Net profit of the banking group SG in Russia amounted to RUB 3.1 bln for 2016 according to IFRS
During 2016, the banking group Societe Generale in Russia* (hereinafter - the Group) significantly improved its financial result, earning a net profit of 3.1 billion rubles compared to a loss of 9.2 billion rubles in 2015. In the second half of 2016, the Group's results have already moved to the positive zone and only for the 4th quarter amounted to 2.8 billion rubles.
Despite the difficult economic environment, the Group's activity in the Russian market largely recovered compared to 2015. In particular, the growth of the active customer base has resumed, the volume of lending to individuals is returning to pre-crisis level, and to legal entities has even exceeded it, that allows the Group to maintain its market position in the retail business and increase market share in the corporate business.
*Rosbank, DeltaCredit, Rusfinance Bank and their subsidiaries
Key achievements in retail business
The 2016 retail loans production increased by 35% compared to 2015, while still remaining below the 2014 level (-22%). As a result the Group continues to maintain a leading position in the retail lending market, increasing the market share of issued loans from 3.4% to 3.6%, mainly in the segment of consumer lending where the market share increased from 2.2% to 2.6%.
At the same time, the Group maintains a leading position in the mortgage and car loan market due to strong performance of specialized subsidiaries DeltaCredit and Rusfinance Bank.
DeltaCredit is in the top 5 in terms of mortgage loans issuance (according to the analytical center Rusipoteka) with a market share of 3.1%. The total volume of mortgage loans issued in 2016 is by 44% higher than in 2015, while the quality of the ruble mortgage portfolio is much higher than the average market indicators. As of December 31, 2016, the 90+ delinquency in the DeltaCredit ruble mortgage portfolio is amounted to 1.21%, compared to the market rate of 2.65%.
Rusfinance Bank consistently ranks in the top 3 banks in the car loan market with a market share of 13.5%. In 2016 the total volume of car loans is by 28% higher than in 2015. The bank continues to participate in the state program of preferential car loans occupying the second place in terms of the volume of issuance (according to the data of the Ministry of Industry and Trade).
In 2016, Rosbank successfully continues to enlarge its client base: the number of new customers attracted in 2016 is by 33% higher than in 2015, the portfolio of active clients grew by 1% thanks to innovations in the field of daily banking services, as well as effective synergies with the corporate business. In Q4 2016 Rosbank, together with the international payment system Mastercard and GC O'KEY, launched the debit card "ROSBANK O'KEY Mastercard". Rosbank Visa Platinum Sverkhkarta+ is recognized as the most attractive card for customers with an income above the average - about 130 thousand rubles per month, according to RBC.
Key achievements in corporate business
As part of the international group Societe Generale, Rosbank continues to increase its share in the market of banking services to the largest Russian and international companies. The volume of loans issued in 2016 by 29% exceeds the indicator of 2015 (excluding forex effect).
Societe Generale / Rosbank are the leaders on the Russian syndicated lending market with a share of 23.5% (according to the Bloomberg news agency). Main transactions with the key customers during 2016 organised in co-operation with Societe Generale:
- acting as a coordinating mandated lead arrangers and bookrunners in Uralkali loan agreement in the amount of $1.2 billion together with 16 international banks.
- acting as one of the co-ordinating mandated lead arrangers and a passport bank to the debut pre-export financing of FosAgro, teaming with international banks, totaling $250 million, with a four-year maturity.
- entering the pool of international banks that provided the group EuroChem pre-export loan in the amount of $800 million for five years.
- acting as the initial mandated lead arranger, bookrunner, coordinating and documentation bank for $500 million club prepayment facility in favour of PJSOC Bashneft secured by long-term contract for the supply of oil and oil products.
- acting as mandated lead arrangers of the syndicated pre-export finance facility to CJSC Russian Copper Company, one of the leading copper producers in Russia. A non-renewable loan is provided for $300 million for a period of 5 years.
Rosbank is actively expanding its business in trade finance. So, according to the results of 2016 Rosbank takes the 7th position in the market by the volume of the trade finance portfolio, showing an increase of 25% compared to the previous year.
We also continue to develop our investment services. In 2016, Rosbank placed 23 market issues of 16 issuers with a volume of 88.4 billion rubles, ranking fifth in the league tables of the leading organizers of market placements of Russian bonds by Cbonds. The share of Rosbank in market issues was 7.95%. The bank also ranks fifth among the corporate issues organizers with a market share of 5.73% and the third among the organizers of the issue of mortgage bonds with a market share of 14.55%.
