PSB Publishes 9M 2016 Preliminary RAS Results

According to the preliminary reporting (published form) under the Russian Accounting Standards (RAS), PSB net profit for 9M 2016 amounted to RUB 2.0 bn. Income from core banking operations (interest income and fee and commission income) increased by 21% to RUB 36.9 bn.

Net interest income1 was up 23% compared to the same period last year and amounted to RUB 26.0 bn. Interest income increased by 6% y-o-y, to RUB 80.2 bn. Interest expense, on the contrary, decreased by 1% during the period and amounted to RUB 54.2 bn.

According to bank’s management accounts net fee and commission income increased by a strong 34% y-o-y, to RUB 13.0 bn. Herewith the SME segment generated over 40% of total net fee and commission income during the period due to sustainable IT platform which allows the bank to increase and retain its transactional business clients among all business segments.

PSB other operating income, which includes income from operations with securities, foreign exchange and financial derivatives2 , was RUB 1.5 bn. Therefore, 9M 2016 total operating income amounted to RUB 38.4 bn.

Operating expenses remained flat y-o-y and totaled RUB 16.7 bn, cost-to-income ratio was 44%.

The macroeconomic situation in the reporting period continued to be quite challenging, and PSB kept a conservative policy in relation to growth. As of 1 October 2016, PSB assets remained virtually unchanged relative to the beginning of the year and amounted to RUB 1.2 trln. Total loans to customers (net of provisions and excluding interbank loans) decreased by 6% compared to the beginning of 2016, and as of 1 October 2016 amounted to RUB 842 bn. Corporate loan portfolio stood at RUB 754 bn, down 7%, mainly due to the effect of the ruble recovery. Retail loan portfolio was RUB 87 bn, which is 1% more than at the end of 2015.

Amid continuing economic stabilization, 9M 2016 loan portfolio provision charges decreased by 22% y-o-y to RUB 27.8 bn2, which corresponds to a cost of risk of 4.3% on the annualized basis (9M 2015: 5.4%).

Securities portfolio3 as at 1 October 2016 stood at RUB 66 bn or 5% of PSB assets (2015: 5%). Overall, PSB maintains a conservative view of the situation in the financial markets and continues to build its securities portfolio mainly with sovereign and blue chip corporate bonds.

As at 1 October 2016, total customer accounts and deposits (retail and corporate 4) increased by 12% compared to the end of 2015 and amounted to RUB 898 bn. Corporate accounts and deposits remained unchanged at the level of the beginning of the year and amounted to RUB 544 bn. Retail customer funds amounted to RUB 354 bn, including effect of Pervobank PJSC customer account balances consolidation.

As at 1 October 2016, PSB capital («own funds» as defined in RAS) amounted to RUB 146 bn. Common equity tier 1, tier 1 and total capital ratios were 5.4%, 6.8% and 12.6%.

Liquidity ratios are at a comfortable level. As at 1 October 2016 instant (N2) and current liquidity (N3) ratios were, respectively, 72% and 95%, well above the respective 15% and 50% CBR minimum requirements. Moreover PSB meets new liquidity coverage ratio (LCR) requirement.

PSB Deputy Chairman of the Management Board and CFO Vladimir Mamakin comments on the results: «The results of the first 9 months of 2016 are positive and fully in line with our expectations. In the reporting period we’ve seen sustainable monthly customer base growth. Risk-free transactional business segment, where PSB continues to hold a leading market position, remains a priority for us. Indeed, Euromoney, an international financial publication, has recently recognized PSB as the best Russian bank in the area of cash management, while the Russian rating agency Expert RA named PSB as the bank of choice for transactional business in Russia. Therefore, core income of the bank grew over 20% y-o-y. We continue to effectively manage operating costs, maintaining them at the level of the previous year. A certain stabilization of macroeconomic indicators has had a positive effect on loan provisions: in the reporting period, their volume decreased by more than 20% y-o-y.

On 30 September 2016, the Central Bank published an updated list of systemically important banks. For the second year running, PSB has been included in Russia's Top 10 systemic banks».

For Reference: We intend to hold a more complete discussion of the results, including in terms of profit and loss statement, during a conference call with investors and analysts in Q4 2016, when PSB 9M 2016 IFRS statements will become available.

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