Bank Saint Petersburg 1H 2009 IFRS Results

Financial highlights for 1H 2009*:

•    Assets grew 29% compared with July 1, 2008 amounting to RUB 214.0 billion (USD 6.8 billion)

•    Revenues grew by 52.2% to RUB 7.1 billion (USD 227.0 million) compared to 1H 2008

•    Net interest income increased by 13.8% to RUB 4.6 billion (USD 146.7 million) compared to 1H 2008

•    Net loss amounted to RUB 48.7 million (USD 1.6 million)

•    Cost/income ratio for 1H 2009 is 23.48% (down 11.18 pp compared to FY 2008)

*The RUB-nominated figures are translated into USD at the official exchange rate quoted by the CBR for July 1, 2009 (USD 1.00 = RUB 31.29.

Alexander Savelyev, Chairman of the Management Board, comments on the Bank’s 1H 2009 results:
“First half of 2009 is the first period when the Bank’s balance sheet became affected by the crisis. In spite of the worsening market environment we have managed to keep our operational and financial capacity at an exceptionally high level. Thus the Bank was able to solve the dilemma of creating robust provisions and maintaining strong capital position at the same time. The Bank committed the record RUB 5.5 billion to build up provisions, while revenues grew by impressive 52.2% to RUB 7.1 billion compared to the first half of 2008. Today we are focused both on asset quality and capital adequacy. We have a new share issue in the pipeline towards the end of 2009 and with the macro situation getting clearer there is definitely the light at the end of the tunnel”.

As at July 1, 2009, Bank Saint Petersburg was ranked 12th in terms of retail deposits and 15th in terms of assets among the Russian banks (Interfax ranking). The Bank provides services for over 35,900 corporate customers and 883,000 individuals. Today the Bank’s branch network is comprised of 37 branches and 440 ATMs; in the 1H 2009 the number of cards issued by the Bank exceeded 665,000.

In the first half of 2009 the Bank has paid particular attention to strengthening its capital position. In June 2009, the Bank received the 10.5 years USD 75 million subordinated loan from EBRD; the loan counts towards Bank Saint Petersburg’s Upper Tier II capital under both Russian Central Bank regulations and Basel accord. In August 2009, the Bank received the RUB 1,466 million subordinated loan from Vnesheconombank; new applications for RUB 3,769 million are submitted.

On July 22, 2009 the extraordinary Shareholders Meeting took place. The shareholders approved amendments to the Bank’s Charter announcing new type of the preferred stock. New type of stock is mandatory convertible into the ordinary shares on May 15, 2013 (one-to-one ratio) and bears a dividend of 13.5% of the placement price. The Bank expects to convert up to USD 100 million from the existing subordinated debt into the new type of shares, while the issue size can be potentially increased up to USD 200 million. The placement price is to be announced in late November.

The Bank’s Cost-to-Income Ratio for the 1H 2009 improved by 11.18 percentage points to 23.48% compared to the 1H 2008 result. Bank’s operational expenses are maintained on the previous year level of RUB 1,669 million (+2% compared to 1H 2008) as cost control remains the key priority on all levels.

Net interest income increased by 13.8% compared to 1H 2008 amounting to RUB 4.6 billion. Net interest margin (NIM) for 1H 2009 decreased by 1.01 pp to 5.00% from 6.01% for 1H 2008. NIM decrease is attributed to the liabilities being re-priced faster than the assets and a significant liquidity cushion being maintained as a response to the unfolding crisis.

Financial markets operations. In 1H 2009 an aggregate result from financial markets operations amounted to RUB 1.6 billion comparing to RUB 62.1 million for 1H 2008. The result is attributed to the gains from trading in foreign currencies in the amount of RUB 427.7 million (+79% compared to 1H 2008) and the foreign exchange translation gains in the amount of RUB 703.9 million (-RUB 4.6 million for 1H 2008). The gain from trading securities amounted to RUB 470.3 million (-RUB 183.6 million for 1H 2008).

Net income before provisions and taxes increased by 81.2% compared to 1H 2008 and amounted to RUB 5.4 billion. Significant growth in revenues was outweighted by growth in provisions for loan impairment. Net loss for 1H 2009 amounts to RUB 48.7 million; consequently the Bank’s Return on equity dropped to -0.52%.

Liabilities. Customer accounts amounted to RUB 145.1 billion (+0.7% compared to January 1, 2009; +16% compared to July 1, 2008). At the end of 1H 2009, 62% of customer accounts belonged to corporate customers and 38% - to individuals. During 1H 2009 the volume of retail customer accounts increased by 12% while the volume of corporate customer accounts decreased by 5% due to the increased demand for additional funding from the corporate clients. The share of wholesale funding in liabilities remains insignificant (8%).

Equity and capital. In 1H 2009 shareholders equity decreased by 1.0% to RUB 18.6 billion due to the decrease in revaluation reserve for premises and decrease in retained income. The Bank’s total capital grew by 10% to RUB 26.4 billion from RUB 24.2 billion in FY 2008. As at July 1, 2009, the Bank’s Tier 1 and total capital adequacy ratios were 8.7% and 13.8% respectively.

As at July 1, 2009, Loan portfolio amounted to RUB 143.9 billion (-0.6% compared to January 1, 2009; +20.3% compared to July 1, 2008). As at July 1, 2009, retail loans constituted 10% of the loan book, during 1H 2009 their volume decreased by 6.6% to RUB 15.2 billion. Loans to corporate customers amounted to RUB 128.7 billion (+0.07% compared to January 1, 2009).

Loan portfolio quality. As at July 1, 2009, the share of overdue loans in the Bank’s portfolio increased to 7.5% of total volume of loans (0.7% as at January 1, 2009). The share of the corporate overdue loans amounted to 7.5% (0.6% as at January 1, 2009); the share of the retail overdue loans amounted to 8.0% (2.1% as at January 1, 2009). Restructured loans ratio remained stable over the 1H 2009 and constituted 6.6% of the total volume of loans (6.5% as at January 1, 2009). The rate of provisions for loan impairment increased by 3.4 percentage points to 7.3% compared with 3.9% as at January 1, 2009.

1H 2009 IFRS Financial Statements are available on the Bank’s website.