Vozrozhdenie Bank PJSC :BKVZY-US: Earnings Analysis: Q4, 2016 By the Numbers : March 27, 2017

Vozrozhdenie Bank PJSC reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of Vozrozhdenie Bank PJSC – Canadian Imperial Bank of Commerce and Banco Latinoamericano de Comercio Exterior, S.A. Class E (CM-US and BLX-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 73.84 million, Net Earnings of USD 14.11 million.
  • Net interest income margins widened from 55.54% to 67.12% compared to the same period last year.
  • Year-on-year change in operating cash flow of -1.03% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 73.84 61.53 67.71 31.55 62.35
Revenue Growth (%YOY) 18.44 7.31 -7.81 -53.96 -16.86
Earnings (mil) 14.11 11.16 11.92 -3.73 -18.4
Earnings Growth (%YOY) 176.67 136.53 204.22 -687.33 -3430.41
Net Margin (%) 19.11 18.13 17.6 -11.82 -29.52
EPS 0.59 0.46 0.51 -0.15 -0.77
Return on Equity (%) 15.03 12.6 14.14 -4.72 -23.34
Return on Assets (%) 1.48 1.24 1.4 -0.47 -2.39

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Market Share Versus Profits

Revenues History
Earnings History

BKVZY-US‘s change in revenue this period compared to the same period last year of 18.44% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that BKVZY-US is holding onto its market share. Also, for comparison purposes, revenues changed by 20.00% and earnings by 26.48% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by the following factors: (1) Year-on-year improvements in net interest income margins from 55.54% to 67.12% and (2) improvement in loan loss provisions. As a result, net interest income after provisions margins improved from 4.83% to 49.56% compared to the same period last year. Loan loss provisions as a percentage of net interest income were 26.16% this period and 91.31% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

BKVZY-US‘s change in operating cash flow of -1.03% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from -29.40% to 22.08% and (2) one-time items. The company’s pretax margins are now 23.20%, compared to -46.41% for the same period last year.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

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Company Profile

Vozrozhdenie Bank PJSC engages in the commercial and retail banking operations. It operates through the following business segments: Corporate, Retail, Bank Cards and Financial Business. The Corporate Business segment represents direct debit facilities, current accounts, deposits, loans, overdrafts, credit lines, and other credit facilities, foreign currency, and derivative products. The Retail Business segment provides private banking services, private customer current accounts, savings, deposits, investment savings products, custody, consumer loans, and mortgages. The Bank Cards Business segment operates settlement services to individuals with the use of bank cards, overdrafts, and revolving loans with the use of bank cards, payroll project services, acquiring, self-service operations on ATMs, and information service to plastic cards holders. The Financial Business segment comprises transactions in the interbank lending market and securities transactions. The company was founded on April 12, 1991 and is headquartered in Moscow, Russia.

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