Servicing small and medium-sized enterprises is a priority direction of Vozrozhdenie Bank’s business. The bank continued to work on the development and diversification of its client base in 2014, building long-term partnerships, improving client relations, strengthening the competitive position on the market.
CLIENT BASE DEVELOPMENT
Among the bank’s strategic objectives is the provision of the most comfortable financing conditions for small and medium-sized businesses. The bank is constantly improving its range of credit products and security instruments to facilitate access of small and medium-sized business to financial resources.
The bank’s loan portfolio as at the end of 2014 amounted to RUB 123.9 billion, which is 1.3% below the level of 2013. More than a half of the loan portfolio accounted for loans to small and medium sized businesses and amounted to RUB 68.3 billion in total. The yield on the loan portfolio exceeded last year’s result by 0.13 pps, amounting to 11.15%.
The average rate on corporate loans in the first half of 2014 amounted to 11.05%; in the second half of 2014, it increased to 14.41% in connection with the growth of funding costs.
The bank continued to participate in the government Programme for Financial Support for Small and Medium-sized Businesses in cooperation with SME Bank. Within the framework of this Programme, the bank provided more than 1,450 loans worth over RUB 26.1 billion. In December 2014, the bank and SME Bank entered into the first SME Syndicate product transaction involving provision of a loan simultaneously from two sources.
The bank is a member of the working group under the Russian Federation Ministry of Construction, Housing and Utilities Infrastructure on the development of mechanisms for crediting capital renovations, and it is one of the first credit institutions in the country, which developed a special loan product for financing capital renovation projects.
The bank continued cooperation with regional guarantee funds in 2014, which helps the bank’s customers facing the problems with shortage of liquid collateral. By the end of 2014, the volume of the bank’s guarantees from regional funds exceeded RUB 2.2 billion, which allowed the bank to provide loans to small and medium-sized businesses for over RUB 4.4 billion in total.
In order to increase the availability of loans for business, the bank was one of the first in the country to sign a cooperation agreement with the Agency for Credit Guarantees in August 2014. During the year, the bank provided loans totalling more than RUB 180 million, secured by the Agency’s guarantees in the amount of RUB 74 million.
In 2014, the bank worked on the implementation of the “Micro Business” programme aimed at financing small and micro enterprises. In 2014, 475 loans worth RUB 1.7 billion were provided under the programme, which is 40.8% higher than in the previous year.
In 2014, the bank switched to a centralised model of work with collateral in the corporate segment, which was designed to improve the quality of the collateral portfolio and provide objective appraisal of collaterals.
The bank plans to continue diversification and increase its loan portfolio in the future, primarily thanks to active work with small and medium-sized businesses, participation in government programmes supporting this segment and further development of the Micro business programme.
The bank has a diversified deposit portfolio. The bank’s activities are aimed at preserving the existing volume of the deposit portfolio, building up a sustainable resource base through work with small and medium-sized businesses and reducing exposure to large depositors.
Attraction of term deposits depends on the needs for loan portfolio funding. In the reporting period, the bank aimed to maintain its deposit costs at a comfortable level, despite the increased competition in this segment. At the year-end, the average interest rate of the portfolio was 8.3%, which is 0.92% higher than the 2013 level.
The bank developed cooperation with insurance companies in 2014: non-interest income from the sale of bank services to insurance companies exceeded RUB 9 million and the amount of fees and commission received thanks to cooperation with accredited insurance companies exceeded RUB 20 million.
The bank adjusted its rates for corporate clients in accordance with the market trends during 2014. In the second half of the year, raising of funds was reduced in order to retain the minimised funding costs; at the year-end, the raising of funds was increased to maintain liquidity and compensate the planned outflow of funds.
Most of the corporate deposits are denominated in Rubles; deposits in foreign currencies account for 14% of the bank’s corporate deposit portfolio. Due to the sharp depreciation of the Ruble and conversion of a portion of Ruble funds in foreign currency, the share of foreign currencies grew by 6.6% in the fourth quarter of 2014.
