by the CBR for January 1, 2009 (USD 1.00 = RUB 29.39).
Alexander Savelyev, Chairman of the Management Board, comments on the Bank’s annual results:
“In 2008 our business strategy and our professionalism passed the test set by dramatic changes and turbulence of the global economy. Today we are pleased to highlight that focus on the regional market and conservative policy allowed us to stay profitable in these difficult times. From the strategic point of view it is even more important that we have increased our market share in all segments. In particular, our retail deposit share in St. Petersburg increased to 9.5%. Our customer base also grew significantly. This is the best evidence of our customers’ confidence in the Bank’s prospects”.
In 2008 the Bank continued to implement its strategy to develop as a full-service universal bank and further strengthen its market position in St. Petersburg and the Leningrad region. Bank’s share in the St. Petersburg corporate loan market grew to 13.9% (12.9% in 2007) and in the corporate deposit market - to 11.8% (10.5% in 2007); in the retail market the share grew to 7.1% (6.3% in 2007) and 9.5% (7.8% in 2007) respectively. According to Interfax the Bank is ranked 17th by assets and 12th by retail deposits among the Russian banks.
In 2008 the branch network of the Bank was restructured to form 33 offices in St. Petersburg and three branch offices in Moscow, Kaliningrad and Nizhny Novgorod in order to increase cost efficiency and to speed up the decision making process. By the end of 2008 the Bank’s ATM network was comprised of 405 units; the number of cards issued by the Bank exceeded 590,000. In 2008 the Bank upgraded its Internet banking system and continued to extend the line of services provided. By the end of the year it was actively used by 27,000 clients. Last year the Bank launched Internet-Bank for corporate customers and the Pocket PC version of its Internet-Bank system for retail customers.
The most significant events on the capital market were the raising of USD 100 million syndicated loan (with the EBRD acting as a lead arranger), USD 35 million bilateral loan from KfW IPEX-Bank and the private placement of the USD 75 million Eurobond issue. In aggregate in 2008 the Bank raised more than USD 200 million on the capital markets. Besides, at the end of December the Bank attracted the 6-year EUR 36.7 million subordinated loan from its shareholders.
In 2008 the Bank successfully repaid three syndicated loans in the aggregate amount of USD 172 million.
Net Income. The Bank’s 2008 net income increased by 38% to RUB 2.8 billion from RUB 2.0 billion in 2007. The major factors behind this increase are rapid growth of net interest income and business volumes expansion.
Net Interest Income more than doubled and reached RUB 9.5 billion for 2008 from RUB 4.7 billion in 2007. The Bank’s Net Interest Margin increased by 1 percentage point to 6.5% comparing to 5.5% in 2007. Net interest income and NIM increase are attributed to the growth in the Bank’s loan portfolio and general increase in interest rates throughout the loan book.
Net fee and commission income grew by 56% to RUB 1.4 billion for 2008 from RUB 889.4 million for 2007. The growth resulted from increased number of the Bank’s customers and new services introduced; the number of transactions grew accordingly. In 2008 the number of the Bank’s retail customers increased by 190,000 and reached 774,000 individuals; the number of corporate customers increased by 6,600 and reached 35,000 companies. The bulk of fee and commission income (57%) comes from cash and settlement operations. Fee and commission income received by the Bank from the service of cash and settlements operations increased to RUB 969.5 million in 2008 from RUB 548 million (+77%) for the previous year.
Financial markets operations. Facing the negative changes in the market environment the Bank registered a loss from trading securities in 2008 in the amount of RUB 1.3 billion. This result was compensated by gains from trading in foreign currencies in the amount of RUB 980 million and foreign exchange translation gains in the amount of RUR 382 million. An aggregate result from financial markets operations amounts to RUB 103.2 million in 2008 compared to RUB 392.7 million in 2007.
Cost-to-income ratio improved by 5.5 percentage points to 34.7%, being one of the best among the Russian commercial banks. In 2008 operating expenses increased 59% to RUR 3.9 billion from RUR 2.4 billion in 2007. As in the previous years staff costs constitute the major part of operational expenses (54%). Cost control remains the key priority of the Bank under current circumstances.
Liabilities. Customer accounts remain the major source of funding for the Bank being increased by 50% to RUB 144.2 billion from RUB 96.1 billion in 2007. At the end of 2008, 66% of customer accounts belonged to corporates and 34% - to individuals. During the 4Q 2008 the Bank experienced a temporary outflow of both corporate and retail deposits which was fully compensated by the deposits growth resumed towards the end of the year. According to its 2008 results the Bank’s share in the corporate deposit market reached 11.8% and in the retail deposit market - 9.5%. The share of borrowings in liabilities remains insignificant (9%).
Equity and capital. As at the end of 2008 the Bank’s shareholders equity grew by 25% to RUB 18.8 billion primarily due to the retained income in the amount of RUB 2.8 billion and assets revaluation of RUB 1.1 billion. The Bank’s total capital grew by 31% to RUB 24.2 billion from RUB 18.5 billion in 2007. Along with the other factors the growth is attributed to the raising of the 6-year EUR 36.7 million subordinated loan from the Bank’s shareholders at the end of December 2008. The Bank’s Tier 1 and total capital adequacy ratios under Basel accord as at the end of 2008 are 9.69% and 14.15% respectively.
Loans and advances to customers increased by 58% to RUB 144.8 billion from RUB 91.7 billion in 2007. Corporate loans amount to 89% of the loan portfolio and grew by 54% to RUB 128.6 billion. Retail lending increased by 96% to RUB 16.3 billion. In order to meet the negative changes in the market environment the Bank modified its credit policy in the second half of 2008 which slowed down the loan book growth. On the other hand, we did not stop lending completely in the 4Q 2008 in order to support our customers.
Loan portfolio quality. As at the end of 2008, the share of overdue loans in the Bank’s portfolio amounted to 0.73% of the total volume of loans (0.25% in 2007). Impaired but not overdue loans constitute 5.8% of the gross loans. The volume of write-offs during the year remained rather low - RUB 121.8 million, which amounted to 0.13% of the loan portfolio. The rate of provisions for loan impairment increased by 1.13 percentage points to 3.88% compared to 2.75% as at January 1, 2008 in order to meet the negative changes in the market environment.
Consolidated IFRS Financial Statement and Auditor’s Report for 2008 are available on the Bank’s website.