The retail business is one of the bank’s key activities. Vozrozhdenie Bank is developing this segment by increasing the volume and profitability of the loan portfolio, attracting client funds and improving the service infrastructure of bank cards. A distinctive business feature of Vozrozhdenie Bank is the exceptionally high quality of its loan portfolio in the retail segment. In 2014 the bank managed to ensure ongoing business development, to exceed a number of key targets, to expand its client base and to increase the functionality and popularity of remote service channels.
- At the year-end, the retail loan portfolio increased by 7.9% to RUB 46.2 billion (including credit cards portfolio).
- Interest income increased by 21.3% to RUB 5.5 billion, which is above the target level.
- The target for non-interest income was substantially exceeded; its volume reached RUB 1.2 billion, which is about 17% higher than in the previous year.
- Mortgage programmes remain the key area of retail lending. In 2014, Vozrozhdenie Bank joined the TOP-10 banks in terms of mortgages on the primary market. The mortgage loan portfolio amounted to RUB 32.1 billion.
- The bank provided over 26,000 consumer and car loans totalling more than RUB 7.9 billion in 2014.
- The number of customers increased by 3,800 people in the mortgage segment, and by 5,000 people in the consumer and car loans segment. Special attention is paid to extension of payroll projects and the cross-sales.
- The retail deposit portfolio amounted to RUB 104.7 billion, increasing by 17.4 billion.
- During the year, the bank installed more than 50 additional selfservice terminals, and its park of payment terminals increased from 106 to 164 units.
A key challenge for the bank remains maintaining the high quality of its loan portfolio. Other key priorities of the bank include:
- development of sales
- increasing fees and commissions from lending, payments and transfers, launch of new fee-generating products, development of targeted proposals for core clients
- strengthening market positions in the retail segment
- providing high levels of financial and operating efficiency
- further growth of loan and deposit portfolios
The largest share in the structure of the bank’s retail lending is accounted for by mortgages and consumer loans. The bank’s retail loan portfolio was RUB 46.2 billion in 2014 (including credit cards loans). Mortgage portfolio, taking into account securitisation, grew by 8.4%, and the consumer and car loans portfolio – by 12.3%.
The average size of a mortgage loan in 2014 amounted to RUB 2,065 thousand; 88% of all loans were provided in Moscow and the Moscow Region.
The bank mortgage portfolio includes loans for the purchase of apartments in the primary and secondary markets, countryside real estate, construction of individual houses and “social” mortgages. The most popular product is the “New-Built Apartment” line, which provides loans for the purchase of apartments through participation in the funding of construction. The bank manages to maintain the high quality of the mortgage portfolio and to minimise its risks: construction projects and companies undergo a centralised procedure of accreditation. Vozrozhdenie Bank joined the TOP-10 banks in terms of mortgages in the primary market in the first half of 2014.
Due to the challenging economic situation, at the end of 2014 the bank offered new products to its customers, including insurance against the loss of work for consumer loans. The programme was launched in partnership with SOGAZ Insurance Group.
The bank provided over 26,000 thousand consumer and car loans in 2014 totalling more than RUB 7.9 billion. Non-interest income grew by almost 17% up to RUB 1.2 billion due to the growth in public demand for retail products. The absolute majority (99.8%) of mortgage loans were provided in Rubles, therefore the bank did not use the conversion option for foreign currency portion of the mortgages at the exchange rate as of October 1, 2014 offered by the Bank of Russia. The approval ratio of loan applications in the target segment was about 70%, while the share of non-performing loans in the entire portfolio of consumer loans in 2014 did not exceed 4%.
The bank maintains a conservative approach to risk assessment of consumer loans. The portfolio formed by the bank in 2014 consists by more than 85% of loans to employees from companies participating in the bank’s payroll projects, employees of state funded organisations and individuals with a positive credit history. The bank’s strategy to focus on the “understandable clients” becomes particularly important in connection with the policy of the Bank of Russia to increase the requirements on provisioning loans for borrowers “from the street”. Thus, when the law “On Consumer Loans” became effective on July 1, 2014, it did not require significant changes in the bank’s system of consumer lending.
The bank paid special attention in 2014 to mortgage funding through third securitisation and the formation of a pool of mortgage loans for the fourth securitisation. The total initial amount of the mortgage-backed bonds issues is over RUB 11 billion. An investment rating was assigned by Moody’s Investors Service to the mortgage bonds issued within the mortgage portfolio securitisation. The issue of bonds was made by special purpose vehicles (mortgage agents): CJSC Mortgage Agent Vozrozhdenie 1, CJSC Mortgage Agent Vozrozhdenie 2 and CJSC Mortgage Agent Vozrozhdenie 3. The true sale of rights of claim to a mortgage agent is an essential condition for the securitisation of the bank’s mortgage loan portfolio, since it can increase the effectiveness of risk management. The bank is planning to conduct the fourth mortgage loan portfolio securitisation worth RUB 3.5 billion in 2015.