DEPOSITS OF CORPORATE CLIENTS
CASH AND SETTLEMENT SERVICES
Cash and settlement services are the most popular product of the bank used by 99.7% of clients. Most of the fee and commission income comes from customers of the medium and small business segment. The volume of settlement transactions in the accounts of legal entities approximated RUB 1,732 billion in 2014, decreasing by 13,5% due to the reduction of transactions by 7.7% to 7.4 million caused by deteriorating macroeconomic conditions and increased competition from large state banks. In the second half of the year, fee income dynamics reversed to positive due to attraction of new clients as part of the package offers for SMEs
THE NUMBER AND VOLUME OF TRANSACTIONS ON
ACCOUNTS OF LEGAL ENTITIES
In 2014, the bank developed and implemented new factoring software, aimed at reducing operating and credit risks as well as at reducing the personnel costs of factoring transactions support. A uniform interface of the factoring module and the bank operating system allows experts to carry out factoring transactions in a convenient and specified way. In order to improve the factoring service for clients, the bank signed agreements with federal retail chains, enabling electronic verification of deliveries, thereby making the customer service more efficient and improving the quality of the factoring portfolio.
In the difficult economic situation, the bank’s priority in 2014 was not aggressive growth of its factoring portfolio, but rather attracting factoring clients who are, firstly, reliable and efficient companies with a diversified portfolio of debtors. As a rule, these are the sellers and manufacturers of food and non-food consumer goods, packaging materials and raw materials and components for manufacturing enterprises. The bank is planning to actively offer factoring to the suppliers of the bank’s existing clients as priority sales channels in 2015, namely regional retail chains. The bank will do so in order to provide the latter with a sufficient amount of working capital in the form of accounts payable. The bank will also offer factoring services to suppliers of goods and services to federal retail chains.
The volume of the bank’s trade finance portfolio at the end of 2014 exceeded RUB 4 billion. The most actively implemented deals were the acquisition of foreign equipment funded against guarantees of national export agencies. The sharp increase in the foreign currencies rate in the fourth quarter of 2014 become a major concern for customers borrowing loan products in foreign currencies. In these circumstances, the bank began the search for individual solutions for its clients.
The bank retains a strong position in the cash-in-transit market, especially in the Moscow Region, covering its own cash transportation needs and increasing its customer base by offering reasonable pricing and attractive innovative technologies.
In 2014 the bank launched a new high-tech product “Collection Lite” within the cash-in-transit optimisation project. This product enables to reduce personnel and time costs for collecting and processing cash at cash desks. The use of the “Collection Lite” product serves to attract small and medium-sized business clients as part of the policy to diversify the customer base. The product has been marketed in the Moscow Region since November 2014, and it will be introduced in the other regions of the bank’s presence in 2015.
The bank was the first in the Russian market to offer its clients an innovative service of cash-in-transit management with the use of mobile applications. In addition, mobile data collection terminals and mobile printers for the preparation of accompanying documents are used during the collection process.
In the reporting period, due to the challenging economic situation, some of the bank’s customers faced a decline in their business volume and reduction of revenues, which resulted in a decrease of the bank’s income from cash-in-transit services. In the future, the bank is planning to continue the development of this business, including through promotion campaigns and by offering package services.
BANK’S INCOME FROM CASH-IN-TRANSIT SERVICES
The bank continued to develop multi-channel remote banking services in 2014. The share of the bank’s customers using such services reached 61.5% of the total number of clients at the end of 2014. Furthermore, the share of payments made by customers through the remote communication channels increased by more than 2 pps and reached 86.9%. The increase in the share of customers using remote banking services was facilitated by the implementation of various programmes aimed at improving the convenience of settlement transactions for customers. In particular, the bank developed a unified bank account contract, which allows joining the system of cash and settlement services by executing only one application; it introduced package offers enabling fast connection to the most popular services. In addition, the bank switched to a new version of the remote service system with advanced features and a new interface.
The most effective instrument of remote services is the Internet- Client system, which enables quick receipt all updates related to changes in legislation or functionality. The bank is planning to further develop its product line of remote banking services, creating comprehensive integrated solutions. The bank is scheduling some initiatives for 2015 such as expansion of the Internet-Client system functionality and creation of a mobile banking system.
The bank continued to use the ROUND Custom Card product, which allows customers to make customs payments remotely; the functionality of the card was expanded during the year. Currently, the bank, together with Multi-Payment System LLC, is developing a technology to provide guarantees for the additional verification of the information stated in the declaration. Vozrozhdenie Bank won the “Customs Olympus” for the fourth time in 2014 as the best financial institution providing services in the area of customs affairs. Working with other counterparty banks on the customs card basis creates synergy for the interbank business.