On June 3 Vozrozhdeniye bank published its 1Q 2008 financials audited to IFRS. Net profit soared by nearly 150% y-o-y to RUB 681 mn. Operating income surged by 58.1% to RUB 2, 480 mn and net interest income jumped 48.8% to RUB 1,655 mn. Assets rose 5% to RUB 116.9 bn.
Table 1. Vozrozhdeniye bank: Basic financials for 1Q 2008, mn RUB
| Indicator | 1Q 2008 | 1Q 2007 | Change |
|---|
| Assets | 116 925 | 111 404* | 5.0% |
| Total credits | 81 317 | 78 149* | 4.1% |
| Equity capital | 12 571 | 11 890* | 5.7% |
| Interest income | 2 860 | 1 994 | 43.4% |
| Interest expenses | 1 205 | 882 | 36.6% |
| Net interest nicome | 1 655 | 1 112 | 48.8% |
| Net commission income | 803 | 601 | 33.6% |
| Operating expenses | 2 480 | 1 569 | 58.1% |
| Administrative expenses | 1 589 | 1 194 | 33.1% |
| Net profit | 681 | 275 | 147.6% |
| Cost/Income | 61% | 66% | - |
* - data as of 31.12.2007
Source: bank data, Finam estimates
On the upside, we point to the rapid growth in interest income, which has enabled the bank to boost its net interest income by nearly 50%. We also indicate the steady rise in commission income, up 33.6% y-o-y, and the low share of casual income in the bank's operating profit, at about 6%. We also highlight a comfortable loan-to-deposit ratio and a sound balance sheet.
We are, however, wary of the slow growth in the bank's assets and total credits, which grew slower than the average indices in the sector. On the downside, we point at the rapidly growing payroll costs, up 46.2% y-o-y and up 13.9% q-o-q. Despite this, the bank managed to bring its cost/income multiple down to 61%, from 66% in 2007.
The published financials demonstrate the bank's effective business, while raising doubts as to its future growth rates. The loan portfolio grew 2.5x slower than the average for the sector. The management also needs to reduce payroll costs. We estimate the fair value of the bank at USD 69.5 per common share, with an upside potential of 16%.
0.569
0.073
