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Otkritie Bank Publishes Financial Statements for the nine months of 2020 under IFRS

11 November 2020

Otkritie Bank: 9 months of 2020 Financial Results under IFRS

Otkritie banking group has published its Interim Condensed Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS) as of September 30, 2020, and for the 9 months of 2020.

Mikhail Zadornov – President, Chairman of Otkritie bank’s Management Board:
“The profit earned by Otkritie bank and the companies of the group for the 9 months of 2020 is close to the initially planned target level despite limitations caused by coronavirus pandemic and allied economic slowdown.
The group showed sustainable growth of net interest income which increased by more than 25% year-on-year. Otkritie bank’s loan portfolio is doubling the market pace and the increase of its share in assets allows to build up a solid base for the further income growth. 
We focus on cost optimisation and efficiency increase in all key business segments. 
The companies of the group continue to support clients who suffered the pandemic consequences.
Otkritie has a significant safety buffer which allows us to cope with external pressure and feel confident about the future.”

Financial Highlights for the 9 months of 2020

Net profit of Otkritie group for the 9 months of 2020 amounted to RUB 30.2 billion (RUB 42.4 billion for the 9 months of 2019). The key driver of net profit dynamics in 2020 comparing with the same period of 2019 was the loan loss provision creation. 

Return on tangible equity (ROTE)1  for the 9 months of 2020 stood at 11.0%.

Total capital adequacy ratio of the group (Basel III) comprised 14.8% as of September 30, 2020 (12.8% as of December 31, 2019). The group’s capital (Basel III) increased by 30% and stood at RUB 416 billion as of September 30, 2020.

The group’s revenue (operating income before impairment of assets) for the 9 months of 2020 comprised RUB 116.2 billion, up by 4% year-on-year (RUB 112.2 billion for the 9 months of 2019). The revenue growth in 2020 was driven by the key income sources increase and net interest income growth in particular.

The group’s net interest income for the 9 months of 2020 amounted to RUB 57.7 billion, up by 27% year-on-year. Interest income growth (+29% year-on-year) is in line with the increasing loan portfolio and outpaced the growth of interest expenses on customer funding (+10% year-on-year).

Otkritie bank’s net interest margin (NIM)2 stood at 3.7% for the 9 months of 2020. 

The group’s net fee and commission income for the 9 months of 2020 totaled RUB 18.9 billion, which is flat year-on-year (RUB 19.0 billion billion for the 9 months of 2019). The commission income dynamics was negatively affected by contraction of volumes and overall decrease of transactional activity in the second quarter of 2020. 

The greater volume of net fee and commission income came from settlements and cash operations (RUB 8.8 billion), documentary (RUB 2.7 billion) and brokerage operations (RUB 2.5 billion).

Otkritie bank’s net commission margin (NCM)3 stood at 1.2% for the 9 months of 2020.

Operating results from insurance business for the 9 months of 2020 amounted to RUB 10.6 billion (RUB 9.0 billion for the 9 months of 2019). Insurance companies Rosgosstrakh and Rosgosstrakh-Life increased the amount of gross premiums by 19% year-on-year.

Operating results from pension business for the 9 months of 2020 amounted to RUB 8.6 billion, down by 28% year-on-year. Operating results dynamics was stipulated by investment income volatility in 2020.

The group’s operating expenses for the 9 months of 2020 decreased by 1% year-on-year comprising RUB 70.6 billion.

Key indicators of profit and loss statement

RUB billion

  9m'20 9m'19 Change, %
Net interest income 57.7 45.6 27%
Net fee and commission income 18.9 19.0 -1%
Net trading income 1.8 14.7 -88%
Operating results from insurance business 10.6 9.0 18%
Operating results from pension business 8.6 12.0 -28%
Other income (expenses) 18.6 11.9 56%
Revenue (operating income) 116.2 112.2 4%
Operating expenses -70.6 -71.1 -1%
Provisions on debt financial assets -7.8 16.8 n.a.
Other provisions -0.8 -11.5 -93%
Taxes -6.8 -4.0 70%
Net profit 30.2 42.4 -29%
Key financial ratios 9m'20 9m'19*
Return on tangible equity (ROTE) 11.0% 18.5%
Return on equity (ROE) 8.4% 12.9%
Return on assets (ROA) 1.2% 2.6%
Net interest margin (NIM) 3.7% 3.9%
Cost-to-income ratio 60.7% 63.4%

*While calculating ratios for 9M’19, B&N Bank data as of December 31, 2018, were not taken into account as for the accounting purposes the effect from its merger with Otkritie Bank took place on January 1, 2019

Balance Sheet Key Figures

As of September 30, 2020, Otkritie banking group’s total assets grew by 5% (+1% excluding foreign currency revaluation) and reached RUB 3,423 billion.

