News

Banking Group ZENIT reports its financial results for the year 2009

16 April 2010

Moscow, Russia - Banking Group ZENIT, one of the leading private financial institutions in Russia, hereby reports its audited consolidated financial results for the twelve months ending December 31, 2009 prepared in accordance with International Financial Reporting Standards.

KEY 2009 FIGURES

• Net revenues increased by 11.9% to RUR 7.8 billion;
• Profit before tax increased by 97.4% to RUR 2.8 billion;
• Net profit increased by 77.5% to RUR 2.1 billion;
• Total assets amounted to RUR 186 billion;
• Customer accounts increased by RUR 8.3 billion (8.6%) and reached RUR 104.7 billion;
• Allowance for loan impairment increased 1.7-fold to RUR 8.2 billion.

Commenting on the end of year results, Mr. Kirill Shpigun, Chairman of the Management Board of the OJSC Bank ZENIT, noted: "The past year was not easy due to difficulties faced by the Russian banking system and the national economy in general. Nonetheless, the Banking Group ZENIT demonstrated successful results. Year 2009 saw an increase in profit, we managed to retain our customer base, and during the year we observed a significant inflow of individuals' deposits.

Owing to the conservative lending policy, the overdue debt is at an acceptable level and is fully covered by existing allowances for loan impairment. During the year, the Banking Group ZENIT successfully attracted funds from the financial market and made repayments under existing obligations in due course. The shareholders support allowed for a significant increase in Bank ZENIT's own capital and became an additional factor of stability in the downturn of business processes on financial markets.

I am positive that the Banking Group ZENIT possesses remarkable potential. Measures taken in 2009 on cost optimisation, improvement of quality of loans, improvement of risk management systems and organisational procedures, including in the area of the bank network management, will provide the Banking Group with a solid base for efficient development of all areas of business".

FINANCIAL RESULTS

FINANCIAL REVIEW

• The Banking Group ZENIT's Total capital ratio grew from 13.4% to 18.6% as at the end of year 2009 while the Tier 1 capital ratio increased from 10.2% to 12.8%. This was accomplished partially owing to the support of a shareholder - the JSC Tatneft that has placed a subordinated deposit totalling in RUR 2.14 billion, following which Bank ZENIT was able to attract a subordinated loan of the same amount from Vnesheconombank. Furthermore, the Bank capital was increased by the subordinated loan of the Black Sea Trade and Development Bank, by US$20 million.
• In the first half of 2009, Bank ZENIT (a parent company and principal operating entity of the Group) was actively using the uncollateralized loan facilities provided by the Central Bank of the Russian Federation and at that, utilizing no more than half of the available limit.
• Over the year, as financial markets were recovering and the liquidity situation in the banking system was improving, the Bank was gradually reducing the liquidity cushion formed in 2008 - early 2009. The sufficient liquidity enabled the repayment of syndicated loans in the first half of the year (i.e. US$218 million, EUR95.75 million and US$5 million). Also, in accordance with placement terms, the Eurobond in the amount of US$200 million was redeemed in October 2009.
• Customer accounts grew by RUR 8.3 billion, or by 8.6%, and reached RUR 104.7 billion. Individual deposits were the main contributor due to an active afflux of clients and a wide product range.
• In 2009, the Banking Group conducted a conservative lending policy with a particular focus on the quality of loan portfolio and risk monitoring. The volume of loans to customers before impairment decreased by RUR 4.6 billion, or by 4%, and reached RUR 109.4 billion. Corporate loans portfolio decreased slightly - by RUR 1.4 billion, which is explained by the general decline in business activity and reduced demand for credit resources. Retail loans contracted by RUR 3.2 billion, which is caused by significant risks in the context of falling disposable income of the population.
• Loans overdue by over 90 days amounted to RUR 8.1 billion. (7.4% loans to customers). The allowance for loan impairment for the year 2009 increased by 71% and reached RUR 8.2 billion. The ratio of overdue loans to allowances was 101.6% as at 31.12.2009.
• The volume of the securities portfolio remained virtually unchanged and amounted to RUR 16.2 billion. In 2009 the portfolio quality improved significantly due to increased share of high quality debt securities of Russian issuers included in the Lombard list of the Central Bank of the Russian Federation.
• Net interest margin decreased from 5.8% in 2008 to 4.6% in 2009, due to the growing cost of funding and the necessity to maintain a substantial liquidity cushion in the first half of 2009.
• Despite the decline in business activity on the market, net fee and commission income decreased by 4.8% only and equalled RUR 3.3 billion.
• In 2009, the Banking Group was optimizing operating expenses to improve business efficiency. As a result of taken measures, operating expenses tumbled by 10.4% - to RUR 5 billion while the cost to income ratio decreased from 59.1% in 2008 to 41.6% in 2009.
• The substantial increase in tax burden is mainly due to different treatment of securities transactions in the recovering market for accounting purposes and for tax purposes.