The bank traditionally supports the share of retail funds in the structure of its liabilities at a level of at least 50%, since the funds of individual clients are the major source of funding. This indicator reached 60.3% as at January 1, 2015. The bank continued to attract deposits of individuals in 2014 by offering new deposit products and higher quality service based on an updated technological base as well as by effectively managing interest rates. The core customers in the deposit segment are participants of payroll projects and pensioners. Despite the difficulties we faced at the end of 2013 and the end of 2014 due to changes in the banking sector and the economy as a whole, the annual growth of RUB deposits was in line with the planned level, while the growth of the total retail funds exceeded the average market indicators by 6.4 pps according to the Bank of Russia. This amounted to RUB 122.8 billion, increasing by RUB 16.8 billion, including due to term deposits opened with the use of remote service channels, the volume of which increased by RUB 0.8 billion.
During the year, the bank changed interest rates in accordance with the market trends. Interest rates were raised for a number of RUB deposits for terms exceeding one year in the first quarter, while interest rates on foreign currency deposits were reduced for all periods and types of deposits; in the second quarter, interest rates on Ruble deposits were increased for major clients; in the third quarter the rates remained unchanged, and in the middle of the fourth quarter the rates slightly increased on RUB deposits and were lowered on deposits in foreign currencies. At the end of 2014, due to the hike in the Bank of Russia's key rate, the interest rates on short term Ruble deposits and rates on deposits in foreign currency for 3, 6 and 12 months were increased.
A considerable part of deposits in the bank is denominated in rubles. At the end of 2014, the bank faced increased demand for the conversion of RUB deposits into foreign currencies. In these circumstances, the bank provided its customers with comfortable FX term deposit conditions (up to 1 year) as well as with RUB deposit conditions (for 3-6 months) corresponding to the market dynamics. Time proved the correctness of the chosen tactics: there has been a downward trend in interest rates since February 2015.
The bank developed a technology of opening online deposits with increased interest rates by using ATMs, Internet and mobile bank in 2014. The line of deposit products during the reported period was complemented by the Actual’ny deposit product, which became popular among clients. In the future, the bank is planning to continue attracting individual depositors, while giving priority to the provision of reasonable interest rates and an increase in availability of operations related to the placement and management of deposits.
STRUCTURE OF ACCOUNTS BASED ON THE SIZE OF ACCOUNT BALANCE AS AT JANUARY 1, 2015
|Size of account balances,
|Number of accounts,
|Total amount of deposits,
|Up to 1 (inclusive)||829,318||107,727|
|From 1 to 10 (inclusive)||267,367||1,108,599|
|From 10 to 100 (inclusive)||278,162||9,531,267|
|From 100 to 400 (inclusive)||102,779||21,104,314|
|From 400 to 700 (inclusive)||36,955||20,478,053|
|From 700 to 1000 (inclusive)||14,952||12,014,;918|
CUSTOMER SERVICE AND CROSS-SELLING
Vozrozhdenie bank is consistently implementing its strategy of improving the quality of customer service. In 2014, the employee motivation system was reoriented to promote the development of high-quality sales and cross-selling.
The bank installed more than 50 self-service terminals, and the fleet of payment terminals increased from 106 to 164 units during 2014. In total, 800 thousand payments for RUB 700 million were made through the bank terminal network in the reporting period, while the number of transactions increased by 84%.
A significant amount of payment operations of the general public is conducted through the bank’s cash operating units. There were over 5 million payments totalling RUB 17.7 billion in 2014. The bank is developing remote service channels. The bank is planning to install at least one remote workstation for the demonstration and testing by customers of transactions in the Internet Bank using the Vbank with You service in 2015.
The bank aims to use the synergies from all its segments to a maximum effect by developing cross-selling. One of the main instruments for increasing the customer base is the launch of new payroll projects, including for employees of those companies, which are the bank’s existing clients in the corporate segment. The development of cross-selling in the retail segment also includes a VIP-service proposal for management of client companies, and debit and credit card issues for the employees of such companies.
The Campaign Management system was launched in 2014, which is a modern technological solution for the management of marketing campaigns. The system improves cross-selling efficiency through the formation of personalised, highly-focused offers for customers, expansion of communication channels and reduction of marketing campaign personnel costs. The solution is already being used to promote services in the consumer loan, credit card processing and deposit segments.