Expobank reported 5.1 billion rubles in net profit, three times the level of 2018 and a record for the bank.
Kirill Nifontov, Chairman of the Management Board of Expobank, commented, “It was a very good year for Expobank and we are pleased with the results of our acquisition of Kurskprombank. We are upbeat about the future of the bank, but we are alsocautious because of the currenthealth and economic environment. We are concerned about the health of our employees and of our customers. We are also concerned about the world economy and the impact onRussia’seconomy and banking system. While no one knows the full economic impact of the current pandemic, we think that the authorities are reacting appropriately.What we can say is that last year’s excellent results have not only demonstrated our capability, but also put us in a much stronger position to ride out the present uncertainty. Our team is solid, our capital is much stronger, our liquidity is very good, and most importantly our relationships with customers are strong. We have shown that we have the flexibility to survive and to prosper in the coming years.We are confident that Expobank will continue to do well once this is over.
“Our financial results for 2019 were very good. A key metric for us is our return on equity, which reached 30.6% last year, bolstered by the purchase of Kurskprombank. Without the acquisition effect, return on equity from operations wouldhave been a still very strong 24%. Our net profit after tax rose to 5.1 billion, triple the previous year due to strong results in almost all our business lines.
“We hope for a relatively short and successful battle against the coronavirus here and globally. This is a primary concern right now. The Bank has taken all precautions possible: most employees are working from home and we have sanitizers, air purifiers and masks for those who must be in offices and branches to service clients and keep our business running. We are donating medical equipment and supplies to hospitals in our home regions. We will do our utmost to help clients keep their businesses alive and prosperous as well.”
Total assets reached 98 billion rubles, a relatively modest 22% increase. We do not regard size alone as a goal for the bank. In preparing for the purchase of Kurskprombank, we held significant liquid and financial assets at the end of 2018 in order to pay for the acquisition; the proportion of liquid assets declined from 46% to 35% of total assets. Loans to corporate customers grew by 42%, including the additional business of Kurskprombank.
The two areas of our business which grew most rapidly were car loans and express guarantees, both technology based niche products with excellent profitability which we began in late 2018. Car loans make up about 80% of our retail lending – all done on a technology platform with our own underwriting process.
We believe our credit quality is well above the average for the market – we issue loans to only about 6-7% of applicants. Express guarantees, also fully automated applications for clients, help small and large customers participate in government purchases and projects. In 2019 we had over 80,000 applications but issued just over 13,000 guarantees.
On the liability side, our branch network and wealth management clients provide solid and stable resources to the bank. Over 70 % of deposit and account funding comes from retail clients.
Equity grew by 40% to 19.5 billion rubles. Our capital adequacy ratios are very strong, on a group basis with Kurskprombank, against a minimum N20.0 requirement of 8%1, our ratio was 14.3%.
Net interest income rose 44% with net interest margins expanding to 8.4% from 7.1% in 2018. Fees and commissions, due to the Kursk acquisition and our guarantee fees and car loans fees, more than doubled. As a result operating income grew by 72%. Non-interest expenses grew 39%, as we added staff from Kurskprombank, but our cost to income ratio declined from 57% to 46%.
The acquisition of Kurskprombank added 2.2 billion rubles of value over cost , but this is partially offset by 0.8 billion of ‘expected credit losses, stage 1’ under the IFRS 9 accounting rule, for a net addition to profit before tax of 1.4 billion rubles.
Expobank received the EMEA Finance award as in the "Best Bank" in Russia for 2019. Previously, Expobank was also recognized as the best Russian bank in 2014 and 2015.
Key financial indicators: 2
|Profitaftertax||5 131||1 639||213%|
|Equity||19 526||13 991||40%|
|Total Assets||98 060||80 524||22%|
|Loans to corporate customers||33 612||23 726||42%|
|Loans to retail customers||27 825||15 235||83%|
|Guarantees||25 764||8 039||220%|
|Total Liabilities||78 534||66 533||18%|
|Retail customer accounts and deposits||52 689||34 371||53%|
|Corporate customer accounts and deposits||20 389||25 355||-20%|
|Net interest income||5 955||4 054||47%|
|Net interest margin||8,4%||7,1%||-|
|Net fee & commission income||984||415||137%|
|Operating income||8 160||4 754||72%|
|Non-interest expense||-3 721||-2 684||39%|
|Cost to Income Ratio||46%||57%||-|
|Increase in provisions||-1 018||-141||624%|
|Acquisition excess value||2 237||0||-|
|Profit before tax||5 858||2 008||192%|
|Profit after tax||5 131||1 639||213%|
|Total comprehensive income||5 329||1 631||227%|
|Total capital adequacy (N1.0)||11,8%||14,2%||8,00%|
|Group capital adequacy (N20.0)||14.3%||Na||8,00%|
1 Since 01.01.2020 minimum CBR requirement for N1.0 – 10,5%, N1.2 – 8,5%
2 The full 2019 IFRS Auditors’ Report is available in Russian on our website; an English translation will be posted soon.