OPERATING REVIEW

• The Banking group ZENIT's customer base remained stable in 2009 due to effective work with customers and the Group's focus on maintaining long-term partnership relations. The number of corporate clients of the Banking Group ZENIT exceeds 38 thousand.
• In 2009, Bank ZENIT together with subsidiary banks worked to optimise its retail network. Offices duplicating one another's functions and situated in the same area were closed. By the end of 2009, such optimisation was carried out in Saint Petersburg, Rostov-on-Don, Nizhniy Novgorod, Elabuga, Gelendzhik and Lipetsk. At the same time, another regional centre, Krasnodar, was added to the Banking group ZENIT's regional presence. The total number of the Banking Group's points of sale as at the end of 2009 was 153.
• Bank ZENIT's the 6-th RUR 3 bln 5-year bond bearing a coupon of 15% was placed with oversubscription in July, 2009.
• Bank ZENIT successfully executed put options on its 4-th, 3-th and 5-th ruble bond issues in April, May and December 2009, respectively.
• By the end of 2009, the Group ATM network increased to 677 ATMs. The joint ATM network of the Banking Group ZENIT and partner banks increased to 1036 units in 2009. The expanded range of functions of the Bank ATMs allowed cardholders not only to withdraw cash and make deposits into their card accounts but also to make payments for utility services, pay cable TV and Internet providers and top-up their mobile phone accounts.
• In 2009, Bank ZENIT received a general acquiring license of VISA IPS and currently holds the full spectrum of VISA and MasterCard IPS licences, which considerably widens the Banking Group capacity to expand retail business.
• For a long time, Bank ZENIT has been retaining a leading position in providing of private banking services. Its achievements have gained international recognition. Thus, the 'Euromoney'magazine has confirmed the status of Bank ZENIT as one of the best Russian providers of Private banking services in its Private Banking and Wealth Management Survey 2010.
• Bank ZENIT OFBUs (bank managed mutual funds) have fully exploited the possibilities offered by financial markets in 2009. According to the end-of-year results, three equity funds managed by the Bank became the most profitable on the Russian stock market.

SIGNIFICANT EVENTS FOLLOWING THE END OF THE ACCOUNTING PERIOD

• In February 2010, Bank ZENIT acquired 3.6% of shares of OJSC Spiritbank taking 100% ownership of this bank.
• In February 2010, Bank ZENIT Board of Directors made a decision on placement of three issues of RUR-denominated bonds: two issues in total amount of RUR5 bln each and one issue in total amount of RUR3 bln.

* * *

Banking Group ZENIT was formed in 2005 as a result of the purchase by Bank ZENIT of a controlling stake in JSB Devon-Credit (OJSC). In 2007, the Banking Group acquired OJSC Lipetskkombank and JSB Sochigazprombank LLC (later renamed to Bank ZENIT Sochi). In December 2008, the OJSC Spiritbank (town Tula) became part of the Group. According to the consolidated statement of the Banking group for the year 2009 made in accordance with IFRS, equity capital of the Banking group amounts to RUR19.7 bln, assets amount to RUR186 bln. Group provides a full-scale range of banking services: comprehensive services to the corporate clients, retail services, private banking, investment banking and interbank business. The Banking group ZENIT is represented in 23 of 83 regions of the Russian Federation; its own retail network consists of 153 points of sale. The Group has created a wide international correspondent network of banking partners, with co-operation from more than 100 international institutions in Europe, America and Asia. Bank ZENIT is currently rated Bа3/Negative by Moody's and B+/Rating Watch "Evolving" by Fitch.

Disclaimer: some of the information in this press release may contain projections or other forward-looking statement regarding future events or the future financial performance of Banking Group ZENIT. You can identify forward looking statement by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could", "may", or "might" , the negative of such terms or other similar expressions. We wish to caution you that these statements are only prediction and that actual events or results may differ materially. In addition, there is no assurance that the new contract entered into by our subsidiaries referenced above will be completed on the terms contained therein or at all. We do not intend to update these statements to reflect events and circumstances accruing after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statement, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to the company and its operations.

Back to the news list