The Alfa Banking Group, which includes ABH Financial, Alfa-Bank and subsidiaries, reported IFRS financial results for the first half of 2016.
The Alfa Banking Group demonstrated a significant improvement in financial performance, proving sustainability of its business model in the new economic reality, despite the ongoing downturn in the Russian economy.
Net profit of the Alfa Banking Group grew in 5 times and amounted to USD 161 million in 1H 2016 (against USD 32 million in 1H 2015). Operating profit before provisions amounted to USD 914 million. The decrease was mainly driven by the weakening of the average ruble exchange rate by 22.4%, thus, in RUB terms operating profit before provisions grew by 5.9%. An additional factor was the reduction in gains from securities transactions, investments, derivatives and foreign currencies in the context of a conservative risk management in a highly volatile market.
Net interest margin improved significantly to USD 641 million in 1H 2016. The increase in RUB terms amounted to 23.2% mainly due to funding cost reduction. NIM ratio grew to 4.5% from 3.7% in 1H 2015.
Cost of risk ratio of the Alfa Banking Group also demonstrated positive dynamics — it decreased from 3.44% to 1.20% due to decline in problem loans. Provision expense in 1H 2016 reduced to USD 131 million in comparison with USD 466 million in 1H 2015. Provisioning rate amounted to 5.3%.
Thanks to the growth of the client base Group’s net fee and commission income increased by more than 25% in RUB terms compared to the same period of the last year and amounted to USD 277 million. The share of net fee and commission income in operating profit before provisions reached the highest ever level of 30.3% in 1H 2016. This reflects the Alfa Banking Group’s strategy focusing on increase of stable risk-free income and strengthening of the transaction business.
Total assets amounted to USD 33 316 million as of June 30 2016, increased by 5.9% in dollar terms compared with USD 31 470 million as of December 31, 2015.
Gross loan portfolio grew by 1.5% and amounted to USD 21 985 million as of June 30, 2016 compared to USD 21 654 million as of December 31, 2015. During the reporting period the Alfa Banking Group has retained its approach aimed at maintaining the quality of the loan portfolio, lending the most reliable borrowers.
The Alfa Banking Group had positive loan portfolio quality dynamics in 1H 2016. Non-performing loans ratio (more than 90 days overdue) was 4.4% as of June 30, 2016 compared with 6.9% as of December 31, 2014. NPL 90+ coverage ratio remains at conservative high level of 122.1%.
Total liabilities amounted to USD 28 671 million as of June 30, 2016. Customer accounts increased by 8.0% in dollar terms to USD 19 163 million. Wherein current accounts grew by more than third (+34.3%), and its share in total customer accounts increased to 51.1%. Such dynamics reflects clients’ high confidence in the Alfa Banking Group as one of the most reliable financial institutions in Russia.
Total equity of the Alfa Banking Group increased by 6.9% to USD 4 645 million in 1H 2016 compared to USD 4 344 million by the end of 2015. The Alfa Banking Group continued to maintain high level of capital adequacy ratios under Basel I: total capital adequacy ratio and tier 1 ratio amounted to 21.1% and 16.7% respectively, which guarantees Group’s stability and sustainability even in tough economic conditions.
The Alfa Banking Group has maintained its position as one of the largest Russian private banks by total assets, total equity, customer accounts and loan portfolio. In 1H 2016 the Alfa Banking Group strengthened its market position in all market segments:
- average market share of retail demand deposits increased to historically record level of 8.56%,
- average market share of corporate lending remained at the level of the end of 2015 year and amounted to 3.16%,
- number of clients in Mass corporate segment increased by 9.6% from 217 000 to 238 000.
«Alfa-Bank demonstrates a sound positive trend of its key financial performance indicators for the first six months of 2016, despite the unstable economic conditions in Russia. This fact clearly proves the efficiency of the business model implemented by the Bank.
The Bank continues to implement processes intended to improve operations in all of its business segments with deep focus on risk management. Our continuing efforts on improvement of the portfolio quality and effective work with problem loans have added a strong contribution to the sound results of 1H 2016.
The development and implementation of innovative technological solutions offering new opportunities to our customers remains a key area of our business strategy. This important activity is what provides the foundation for sustainability and success of Alfa-Bank for years ahead», comments Alexey Marey, Chief Executive Officer of Alfa-Bank.
The Alfa Banking Group’s 1H 2016 IFRS figures have been reviewed by PricewaterhouseCoopers.