MDM Bank Announces 1Q 2009 IFRS Results

15.06.2009 16:57

Moscow, 15 June 2009 – Today MDM Bank released reviewed International Financial Reporting Standards (IFRS) financial results for the three-month period ended 31 March 2009. Revenue for the period grew 50.6% to RUB 5,954 mln vs. RUB 3,953 mln a year earlier (3M 2007: RUB 4,247 mln). Net Interest Income was RUB 4,102 mln, up 19.6% y-o-y from RUB 3,429 mln for 3M 2008 (3M 2007: RUB 3,086 mln).

Total comprehensive income for the period amounted to RUB 313 mln vs. RUB 753 mln for the three-month period ended 31 March 2008. The decline was primarily due to loan impairment losses of RUB 3,285 mln booked during the period, vs. RUB 691 mln for 3M 2008.

Other highlights include:

• Capital Adequacy Ratio remained strong: as of 31 March 2009 it had increased to 18.2%, and Tier 1 capital ratio was 16.3%;
• Excess liquidity currently amounts to approximately USD 1 bln;
• The Bank redeemed the USD 227 mln MDM DPR 2007-A program. This, together with selective repurchase of some 2010 eurobonds, contributed to a gain from early redemption of debt of RUB 647 mln;
• Net Fee & Commission income increased 38.7% y-o-y to RUB 642 mln from RUB 463 mln (3M 2007: RUB 426 mln);
• Cost/Income ratio for 3M 2009 improved to 33.4%, the third consecutive quarter this ratio has been below 40% on a quarterly basis (Q3 2008: 33.8%; Q4 2008: 38.5%);
• Corporate and Individual term deposits increased by 7.2% and 19.6% during the period, respectively, and total customer accounts excluding LTB Bank increased 2.7%.

3M 2009 Income Statement Review:

The bank significantly increased its revenue for the period by 50.6% y-o-y to RUB 5,954 mln, primarily due to increases in net interest income and gains from early redemption of debt. Gains from securities trading and increased fee and commission income also contributed to the improved revenue. Despite revenue improvements, the primary factor affecting the bank’s result for the period was provisioning expense from creation of loan loss provisions.

Net interest income accounted for 68.9% of total revenue, up 19.6% vs. 3M 2008 to RUB 4,102 mln (3M 2008: RUB 3,429 mln; 3M 2007: RUB 3,086 mln), while net interest margin increased to 5.8% from around 4.8% for 3M 2008 (3M 2007: 5.1%). Ongoing repricing in the corporate and small business loan portfolios was the driving factor behind increased interest income compared to Q1 2008.

Net fee and commission income increased 38.7% y-o-y to RUB 642 mln from RUB 463 mln for 3M 2008 (3M 2007: RUB 426 mln); net fee and commission income is well diversified and grew despite a decrease of certain IB related commissions during the period.

Net result from trading, including trading in securities, foreign exchange and precious metals, increased by 173.1% during the period to RUB 579 mln from RUB 212 mln for 3M 2008 when significant turbulence in the financial markets had a negative effect on the bank’s trading result.

Operating expenses were down 12.8% y-o-y to RUB 1,983 mln from RUB 2,274 for 3M 2008 (3M 2007: RUB 1,850 mln) due to the ongoing effect of significant cost-optimization measures taken beginning in 3Q 2008.

Loan impairment losses were the primary factor influencing the bank’s result for the period, in line with tendencies throughout the Russian banking sector. The bank booked loan loss provisions of RUB 3,285 mln for the period, and will continue to book loan loss provisions that are adequate to cover losses incurred from deteriorating asset quality.

3M 2009 Balance Sheet Review

Total assets decreased by 5.8% to RUB 310,105 mln from RUB 329,117 mln at YE 2008, primarily due to decreases in net loans (3M 2009: RUB 189,407 mln; YE 2008: RUB 194,806 mln) and cash and cash equivalents (3M 2009: RUB 62,524 mln; YE 2008: RUB 77,271 mln). While cash and cash equivalents decreased during the period, the bank’s liquidity position remains strong, with current excess liquidity around USD 1 bln and the bank’s entire RUB 53 bln CBR uncollateralized lending line unused as of the date of this announcement.

Net loans equaled RUB 189,407 mln as of 31 March 2009, down 2.8% from 31 December 2008 due both to contraction of lending activities and to increased loan impairment. Gross loans decreased by just 1.0% during the period to RUB 204,866 mln. During the first quarter, gross loans to corporate customers increased slightly from RUB 137,800 mln to RUB 139,008 mln, while lending in other categories contracted.

Non-performing loans (NPLs – loans with principal or/and interest overdue by more than 90 days and other loans classified as non-performing by Management. A loan is classified as non-performing by management if it is not probable that it will be recovered by means other than repossession and subsequent realization of collateral) increased to RUB 14,678 mln from RUB 8,763 mln at 31 December 2008. NPLs increased in all categories of the loan portfolio.

Customer accounts at 31 March 2009 equaled RUB 112,475 mln, a decrease of 2.3% from 31 December 2008. The decrease was due to a drop in term deposits from state organizations from RUB 10,600 mln at 31 December 2008 to RUB 2,053 mln at 31 March 2009. Corporate term deposits increased 7.2% during the period, from RUB 42,451 mln to RUB 45,500 mln. Individual term deposits continued strong growth (79.9% increase during 2008), increasing 19.6% over the three-month period from RUB 25,362 mln at YE 2008 to RUB 30,327 mln on 31 March 2009. Excluding deposits in LTB Bank, which management does not consider for liquidity management purposes due to the short-term and volatile nature of deposits in this bank, customer accounts increased 2.7% during Q1 2009 from RUB 98,347 mln to RUB 100,998 mln.

MDM Bank will repay a USD 500 mln syndicated IFC B loan due in July 2009, which is the only significant repayment for the bank for the remainder of the year. The Bank remains opportunistic in 2009, and is currently in discussions to raise a new syndicated IFC B loan that would partially refinance this facility. This is currently the only refinancing activity planned by either MDM Bank or URSA Bank in 2009, with all further plans on syndications and capital market transactions subject to market conditions.

Capital adequacy ratio increased from 17.9% at YE 2008 to 18.2% as of 31 March 2009. The bank’s Tier 1 ratio also increased from 16.0% to 16.3% during this period.

Conference Call on 3M 2009 Results

MDM Bank will hold its 3M 2009 results conference call on Monday, 15 June 2009, at 5 p.m. Moscow time (2 p.m. London time, 9 a.m. New York time). MDM Bank management will discuss the Bank’s financial results for the three month period ended 31 March 2009.

For registration and instructions, please go to the following link: http://wcc.webeventservices.com/view/wl/r.htm?e=151725&s=1&k=A1D80992116D3AF9703C8DA69E4C59DE&cb=blank

The Bank’s 3M 2009 Financial Statements, press release and results presentation will be available on the day of the call on MDM Bank’s website.

Financial statements: www.mdmbank.com/about/financial
Press release: www.mdmbank.com/pr/press
Presentation: www.mdmbank.com/about/calls

The call will be held in English. A recording and transcript of the call will be made available on the MDM Bank website.

Investor Relations: +7 495 221 30 75
Public Relations:  +7 495 363 27 41

15.06.2009 17:13

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