AHML has published its interim condensed consolidated financial statements for 1H 2017 in accordance with the International Financial Reporting Standards (IFRS). The financial statements include the report on the review conducted by Ernst & Young.
AHML’s key financial highlights for 1H 2017:
- Net profit increased by 16.2%, or RUB 0.9 bn y-o-y, to RUB 6.7 bn;
- annualised ROE for the period reached 9.5% compared to 8.5% in 1H 2016;
- As at 30 June 2017, the portfolio of mortgage assets1 grew by 16.4%, or RUB 44.6 bn, totalling RUB 316.7 bn;
- As at 30 June 2017, the portfolio of rental housing and apartment projects2 grew year-to-date by 75.0%, or RUB 10.1 bn, totalling RUB 23.6 bn;
- As at 30 June 2017,3 the capital adequacy ratio stood at 30.6% versus 34.6% as at 31 December 2016.
The success of the mortgage refinancing programme involving use of one-tranche mortgage-backed securities guaranteed by AHML delivered a 16.4% growth in mortgage assets year-to-date. Following the completion of a pilot RUB 50 bn deal, AHML and Sberbank signed a memorandum on mortgage-backed bonds to be issued in the span of three years for up to RUB 300 bn. More transactions with leading public and private banks holding over 80% of the mortgage lending market are currently under preparation.
“Mortgage rates have hit an all-time low since the start of the year: the average rates offered by Top 15 mortgage lenders in June stood at 10.1% in the primary market and 10.6% in the secondary market. We are convinced that, should the current monetary policy persist, the average rates are bound to plunge below 10% thanks to, among other things, the one-tranche securitisation instruments developed and successfully tested by the Agency in 2016 and 2017,” said AHML’s CEO Alexander Plutnik.
As at 30 June 2017, the Agency provided financing for rental housing projects with a total area of 366.2 thousand sq m (7,220 flats and apartments), including a 283.6 thousand sq m corporate rental project (5,725 flats) for employees of the Zvezda Shipyard in the town of Bolshoy Kamen in Russia’s Primorye Territory, and 82.6 thousand sq m commercial lease projects (1,495 flats and apartments) in Moscow. The first rental housing project at the Liner Residential Development (Moscow) was commissioned in July 2017, with more than 40% of the apartments rented out when launched.
“The pilot projects of rental and apartment housing development are carried out by the Agency as instructed by the Russian President Vladimir Putin following the meeting of the State Council on construction and urban development. AHML’s 2020 development programme contemplates considerable investments of RUB 100 bn into this segment. At the same time, with the share of rented properties exceeding 40% of the total housing stock in today’s metropolitan areas, a mission of this calibre would cost trillions of roubles in investments. This would require a workable framework for collective investment to attract both private and institutional investors. And this is what we are focusing on as we proceed with the pilot projects in cooperation with the Government and the Bank of Russia to create investment mechanisms and a regulatory framework for the rental housing market,” emphasised Alexander Plutnik.
Thanks to the growing portfolio of mortgage assets, strong credit risk management practices and efficient use of capital, the Agency has boosted its net profit, ROE and dividends paid to the federal government. The dividends declared in June 2017 following the Annual General Meeting of Shareholders amounted to RUB 7.1 bn, a y-o-y growth of 1.6 times.
|1H 2017||1H 2016||Change in |
|Net interest income, RUB m||9 294||10 183||(889)||(8,7)|
|Reversal of provisions / (provisioning) for impairment of debt financial assets, RUB m||382||(2 244)||2 626||(117,0)|
|Net operating income for acting as the agent of the Russian Federation, RUB m||1 012||661||351||53,1|
|Net operating income from investment property, RUB m||283||–||283||–|
|Other income4, RUB m||153||783||(630)||(80,5)|
|Operating expenses, RUB m||(3 236)||(2 410)||(826)||34,3|
|Net profit, RUB m||6 706||5 773||933||16,2|
|Key financial ratios|
|Net interest margin (NIM), %||5,8||6,3||(0,5) pp||(7,9)|
|Сost-to-income ratio, %||30,1||20,7||9,4 pp||45,4|
|ROE, %||9,5||8,5||1 pp||11,8|
In 1H 2017, net interest income decreased by 8.7%, or RUB 889 m y-o-y, to RUB 9,294 m. The decrease was due to:
- NIM decline by 50 bp (from 6.3% in 1H 2016 to 5.8% in 1H 2017);
- decrease in average interest earning assets by 0.4% (from RUB 323,461 m in 1H 2016 to RUB 322,237 m in 1H 2017).
