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    1H 2014 IFRS results: Early positive signs although weakening economy continues to adversely affect HCFB's results

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    Moscow, 29 August, 2014:  Home Credit & Finance Bank (“HCFB” or ‘the Bank”), announces the consolidated financial results of operations in Russia and Kazakhstan for the six-month period ended 30 June 2014 in accordance with International Financial Reporting Standards (IFRS).

    HCFB is rated by Moody’s at Ba3, and by Fitch at BB. SB JSC Bank Home Credit (Kazakhstan), a 100% subsidiary of HCFB, is rated by Fitch at BB-.

    “While the challenging economic environment continues to impact our performance, the swift measures taken last year and earlier this year led to an improved second quarter with the pace of decline slowing considerably. Importantly, we have also maintained our financial strength with a robust capital adequacy ratio of 23.7% and a strong cash position, while remaining fully compliant with the new challenging regulations in a constantly evolving regulatory environment.

    The new loans granted since we imposed stricter conditions in mid-2013 continue to show signs of improved quality and performance, which will enhance our risk profile in the medium term. Shrinking the loan portfolio has however caused the ratio of non-performing loans to increase in the short run. On deposits, we are pleased to report an increase in retail deposits from the previous quarter: a strong sign of customers’ confidence in the bank.

    Home Credit prides itself on its reputation as an industry-leading responsible lender and is committed to building on its strong position in the consumer lending and retail banking sector in Russia. These results give us confidence that we continue to be on the right track.”

    Ivan Svitek, Chairman of the Management Board, HCFB

    The macroeconomic backdrop has continued to weaken in Russia in the first half of 2014 and the consumer finance sector has been particularly impacted by the on-going regulatory reform. In response to these tighter market conditions HCFB has implemented a number of initiatives, including re-calibrating its risk-management and collection procedures, cutting costs and improving its customer service offering.

    The Bank continues to manage cautiously its business with an increased focus on reducing risk costs and improving loan quality. Early positive signs of this enhanced approach to risk management are already emerging with newer loans exhibiting a lower level of risk, for example, the number of defaults on first payments being five times lower for some products.  However, loans issued before these measures were put in place continue to impact our profitability resulting in a loss for the first half of 2014. Encouragingly, compared with the first quarter, the pace of loss over the first half has slowed substantially, and portfolio quality has stabilized as new loans are being underwritten. Management remains focused on improving the risk profile of both existing and future customers. 


    • Operating income for the reporting period fell 18.4% to RUB 36.5 billion (1H 2013: RUB 44.7 billion). The drop in operating income was mainly driven by an intentional policy to underwrite fewer loans compared to year ago. It reflects also the weaker outlook in Russia.
    • Net loss for the first half of 2014, on IFRS basis, was RUB 4.0 billion, generated predominantly from loans originated before the middle of 2013. On a Russian accounting standards basis, which is principally used by our peers in the sector, HCFB recorded a stand-alone profit of RUB 0.7 billion.
    • HCFB achieved net interest margin of 18.4% despite the tougher market conditions.
    • General administrative and other operating expenses rose 6.8% to RUB 13.9 billion, reflecting business development in Kazakhstan. The Bank continued to manage effectively its operating expenses with cost-to-income ratio of 38.1% and cost-to-average-net-loans ratio of 10.4%. The increase of cost-to-income ratio was primarily driven by the reduction in income, while expenses did not grow dramatically.      
    • Total assets amounted to RUB 332.5 billion down 7.4% since the end of 2013 in light of decrease in business volumes.
    • Net loans decreased 12.8% to RUB 249.5 billion at 30 June 2014 (YE 2013: RUB 285.9 billion), with RUB 120.7 billion new loans granted (1H 2013: RUB 182.4 billion). Given the changes in the regulatory and macro environment in Russia and also as a result of a tightening in the Bank’s underwriting standards, the growth rates in the volume of cash loans were intentionally reduced from the middle of 2013. In response to regulatory reform in 2013, the Bank optimized its product line and reduced interest rates.
    • Retail deposit and current account balances were RUB 208.7 billion as at 30 June 2014, down 2.8% since YE2013. Deposit and current account balances comprised 75.5% of the Bank’s liabilities. The ratio of loans to deposits was 116.6% at the end of the reporting period, confirming the Bank´s continued focus on retail deposits as a major funding source. The deposits outflow in the first half of 2014 reflects the decreased volumes of lending. At the same time retail deposits and current accounts grew 6.3% in the second quarter of 2014, which showed continued customer confidence in the Bank.   
    • Non-performing loans (NPL) grew to 16.1% of total gross loans (YE2013: 11.7%) in line with the market trend of asset quality decline. HCFB continues to apply a conservative provisioning policy with NPL provision coverage of 107.2%. NPL growth has been driven by older loans made during 2012 and 2013, which was a period of rapid growth in Russia. In the first half of 2014 HCFB was one of the few players in the market who did not increase its credit portfolio. The proactive decision to underwrite fewer new loans means that NPLs represent a larger share of the total, however, the risk profile of loans granted since the middle of 2013 is healthier as a result of actions taken to reduce risk. New loans accounted for almost half of the credit portfolio.
    • HCFB remains strongly capitalised with consolidated capital adequacy ratio (CAR) of 23.7% at 30 June 2014 (YE2013: 23.5%). Capital adequacy ratio, based on standards set by the CBR, was 13.7% at 30 June 2014.
    • HCFB serves about 4.9 million active customers through 1,064 bank branches, 8,669 loan offices, over 93,000 points of sale, and 1,293 ATMs across Russia and Kazakhstan. The Bank‘s client base comprised 30.2 million customers at 30 June 2014.

    For full details of HCFB’s H1 2014 financial results, please visit:



    Balance Sheet (RUB million) 1H 2014 2013 Change, %
    Total assets 332,500 358,934 -7.4
    Net loan portfolio 249,453 285,913 -12.8
    Equity 49,396 55,196 -10.51


    Income Statement (RUB million) 1H 2014 1H 2013 Change, %
    Operating income 36,486 44,700 -18.4
    Profit befor tax (4,765) 9,703 -149.1
    Net profit (4,018) 7,540 -153.3



      1H 2014, % 2013, % 1H 2013, %
    Return on average assets (ROAA)1 -2.3 3.1 4.2
    Return on average equity (ROAE)2 -15.4 20.9 28.8
    Cost-to-income ratio3 38.1 31.2 29.1
    Capital adequacy ratio 23.7 23.5 20.0
    NPL4 16.1 11.7 8.5
    Cost of risk5 20.4 17.6 17.0
    1) RoAA is calculated as net profit for the period divided by average balance of total assets
    2) RoAE is calculated as net profit for the period divided by average balance of equity.
    3) Cost-to-income ratio is calculated as general administrative expenses divided by operating income.
    4) NPL ratio is calculated as gross non-performing loans (loans which are contractually overdue for more than 90 days) divided by total gross loans.
    5) Cost of risk represents impairment losses for the period divided by average balance of net loans to customers.

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