The Alfa Banking Group, which includes ABH Financial, Alfa-Bank (Russia) and its subsidiaries, reported IFRS financial results for the full year 2015.
2015 year was a complicated year for the whole Russian economy. Oil prices fall, significant Rouble depreciation, interest rates growth, decline in real income of the population and other factors had influenced performance of all Russian banks as well as the Alfa Banking Group.
Despite challenging macroeconomic environment the Alfa Banking Group has proven sustainability of its business model in the new economic reality.
Net profit of the Alfa Banking Group grew by 15 times and amounted USD 480 million in 2015 (against USD 33 million in 2014). Operating profit before provisions amounted to USD 2 257 million, having decreased by 12.9% driven by average RUB depreciation of 58.7% in comparison with last year. In RUB terms, operating profit before provisions grew by more than a third (+38.2%).
Sharp increase in key interest rate at the end of 2014 and considerable Rouble depreciation significantly affected interest margins of the whole banking system. Net interest income of the Alfa Banking Group declined by 40.7% to USD 1 321 million, while in RUB terms the decrease was only 5.8%.
Provision expense in 2015 reduced to USD 777 million in comparison with USD 1 228 million in 2014.
In 2015 cost of risk of the Alfa Banking Group demonstrated positive dynamic — it decreased from 3.96% to 3.12% due to slowing growth of problem loans. Traditionally conservative approach to risk analysis was reflected in provisioning rate increase from 5.8% to 6.5%.
Net fee and commission income amounted to USD 585 million: a decrease of 29.1% compared to the previous year is solely due to the Rouble weakening, as in RUB terms net fee and commission income increased by 12.5%. The share of net fee and commission income in operating profit before provisioning remains stably high — more than 25%.
Due to positive dynamics in securities market and foreign exchange volatility the Alfa Banking Group gained USD 334 million from trading securities, derivatives and foreign exchange.
In 2015 the Alfa Banking Group demonstrated stronger operating efficiency in comparison with the previous year. Cost to income ratio declined from 45.8% to 43.0%. Operating expenses decreased by 18.1% to USD 971 million in 2015 compared with USD 1 186 million in 2014 mostly due to staff costs reduction.
Total assets amounted to USD 31 470 million as of December 31, 2015, decreased by 27.8% in dollar terms compared with USD 43 566 million as of December 31, 2014 due to 29.5% Rouble depreciation. The decrease in total assets excluding FX revaluation effect amounted to 19.3%.
Gross loan portfolio declined by 23.0% and amounted to USD 21 654 million as of December 31, 2015 compared to USD 28 105 million as of December 31, 2014, while the decline excluding FX revaluation effect was 12.4%. Loan portfolio contraction was due to low economic activity of population and enterprises as well as the Alfa Banking Group’s strategy focusing on maintaining the quality of the loan portfolio. Corporate loan portfolio amounted to USD 18 940 million as of December 31, 2015, decreased by 19.5% compared with USD 23 532 million as of December 31, 2014 (the decrease excluding FX revaluation effect amounted to 10.2%). Retail loan portfolio declined by 40.7% to USD 2 714 million in comparison with the previous year (the decrease excluding FX revaluation effect amounted to 24.0%).
Loan portfolio quality dynamics was in line with the banking sector trends. Non-performing loans ratio (more than 90 days overdue) was 6.9% as of December 31, 2015 compared with 2.7% as of December 31, 2014. NPL 90+ coverage ratio remains at conservative level of 94.3%.
In the reported period total liabilities of the Alfa Banking Group amounted to USD 27 126 million as of December 31, 2015. Customer accounts decreased by 11.5% in dollar terms to USD 17 748 million due to RUB depreciation. The increase of customer accounts excluding FX revaluation effect amounted to 2.6%.
Total equity increased to USD 4 344 million in 2015 compared to USD 4 296 million in 2014. The Alfa Banking Group maintained high level of capital adequacy ratios under Basel I: total capital adequacy ratio and tier 1 ratio increased by 4.0 percentage points each and amounted to 21.7% and 16.8% respectively.
The Alfa Banking Group has maintained its position as one of the largest Russian private bank by total assets, total equity, customer accounts and loan portfolio. Despite economic uncertainty in Russia the Alfa Banking Group strengthened its market position in all market segments:
- average market share of retail demand deposits increased from 7.24% to historically record level of 8.10%,
- average market share of corporate lending grew from 3.18% to 3.24%,
- number of clients in Mass corporate segment increased from 140 000 to 217 000.
In 2015, the Alfa Banking Group confirmed that it has access to international capital markets and a wide range of investors. In November 2015 the Alfa Banking Group successfully closed a USD 500mln 3-year Eurobond with the lowest coupon rate in the history of Russian private banks — 5.00% per annum. During 2015, this deal became the first public offering of Eurobonds with benchmark size in the primary market among Russian financial institutions after the international financial community revised the attitude to the Russian country risk due to the events in 2014.
«As regards the net profit, our result is the best among private banks and one of the best in the banking system of the country. In my opinion, this is the best evidence that the Alfa-Bank’s development model is sustainable and able to withstand external challenges. Constant attention to risks along with continuous improvement of the operating efficiency in all business segments, special attention to overdue debt settlements have contributed greatly to this year’s success. At the same time we continue keeping our traditional success factors, namely improvement of the services we provide and their technical improvement, innovative products development and their successful promotion into all market segments. The main success factors for us are still team spirit and professionalism. Even in the most difficult situation, our team is able to achieve best results», — comments Alexey Marey, Chief Executive Officer of Alfa-Bank.
The Alfa Banking Group’s 2015 IFRS figures have been reviewed by PricewaterhouseCoopers.