Net profit of the banking group Societe Generale in Russia amounted to 10.4 billion rubles for 2017 according to IFRS
- 15 March
Societe Generale banking group in Russia (hereinafter - the Group) demonstrated rapid development in all business areas, and earned a net profit in the amount of 10,4 billion rubles, which is 3,4 times higher than the results of 2016.
Chairman of Rosbank
In 2017 the Group showed a solid growth in all business areas, actively expanding its client base, increasing the volume of loans to corporate and retail clients. The Group’s retail loan portfolio grew by 7,4% and a corporate loan portfolio - by 14%. We enhanced our relations with a number of regions, in particular by signing cooperation agreements with the Republic of Tatarstan and Sakhalin investment promotion agency. We also entered into a program of concessional agricultural lending. We plan to continue development of diversified business model on the whole territory of Russia, strengthening the positions on the market.
Main achievements in the retail business
Throughout 2017 the Group was actively engaged in enhancing the quality of service and expanding the offerings to retail clients:
- Internet banking and mobile banking have been improved, new functionality was added that made the use of these channels more efficient;
- DeltaCredit Bank became a laureate of the award «Advanced Mortgage Innovation»
- Rosbank’s “SverkhCard” is recognized as the best cashback card for the second year by bankinform.ru
- Rosbank first office in new format was opened in Nizhniy Novgorod. It optimally combines technological innovations and comfort, which brings the quality of customer service to a new level;
- Functional specifications for clients while working with Rosbank’s ATMs were significantly expanded: to pay for services, and to replenish accounts at ATMs is now possible without a card;
- «ROSBANK-RZD-Mastercard», «MIR» cards were launched. «ROSBANK-RZD-Mastercard World Contactless» Classic is recognized as the most beneficial among other banks offers on «RZD-Bonus» program, that allows to accumulate points and save on trains.
During 2017 the Group continued to increase the volume of loan granting in retail segment (increased by +32% compared to 2016). Consumer lending traditionally was in the highest demand, which increased in granting by +30% (at the same time the growth of the market was 29%).
Also in 2017 the Group continued to increase its retail deposits portfolio. The focus was made on current accounts. Thus, in 2017 the Group’s retail deposit portfolio increased by 20% as compared to 2016. The current accounts portfolio increased by 59%, exceeding market growth by 2,5 times.
The Group maintains leading positions in mortgage and car loans due to the strong performance of the specialized subsidiary banks DeltaCredit and Rusfinance Bank respectively.
Despite tough competition in mortgage lending, DeltaCredit holds a market share of 2,8%. In 2017 the volume of mortgage loans production increased by 30% as compared to 2016, with a record growth in the Q4 2017 (+21,3 billion rubles in comparison with Q3 2017). This result was possible in particular due to an increase in the share of sales through digital channels (the share of such sales reached 25%).
The quality of the mortgage portfolio continues to improve substantially. As at December 31, 2017 mortgage portfolio «90+» overdue in DeltaCredit bank reduced to 2,8% (while 3,6% as at December 31, 2016). This significant improvement of quality was able due to participation in government support program (operated by Agency of Housing Mortgage Lending) as well as a consequence of the voluntary campaigns to convert dollar loans into rubles.
Rusfinance bank continually steadily belongs to TOP-2 banks in the car lending market, increased its market share portfolio to 11,5% as at the end of 2017 (as at the end of 2016 the same market share was 11,1%). Car loans production increased by 42% (as compared to 2016), as a result of the car sales restoration in the primary market and the strengthening of partnership with car dealers. During 2017 Rusfinance bank actively participated in the government program of concessional car lending.
Main achievements in corporate business
Despite the high competition, Rosbank confidently holds its market positions in the largest companies segment in 2017. Thus, Societe Generale/Rosbank continues to be leaders in the Russian syndicated loan market. The largest transaction in 2017 were:
- Rosbank together with Societe Generale acted as authorized leading organizers of the loan agreement in the amount of 2 billion US dollars with VimpelCom Holdings B.V.;
- Societe Generale coordinated the transaction and Rosbank acted as an primary lender and a passport bank of the loan agreement in the amount of 1,5 billion US dollars with Metalloinvest Group of companies;
- Rosbank together with Societe Generale acted as a coordinating authorized organizations and book runners in the pre-export financing financing transaction of the loan agreement on the amount of 850 million US dollars with Uralkalij.
In 2017, in accordance with the strategy, Rosbank steadily increased its positions in the segment of lending to small and medium-sized business. As a result Rosbank took 18th position (having risen by 16 positions) in the rating of small and medium-sized business lending based on the results of Russian small and medium-sized business research for the 1st half of 2017, conducted by the RAEX Rating Agency («Expert RA»).
In accordance with the strategy for the development of the segment of large and medium-sized companies, Rosbank demonstrated a robust growth in the loan portfolio of this segment by more than 50%.
Also in 2017 Rosbank Leasing demonstrated portfolio growth by 2 times in medium-sized business, which was one of the driver of increasing in net operational profit of Rosbank Leasing (+21% in comparison with 2016). The total volume of concluded transactions increased by 13% in 2017 as compared to previous year.
Rosbank Factoring continues to increase its activity. In 2017 the company’s turnover increased by 1,5 times as compared to 2016 and exceeded 110 billion rubles. The average factoring portfolio over 2017 increased by 15%. At the moment Rosbank Factoring is on the 8th position in the general rating of companies, providing factoring services.