Rosbank Factoring continues to occupy a prominent position in the factoring services market. According to 2016 results, the company took the 8th place in the general rating published by the Association of Factoring Companies of Russia. Rosbank factoring also continues to increase the customer portfolio (+56% compared to 2015) and the turnover of assigned receivables (+42% compared to 2015).
Rosbank Leasing shows high dynamics as well - the portfolio of deals increased by 13% in 2016. Rosbank Leasing became the winner of the annual award "Financial Elite of Russia - 2016" in the nomination "Development Dynamics", subgroup "Leasing".
The Group's banks are focused on the business collaboration with reliable borrowers and very carefully evaluate the solvency of clients in the new economic conditions, prioritizing quality of loan portfolio.
Based on these principles the Group pursued a more conservative credit policy during 2015 and first half of 2016 as compared to other market players. The Group resumed loan granting activity only in second half of 2016, as a result the Group’s retail portfolio decreased by 8% from the beginning of 2016 (excluding forex effect).
The corporate loan portfolio continued to grow during 2016, increasing by 2% (excluding forex effect) as compared to negative dynamics in the market during the year (-3.6%). At the same time, it is necessary to note the change in the structure of the corporate loan portfolio by currencies in the last 12 months: the share of loans in foreign currency decreased by 15%; while the share of corporate loans in rubles increased by 17%. Such changes positively affected the Group's interest margin.
As a result of such evolution of retail and corporate loan portfolio and notwithstanding the production growth pattern the Group's total loan portfolio decreased during 2016 by 4% (excluding forex effect).
Deposits and current accounts
During 2016, the Group's customer deposit portfolio decreased by 4% (excluding forex effect). The evolution is driven by planned decrease of corporate deposits by 15% during 2016 (excluding forex effect), compared to the market trend of -4%. This trend on one hand was necessary to align the deposits portfolio with lending demand and on the other hand to replace with cheaper funds from individuals.
The volume of retail deposits increased during 2016 by 13% (excluding forex effect), which exceeds the banking sector trend (+9.2%). Particular emphasis is to be made to the dynamics of retail sight accounts and demand deposits– the volume increased by 50% during the year (excluding forex effect). The market share in this segment increased from 1% to 1.43% during 2016, which fully corresponds to the Group's goal for the development of the transactional business.
2016 net interest income of the Group amounted to 38.9 billion rubles with an increase of 4% compared to 2015. The positive dynamics is mainly due to the improvement of interest margin by lowering the cost of financing as a result of successive measures to optimize the balance sheet structure.
2016 net commission income amounted to 8 billion rubles with an increase of 7% compared to 2015. On one hand, the dynamics is explained by activation of retail lending and, consequently, the increase in commissions from insurance companies (retail business commission income rose by 29%). On the other hand, the commission income of corporate business line increased due to development of cash management services (+16%) and trade finance (+23%).
Operating expenses of the Group in 2016 amounted to 32.9 billion rubles, remaining at the level of 2015, despite inflation, which in 2016 was at the level of 5.4%. The growth containment became possible as a result of measures to optimize costs on the side of Rosbank: further reorganization of retail network and staff reduction by 8.7% compared to 2015.
2016 cost of risk amounted at 12.7 billion rubles, decreasing by 42% compared to last year. Reduction in cost of risk was mainly due to retail portfolio quality improvement and optimization of recovery processes. The quality of corporate portfolio remains high. At the same time, these results include the costs incurred to refinance foreign currency mortgage portfolio. As a result of this work, we do not expect any further material negative impact of this activity on the Group's results.
"The banking group Societe Generale in Russia continues to improve its performance in all business segments. During 2016, we increased market share in both retail and corporate business lines. Performance efficiency was possible due to continuous improvement of all business processes along with corporate culture development aimed at transformation. To give an example, Rosbank started to implement lean-management aiming to increase staff involvement in improvement of bank processes, as well as an agile approach to manage changes. A new loan workflow was launched alongside with CRM platform in order to optimize and facilitate banking activities. Centralization of OPER functionality in two cities - Nizhny Novgorod and Krasnoyarsk – was implemented. Thanks to the efforts of the team in 2016, the Group has become more resilient to external influences, as well as better prepared for further sustainable and efficient business growth"- Dmitry Olyunin, Rosbank CEO summed up.
Rosbank and its subsidiaries maintain a strong liquidity position and capital ratios that significantly exceed mandatory standards set by the regulator. International rating agencies Fitch Ratings and Moody's Investors Service confirmed the ratings of Rosbank, Rusfinance bank and DeltaCredit in 2016 at the level of the sovereign rating of the country.
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