2011 Full Year Results
Open Joint-Stock Company NOMOS Bank ("NOMOS" or "the Bank" or with its subsidiaries, the "Group") announces its audited full year financial results for 2011, delivering on key indicators set for the year
The Board of Directors of NOMOS on 27 March 2011 approved the Consolidated Financial Statements of NOMOS and its subsidiaries for the year ended 2011.
During 2011, the Group has delivered against its key performance indicators set for the year. In particular, the Bank continued to meet its core objective of maintaining a high level of profitability and achieving sustainable growth. The robust financial performance was only marginally adversely affected by the volatile capital markets conditions in the second half of 2011.
Group achievements in 2011
PROFITABILITY: robust financial performance despite the tough conditions in the capital markets
In 2011 NOMOS Group continued its focus on profitability and creating shareholder value. Despite the turbulent market conditions the Group delivered strong core revenue generation of RUB 36.9 billion. In 2011 53.7% of the combined Group’s revenue was generated by the corporate business segment and 33.2% by small and retail business1.
Return on average equity (RoAE) was strong at 18.2% and would have reached 18.5% excluding the one-off IPO transaction costs of RUB 215 million. Return on average assets (RoAA) was 2.1% in 2011 compared to 2.3% for the prior year.
Combined operating income before provisions for impairments for 2011 was up 21.2% to RUB 36.9 billion compared to the 2010 Pro forma results2. Net interest income and fees and commissions are the key drivers of the Group’s revenue generation, comprising respectively 76.1% and 16.5% of Group’s revenue. Net interest margin was stable at 5.5%.
Net Fees and commissions income increased by 57.3% to RUB 6.1 billion in 2011 as a result of the successful implementation of an effective cross-selling campaign, which the Bank actively developed during the year. The Bank earned the majority of net fees and commissions income from cash operations (RUB 2.2 billion), documentary operations (RUB 1.7 billion) and settlements (RUB 1.7 billion). The net fees and commissions income earned by the Retail segment in 2011 increased by 77% to RUB 2.2 billion compared to 2010, while the Bank actively developed new insurance products and increased the volume of foreign currency transactions and payment settlements for Rapida clients3.
Net trading income declined by 43% over the year to RUB 2 .4 billion compared to 2010 Proforma results. The strong core operational performance of Nomos Bank was impacted by the mark-to-market losses of RUB 2.9 billion on its fixed income portfolio in Q3. During Q4 the Bank recovered RUB 2.3 billion of these losses and the overall trading loss on the Securities portfolio therefore amounted to RUB 616 million at the year-end.
Operating expenses amounted to RUB 17.4 billion in 2011, a 35% increase compared to 2010 results. This increase was mainly driven by the growing number of employees and non-recurring items, including the one-off IPO transaction costs of RUB 215 million in Q2 2011. As a result, the Cost to income ratio (operating expenses to operating income before provision for impairment) was 46.6% in FY11.
During 2011, NOMOS continued to deliver in terms of profitability and creating shareholder value. NOMOS’ net profit amounted to RUB 12.1 billion, RUB 10 billion of which is attributable to Nomos Bank shareholders. Earnings per share for 2011 amounted to RUB 110.9. Earnings per GDR amounted to USD 1.7 price at a 32.2 RUB/USD exchange rate as at December 31, 2011.
Sustainable loan growth at a higher than average market rate
In 2011 the Group’s total assets reached RUB 662.1 billion and increased by 25% compared to 31 December 2010, which is higher than the average 2011 market growth rate of 23%. Loans represent 68% of the total assets compared to 64% end 2010.
As at 31 December 2011 the Group’s loan portfolio grew 32% to RUB 468.3 billion, above the average market growth rate of 28.8% (25.8% excluding Sberbank). All three core operating segments of the Group’s lending operations produced strong results. Over the course of the year, the retail and small business segments of the loan book progressively expanded in line with the strategy of the Bank of growing these segments faster than the corporate segment. The Group Retail loan portfolio increased by 58.4% to RUB 59.7 billion, which is substantially above the 35.9% average market growth in the Retail segment. The SME loan portfolio increased by 57.8% to RUB 31.7 billion and the corporate loan book increased by 26.9% in FY11 to RUB 376.9 billion.
