VTB Group delivered a record six-month net profit of RUB 53.6 billion for 6M 2011 (approx. US$ 1.85 billion, up 113.5%), and record quarterly net profit of RUB 27.5 billion for 2Q 2011 (up 5.4%).

VTB Group delivered a record six-month net profit of RUB 53.6 billion for 6M 2011, up 113.5% year-on-year, and record quarterly net profit of RUB 27.5 billion for 2Q 2011, up 5.4% quarter-on-quarter. The Group’s 6M 2011 return on equity (ROE) was a strong 18.1% and earnings per share reached RUB 0.0051, versus an ROE of 9.7% and earnings per share of RUB 0.0026 for 6M 2010.

Operating income before provisions amounted to RUB 153.0 billion for 6M 2011, an increase of 45.2% from RUB 105.4 billion for the same period last year. Net interest income before provisions including net recovery of losses on initial recognition of financial instruments and loans restructuring reached RUB 105.0 billion in 6M 2011, up 21.4% from RUB 86.5 billion in the same period last year. Net interest margin (NIM) for the six-month period was stable at 4.8%. In 2Q 2011 NIM improved by 10 bps quarter-on-quarter to 4.9%, mainly due to a decrease in the cost of customer deposits. The Group’s net fee and commission income increased to RUB 17.9 billion in 6M 2011, up 51.7% from RUB 11.8 billion in 6M 2010.

Staff costs and administrative expenses amounted to RUB 67.3 billion in 6M 2011, an increase of 53.3% year-on-year from RUB 43.9 billion in 6M 2010. This increase was mainly due to the consolidation of TransCreditBank (TCB) starting from 31 December 2010, the expansion of the VTB24 retail branch network, as well as higher revenues in the key operating segments.

The Group’s total gross loans demonstrated growth of 7.1% in the first six months of 2011, reaching RUB 3,277.0 billion at 30 June 2011, versus RUB 3,059.6 billion at 31 December 2010. Corporate loans at 30 June 2011 equalled RUB 2,668.4 billion, up 6.0% from RUB 2,518.1 billion at the beginning of the year. Retail loans at 30 June 2011 amounted to RUB 608.6 billion, up 12.4% from RUB 541.5 billion at year-end 2010.

Loan portfolio quality continued to improve, with the provision charge for impairment of debt financial assets down to RUB 17.3 billion for 6M 2011 from RUB 27.2 billion in 6M 2010. The provision charge for impairment of loans and advances to customers was 1.1% of the average loan portfolio in 6M 2011, down from 2.1% for 6M 2010. The allowance for loan impairment declined to 8.6% of total gross loans as of 30 June 2011, compared to 9.0% at the end of 2010.

The Group’s non-performing loan (NPL) ratio decreased to 7.7% of total gross loans, down 90 bps from 8.6% at the end of 2010, while the NPL coverage ratio at 30 June 2011 was a comfortable 111.8%.

Funding from customer deposits continued to grow at a faster pace than loans, up 19.1% to RUB 2,634.7 billion at 30 June 2011, from RUB 2,212.9 billion at year end 2010. Corporate deposits amounted to RUB 1,772.4 billion at the end of the second quarter of 2011, a 21.0% increase from RUB 1,465.0 billion at the end of 2010. Retail deposits reached RUB 862.3 billion, up 15.3% from RUB 747.9 billion as of 31 December 2010.

The share of customer deposits in the Group’s total liabilities rose to 63.9% at the end of the second quarter of 2011, up from 59.6% at 31 December 2010. At the same time, the Group’s loans to deposits ratio improved to 113.7%, down from 125.9% as of 31 December 2010.

The Group continues to optimise its liabilities costs by executing an effective borrowing strategy. In July 2011, VTB Bank closed a US$ 3,130 million syndicated term loan facility, an unprecedented transaction for Russia-related borrowers in terms of both the size and the geographical breadth of participation by banks. Nearly 30 international financial institutions from 16 countries participated in the deal. The facility has a margin of 130 bps per annum over LIBOR.

The Group's Tier 1 capital adequacy ratio (CAR) was 12.0% and the total CAR was 14.1% as of 30 June 2011.

Financial Highlights:

• Record net profit of RUB 53.6 billion in 6M 2011, up 113.5% year-on-year, with an ROE of 18.1%, versus 9.7% in 6M 2010;
• Strong profit contribution from key businesses: Corporate and Investment Banking profit before tax at RUB 51.2 billion, up 100.0% year-on-year, Retail Banking profit before tax at RUB 20.2 billion, up 80.4% year-on year;
• Net interest income including net recovery of losses on initial recognition of financial instruments and loans restructuring for 6M 2011 amounted to RUB 105.0 billion, up 21.4% year-on-year;
• Strong net fee and commission income of RUB 17.9 billion for 6M 2011, up 51.7% year-on-year;
• Net interest margin stable at 4.8% for 6M 2011; in 2Q 2011 NIM rose to 4.9%, up 10 bps quarter-on-quarter;
• Operating income before provisions reached RUB 153.0 billion in 6M 2011, up 45.2% year-on-year;
• Total gross loans grew by 7.0% in 2Q 2011 to RUB 3,277.0 billion; corporate loans increased by 6.4%, retail loans – up 9.6% in 2Q 2011;
• Customer deposits reached RUB 2,634.7 billion, up 11.0% in 2Q 2011 and 19.1% in 6M 2011; the share of customer deposits in liabilities and the loans-to-deposit ratio improved to 63.9% and 113.7%, respectively;
• Cost of risk stabilised at a low 1.1% of average gross loans in 6M 2011, versus 2.1% in 6M 2010;
• Solid capital base reflected in total CAR and Tier 1 ratios of 14.1% and 12.0%, respectively.