Alfa-Banking Group has maintained its position as the top Russian private bank by total assets, total equity and customer accounts.
Founded in 1990, Alfa-Banking Group offers a wide range of products and operates in all sectors of the financial market, including corporate and retail lending, deposits, payment and account services, foreign exchange operations, cash handling services, custody services, investment banking and other ancillary services to corporate and retail customers.
The corporate and retail client base has grown considerably during the last several years — by September 1, 2009 Alfa-Bank Russia served over 55 000 corporate and 3.6 million retail customers, while the branch network has been extended to 341 offices across Russia and abroad, including a subsidiary bank in the Netherlands and financial subsidiaries in the United States and the UK.
During the first six months of 2009 Alfa-Banking Group’s total assets decreased to USD 23.0 billion, down 15.0% from USD 27.1 billion at the end of 2008, resulting from persistent weakness in the economy, accompanied by a reduction in the loan portfolio and general deterioration in credit quality of corporate and retail borrowers. Alfa-Banking Group’s gross loan portfolio decreased by 20.2% to USD 15.3 billion at 30 June 2009 as compared to 31 December 2008. Alfa-Banking Group has maintained its conservative provisioning policy, resulting in provisions being increased to USD 1 451 million (9.5% of loan portfolio) at 30 June 2009, up from USD 1 190 million (6.2% of loan portfolio) at 31 December 2008. At the same time, Alfa-Banking Group’s core funding base comprising customer accounts remained stable at USD 12.6 billion and total equity increased by 16.6% to USD 2.5 billion (2008 — USD 2.2 billion) following a share capital increase of USD 320 million in June 2009.
Net margin from lending operations decreased by 11.5% to USD 571 million (1H 2008 — USD 645 million) mainly as a result of rising cost of funding coupled with cautious balance sheet management policies, leading to a higher proportion of lower yielding cash and interbank balances, as well as a focus on lower margin, shorter dated lending. Profit before tax and provisions decreased by 8.8% to USD 425 million (1H 2008 — USD 466 million), assisted by a net reduction of USD 83 million in operating expenses, with cost-to-income ratio at 46.2% for the period. Net profit attributable to equity holders decreased to USD 14 million primarily as a result of a USD 395 million charge to loan loss provisions in the year-to-date.
Alfa-Banking Group has paid careful attention to the management of its liquidity and capitalization risks. At 30 June 2009, Alfa-Banking Group held approximately 25% of its total assets in cash and short-term interbank instruments. Furthermore, Alfa-Bank has access to various additional liquidity provided by the Central Bank of Russia, such as unsecured financing obtainable at regular auctions, and secured borrowing backed by customer loans or cross-guarantees from other Russian banks.
The shareholder capital injection of USD 320 million in June 2009 combined with a RUB 10.2 billion (USD 294 million) subordinated loan from Vnesheconombank (VEB) in January 2009 significantly improved Alfa-Banking Group’s capital adequacy ratio to 15.8% as at 30 June 2009. In October 2009 two further subordinated loans totaling RUB 29.4 billion (USD 960 million) were received based on new legislation which allows for VEB to provide subordinated funding to banks in an amount up to three times higher than a corresponding capital increase provided by the bank’s own shareholders.
In 2009 Alfa-Banking Group continued its development as a universal bank with the following core business lines: corporate and investment banking including SME, trade finance and leasing, retail banking (including branch banking, auto and mortgage lending). Current strategic priorities include focus on effective restructuring and collection of problem loans, capital preservation, maintaining liquidity, and introduction of new corporate, investment, and retail products.
Alfa-Banking Group’s IFRS figures have been reviewed by PricewaterhouseCoopers.
