Page 79 - RusRPTMar19

8.1.8 Bank news
Russian multi-industry holding AFK Sistema and its subsidiary Sistema Telecom Assets have sold 39.5% shares in MTS Bank to mobile operator Mobile TeleSystems (MTS) for RUB11.4bn, Sistema said in a statement on February 10. As a result of the deal, Sistema’s direct ownership of MTS Bank fell to 5%, while MTS’ ownership grew to 94.7% from 55.2%. In July 2018, Sistema sold 28.6% in MTS Bank to MTS for 8.3bn
Alfa Bank reports earnings up by two thirds in 2018 IFRS results. ABH Financial, the holding company of Alfa Bank, released strong 2018 IFRS results on February 28 and the bank's management held a conference call. Earnings came in at $1.32bn for the full year (up 66%) amid notable growth in retail lending, which kept the net interest margin stable despite high competition in the corporate lending segment, the bank's traditional strong suit. In addition, the bank showed good fee income growth and cost control. ROAE rose to 19.6% for 2018 from 13.2% for 2017, VTB Capital said in a note. Operating income before provisions was $3.13bn, up 34.7%. The net income margin came in at 4.8%, stable y/y due to a growing contribution of higher- margin products in the loan book (the share of retail loans rose from 15.4% to 19.9% over the year). Fee income grew 15.6% and accounted for 31% of pre- provision operating income. Despite the increased retail lending, the bank managed to keep operating costs under control, and the cost-to-income ratio fell to 39.5% from 51.8%. Cost of risk rose from 0.04% to 0.88% over the year, though the figures are incomparable due to IFRS 9 coming into effect at the beginning of the year. “The growth was attributable to corporate loans (whose cost of risk rose from -0.4% to 0.5% in 2018), while the cost of risk on retail loans was flat at 2.9%. Meanwhile, asset quality metrics improved, with 90d NPL/gross loans down from 2.3% to 1.4% y/y (1.3% for corporate loans and 1.8% for retail) and reserve coverage for such NPLs at 208% (183% for corporate, 283% for retail). According to the new standards, the wider category of stage 3 loans represented 3.4% of the overall loan portfolio, and reserve coverage for such loans was 87%,” Ekaterina Sidorova of VTBC said. The bank's Tier 1 capital was supported by the higher earnings and January 2018 issue of $500mn in perpetual Eurobonds. As of January 1, 2019, the local Basel 3 standalone CET1 ratio was 9.5%, while total CAR was 13.5%.
8.2 Central Bank policy rate
The Central Bank of Russia (CBR) kept monetary policy rates on hold at 7.75% at its regular meeting on February 8, saying that inflationary pressures are under control despite a recent rise in prices.
“On 8 February 2019, the Bank of Russia Board of Directors decided to keep the key rate at 7.75% per annum. In January 2019, annual inflation held at the lower bound of the Bank of Russia expectations,” the regulator said in its statement.
Inflation fell to a post Soviet low of 2.2% in the first quarter of last year, well below the CBR’s target rate of 4% leading the central bank to cut rates to a record low of 7.25% in February.
However, a fresh round of sanctions in April, the fall of the ruble against the dollar and the expectation by the population of rising prices all contributed to inflation beginning to climb again in the second half of the year, leading the
79 RUSSIA Country Report March 2019 www.intellinews.com