Rosbank continued to strengthen its regional position in corporate business in 2017:
- the cooperation agreement with the Republic of Tatarstan was signed in a number of areas, in particular, with the non-profit organization «Guarantee Fund of the Republic of Tatarstan» under the program of guarantee provision
- Rosbank also signed the cooperation agreement with Sakhalin Investment Promotion Agency.
Also in the beginning of 2017 an agreement between Rosbank and the Ministry of Agriculture of Russian Federation was concluded. The Bank became one of the authorized organizations within the program of concessional agricultural lending and began to actively lend to agricultural entities throughout Russia (including the Far East).
Rosbank is actively expanding its business in trade financing. As a result of 2017, Rosbank trade financing portfolio grew by 11% up to 250 billion rubles (109 billion rubles at the end of 2016). Over the year the Bank participated in transactions with corporate clients for a total amount of more than 170 billion rubles.
During 2017 Rosbank together with Societe Generale acted as the leading organizers of ruble placements of a number of large companies and banks with a total volume of about 180 billion rubles and eurobonds with a volume of more than 7 billion euros in the debt capital market. The largest deals are JSC «Svyazinvestchim» for 20 billion rubles and PJSC «Norilsk Nickel» on 1 billion US dollars.
In 2017 Rosbank took the highest positions in ratings of depositary services once again. Rosbank’s depositary received the highest Global Custodian rating for the quality of services in Russia. Global Finance and Global Investor (Euromoney) also named Rosbank as «Best provider of depositary services in Russia». Rosbank’s depositary continues to increase its market share in Russia by winning several major mandates of global castodians, management companies and underwriters.
A significant increase of lending activity in 2017 allowed the Group to increase its retail loan portfolio by 7 % from the beginning of the year. There is a steady growth of retail loan portfolio, starting from the second quarter of 2017 (Q2 2017 +2,7%, Q3 2017 +2,7%, Q4 2017 +2,8% (compared to previous quarters)).
The growth dynamic of Group’s corporate loan portfolio in 2017 and in the Q4 2017 is above the market. Thus, the Group’s portfolio increased by 14% from the beginning of the year and by 8% in Q4 2017. At the same time the market increased by 6,8% from the beginning of the year and by 1,7% in Q4 2017 (all excluding foreign currency revaluation).
Deposits and current accounts
Over the past 12 months the Group’s customer accounts increased by 42% and over Q4 2017 increased by 18% (all excluding foreign currency revaluation).
There is an increase of retail customer account (+20%) and corporate customer accounts (+59%). The growth exceeded the market which showed the increase of retail customer account (+8,6%) and corporate customer accounts (+5%).
As a result the Group increased the market share in corporate deposits from 0.8% to 1.8% in 2017 and in retail deposits from 0.76% to 0.93%.
Net profit of the Group in 2017 amounted to RUB 10,4 billion, exceeding the level of 2016 by 3,4 times. Net profit growth remained stable throughout 2017 (Q4 2017 +3,4 billion rubles, Q3 2017 +3,2 billion rubles, Q2 2017 +2,5 billion rubles, Q1 2017 +1,3 billion rubles).
Net operating income of the Group in 2017 amounted to RUB 53,4 billion, exceeding the level of 2016 by 8%. Net operating income for 4Q 2017 amounted to RUB 15,5 billion, exceeding the level of Q3 2017 by 18% and exceeding the level of 4Q 2016 by 24%.
Net interest income of the Group remained stable throughout 2017 and remained at the level of 2016.
Net fees and commissions in 2017 amounted to RUB 9,5 billion increasing by 18% as compared to 2016. The Q4 2017 net fees and commissions exceeded the level of Q4 2016 by 37%. The positive dynamics is mainly driven by rebound in retail lending and as a result increase in commissions paid by insurers (+45%). Digital sales channels development led to a significant increase in commission income for the use of a mobile bank and Internet bank (+40%).
In 2017 operating expenses amounted to RUB 35,6 billion increasing by 8% as compared to last year. The dynamics is mainly driven by holding advertising campaigns, significant business growth (including subsidiary banks) and increase of contributions to deposit insurance. It should be noted that the ratio of operating expenses to operating income of the Group remained stable throughout 2016-2017 (67%).
2017 net cost of risk amounted to RUB 3,5 billion, which is significantly lower than net cost of risk booked in 2016 at RUB 12,8 billion. Decrease in net cost of risk is mainly driven by improved quality of retail loan portfolio, better recovery process as well as one off effect last year linked to foreign currency mortgage restructuring. The quality of corporate loans remains high.
In October 2017 Rating Agency RAEX (Expert RA) assigned the highest credit rating at the ruAAA level to Rosbank with a "stable" outlook.
In September 2017 international rating agency Fitch confirmed the long-term issuer default rating at the level of sovereign rating of Russia to the banks of Societe Generale Group in Russia. An outlook was changed from “stable” to “positive”. The rating is designed to assess the ability of the entity to fulfill its debt obligations in timely manner.
Previously the Analytical Credit Rating Agency (ACRA) assigned the highest credit rating at the AAA (RU) level to the banks of Societe Generale Group in Russia with a "stable" outlook.
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Key indicators of Statement of Profit and Loss