The Group’s rapid rate of business expansion was balanced by conservative and prudent risk management, which allowed the Group to achieve a historically low level of non-performing loans (NPLs: loans overdue more than 90 days). During 2011 the NPL ratio gradually improved to 2.0% as at 31 December 2011 compared to 2.4% as at 31 December 2010. The ratio of loan loss provisions to gross loans remained at 4.4% with a resulting NPL coverage ratio of 213%.
Cost of risk reduced to 0.9% vs 1.2% in 2010 largely as a result of the stable quality of the loan book, with the majority of the new provisions booked representing collective, or statistical, provisions on the growing non-impaired loan portfolio.
The Group’s total liabilities amounted to RUB 586.4 billion as at 31 December 2011 and increased by 24.2% compared to 2010. During the year, Nomos Bank continued to diversify its funding. The customer accounts share of the funding structure remained at 65% of total liabilities.
As of 31 December 2011 the Group’s customer accounts amounted to RUB 382.4 billion, a 22% increase compared with 31 December 2010. Current accounts amounted to 27% of customer deposits or RUB 102.8 billion as at the end of 2011. The rate of growth in deposits during the year was in line with the Bank’s strategy of not paying excessive interest rates in order to safeguard profitability and maintain a stable Net Interest Margin. Retail and Small business accounts comprised 41.7%4 of the total deposit base. The Group’s net loans to deposits ratio amounted to 117% as at 31 December 2011.
Tier 1 capital ratio improved during the year to 12.0% as at 31 December 2011 (2010: 10.6%) and the Group’s total equity amounted to RUB 75.7 billion, including RUB 13.4 billion of non-controlling interest. The total capital adequacy ratio was 16.2% as of 31 December 2011.
Successful integration with BKM: The process of integrating Nomos Bank and BKM ran smoothly during 2011. So far, the planning and control functions have been brought together and standardized, as have tariffs, risk policy, funding and capital management. Furthermore, the joint call-centre for the entire group in Nizhniy Novgorod was launched in December 2011. Revenue synergies are now coming through in all segments of the business including from pre-approved high-margin loans granted by BKM, commission income earned on insurance products and joined limits offered to corporate clients.
Commenting on the results, Dmitry Sokolov, CEO of NOMOS, said:
“These strong results capture what has been a milestone year for the Group, having successfully completed our GDR listing on the London Stock Exchange. We will continue to press ahead with our clear strategy to create shareholder value by building on our solid track record of profitable growth and maintaining our strong capital position to take advantage of the significant opportunities in the Russian banking sector.”
The consolidated financial statements for the year ended 31 December 2011 are available for viewing at https://ir.open.ru/en/
Nomos Bank is currently the eighth largest banking group in Russia by total assets and the second largest privately-owned Russian universal banking group with total assets of RUB 662.1 billion and equity of RUB 75.7 billion under audited IFRS accounts for 2011. As at 31 December 2011, Nomos Bank had an extensive branch network in Russia with 292 offices in the economically important regions of the Russian Federation, with the majority of its business concentrated in Moscow, St Petersburg, Tyumen (including the Khanty-Mansiysk autonomous district), the Novosibirsk and Khabarovsk regions. Nomos Bank provides a full range of banking services to corporate, small business and retail clients. As at 31 December 2011, Nomos Bank served approximately 11,300 corporate customers, 78,500 small business clients and almost 1.5m retail customers, including private banking clients. Nomos has long-term international credit ratings of BB from Fitch and Ba3 from Moody’s (stable outlook for both ratings).
1 Calculated as the share of total revenue for business segments excluding the Treasury and asset and liability management unit and unallocated balances.
2 Pro forma for 2010 results assuming that the acquisition of BKM took place on 1 January 2010.
3 Rapida – payment system purchased by Nomos Bank in 2011.
4 Calculated as the share of total customer accounts for business segments excluding the Treasury and asset and liability management unit and unallocated balances.