The share of the banking business in the group’s total assets accounted for 78% or RUB 2,656 billion as of September 30, 2020. The share of pension business stood at 17% or RUB 593 billion. The share of insurance business was 5% or RUB 174 billion.

Net loan portfolio share continued to grow and comprised 46% of the group’s assets or RUB 1,560 billion as of September 30, 2020 (38% or RUB 1,228 billion as of 2019 year-end). Investments in securities comprised 33% of total assets or RUB 1,143 billion, including pension and insurance businesses portfolios of RUB 593 billion. 

The group’s gross loan portfolio grew by 25% (+20% excluding foreign currency revaluation) and reached RUB 1,678 billion as of September 30, 2020. 

Otkritie bank loan book growth outpaced the market indicators, which allowed it to rank the seventh in terms of legal entities and individuals loan portfolio volumes holding 2.6% and 2.2% of the market respectively4

The group’s gross loan portfolio of legal entities increased by 22% (+15% excluding foreign currency revaluation) and amounted to RUB 1,207 billion as of September 30, 2020. The retail loan portfolio grew by 33% to RUB 471 billion. As of September 30, 2020, the share of mortgage loans and consumer loans accounted for 46% and 43% of the group’s gross retail loan portfolio respectively.

The loan loss provision (LLP) ratio5 stood at 7.0% as of September 30, 2020 (8.4% as of December 31, 2019). The share of problem loans6 reduced to 7.6% (8.4% as of December 31, 2019). The share of NPLs 90+ comprised 4.1% as of September 30, 2020 (3.8% as of December 31, 2019). Problem loans and NPL coverage ratios remained at a high level of 92% and 172% respectively as of September 30, 2020.

Customer deposits and accounts are the core source of the group’s funding structure accounting for 65% of total liabilities and comprising RUB 1,893 billion as of September 30, 2020, up by 4% (flat level excluding foreign currency revaluation) since the beginning of the year. 

As of September 30, 2020, the share of individuals amounted to 56% of customer funds or RUB 1,063 billion, up by 8% (+2% excluding foreign currency revaluation). The funds of corporate customers made up 44% of customer funding or RUB 830 billion (stable dynamics or -3% excluding foreign currency revaluation). The share of current accounts is increasing which allows the group to optimize the funding costs: the current accounts comprised 39% of the customer funding as of September 30, 2020 (28% as of December 31, 2019).

Key indicators of financial position

RUB billion

  9m'20 2019 Change, %
ASSETS 3,423 3,264 25%
Gross loans 1,678 1,341 25%
Gross loans to legal entities* 1,207 987 22%
Gross loans to individuals 471 354 33%
Securities portfolio 1,143 1,255 -9%
LIABILITIES 2,902 2,791 4%
Customer funding 1,893 1,818 4%
Retail customer funding 1,063 985 8%
Legal entities accounts and deposits 830 833 0%
Provisions for pension funds’ activities 574 569 1%
Provisions for insurance activities 103 88 17%
EQUITY 521 473 10%
Key financial metrics 9m'20 2019
Net loans to deposits ratio 82% 68%
NPL90+ ratio 4.1% 3.8%
NPL90+ coverage ratio 172% 219%
The share of problem loans (includes stage III and loans impaired at the date of initial recognition) 7.6% 8.4%
Problem loans (stage III and loans impaired at the date of initial recognition) coverage 92% 100%
Provisioning ratio 7.0% 8.4%

*Including loans to customers at fair value through profit or loss

Consolidated financial statements as of September 30, 2020 are available at ir.open.ru.

 

1ROTE (return on tangible equity) is calculated by dividing net profit by average tangible equity, which is calculated by deducting non-monetary assets (intangible assets, goodwill and deferred income tax assets) from the equity of the group

2Net interest margin (NIM) is calculated by dividing net interest income by average interest-bearing assets

3Net commission margin (NCM) is calculated by dividing net commission income by average interest-bearing assets

4The market share is calculated in accordance with the Central Bank of Russia methodology excluding National Clearing Centre data as of October 1, 2020

5Excluding loans valued at fair value through profit and loss

6Includes individually impaired loans (Stage 3) and financial assets that are credit-impaired at the date of initial recognition (POCI)