The NIM declined because of:
- a 98 bp decrease in average return on interest earning assets (from 11.89% in 1H 2016 to 10.91% in 1H 2017) and a subsequent 98 bp decrease in NIM;
- increase in average debt to average interest earning assets ratio from 59.87% in 1H 2016 to 60.76% in 1H 2017 resulting in a 9 bp decrease in NIM;
- a 89 bp decrease in cost of debt (from 9.35% in 1H 2016 to 8.46% in 1H 2017) and a subsequent 57 bp increase in NIM;
In 1H 2017, income from reversal of provisions for impairment of debt financial assets totalled RUB 382 m compared to RUB 2,244 m of provision charge in 1H 2016. The change was due to:
- reversal of the provision for the impairment of the Military Mortgage portfolio worth RUB 433 m with respect to loans that will not be covered by Rosvoenipoteka’s payments by the expiry dates of loan agreements. The decrease in provisioning is due to the limits of maximum floating interest rates on Military Mortgage loans set by AHML’s Supervisory Board at 12% per annum for 2017, partial early repayment of loans for RUB 2,663 m from the savings accumulated in the Mortgage Savings System, and lower key interest rate set by the Bank of Russia;
- mortgage portfolio credit quality improvement in 1H 2017;
- cutting of provisioning expenses for loans issued, including as a result of reversal of provisions in connection with a partial sale of claims against Territoriya-Innopolis in 1H 2017, worth of RUB 115 m, or 75.2%, compared to 1H 2016, when the Agency made additional provisions of RUB 125 m due to the non-performance by Territoriya-Innopolis of its obligations on mortgages purchased in 2014.
Other income in 1H 2017 dropped by 80.5%, or RUB 630 m y-o-y, to RUB 153 m. Change in other income / (expenses) was mainly due to:
- decrease in net income from transactions with derivative financial instruments by RUB 711 m, or 89.0% y-o-y, on the back of the reduced liabilities to repurchase mortgage-backed securities, capital market rebounding and overall decrease in bond yields in 2016;
- increase in losses from initial recognition of financial assets by RUB 103 m, or 69.1% y-o-y, primarily attributable to the recording of losses from initial recognition of the loan issued to Rosneftegaz under the rental housing development programme;
- decrease in income from early redemption of financial assets by RUB 187 m, or 55.7% y-o-y, mainly due to fewer loans issued under the Stimulus programme.
|Metric, RUB m||1H 2017||1H 2016||Change in |
|Income from early redemption of financial assets||149||336||(187)||(55,7)|
|Net income from securities transactions5||130||25||105||420,0|
|Net income from transactions with derivative financial instruments||88||799||(711)||(89,0)|
|Net expenses from transactions with real estate available for sale||(28)||(64)||36||(56,3)|
|Loss from initial recognition of financial assets||(252)||(149)||(103)||69,1|
|Provisions for impairment of other assets||(171)||–||(171)||–|
|Reversal of provisions / (provisioning) for contingent litigation liabilities||75||(242)||317||(131,0)|
|Reversal of provisions for contingent credit liabilities||54||–||54||–|
|Total other operating income||153||783||(630)||(80,5)|
In 1H 2017, operating expenses increased by 34.3%, or RUB 826 m y-o-y (in nominal terms), reaching RUB 3,236 m. This is mainly due to the changes in employee compensation structure starting from Q4 2016. Compared to the 2016 half-year average, operating expenses in 1H 2017 went up by 5.2%, or RUB 160 m (in nominal terms).
|Metric, RUB m||1H 2017||1H 2016||Change in |
|Employee compensations and contributions to funds||(1 676)||(858)||(818)||95,3|
|Depreciation and amortisation||(150)||(168)||18||(10,7)|
|Communication and information services||(87)||(29)||(58)||200,0|
|Advertising and marketing expenses||(88)||(8)||(80)||1 000,0|
|Repair and maintenance||(22)||(57)||35||(61,4)|
|Taxes other than income tax||(18)||(60)||42||(70,0)|
|Other administrative expenses||(8)||(15)||7||(46,7)|
|General and administrative expenses||(2 402)||(1 451)||(951)||65,5|
|Rossiysky Capital integration expenses||(59)||–||(59)||–|
|Servicing and depository fees||(775)||(959)||184||(19,2)|
|Operating expenses||(3 236)||(2 410)||(826)||34,3|
Balance sheet highlights, RUB m
|30 June |
|31 December |
|Change in |
|Interest earning assets, RUB m||344 578||299 893||44 685||14,9|
|– Mortgages and stabilisation loans, RUB m||244 894||201 375||43 519||21,6|
|– Mortgage-backed securities (MBS)6, RUB m||71 816||70 696||1 120||1,6|
|– Liquid assets7, RUB m||19 865||20 996||(1 131)||(5,4)|
|– Securities8, RUB m||4 515||2 586||1 929||74,6|
|– Loans issued, RUB m||8 003||4 240||3 763||88,8|
|Investment property, RUB m||18 844||13 495||5 349||39,6|
|Total assets, RUB m||373 386||323 687||49 699||15,4|
|Liabilities, RUB m||234 865||180 589||54 276||30,1|
|Equity, RUB m||138 521||143 098||(4 577)||(3,2)|
|Contractual and contingent liabilities, RUB m||78 936||89 452||(10 516)||(11,8)|
|Key financial ratios|
|Mortgages and stabilisation loans 90+ dpd (NPL), %||3,7||4,6||(0,9) pp||(19,6)|
|Provision for impairment of mortgages and stabilisation loans to NPL, %||87,6||90,1||(2,5) pp||(2,8)|
|Capital adequacy ratio9, %||30,6||34,6||(4,0) pp||(11,6)|
As at 30 June 2017, interest earning assets increased by 14.9%, or RUB 44,685 m from the beginning of the year, totalling RUB 344,578 m. Changes in interest earning assets are mainly due to the expansion of the mortgage asset portfolio by 16.4%, or RUB 44,639 m from the beginning of 2017 and an increase in loans issued by 88.8%, or RUB 3,763 m.
As at 30 June 2017, the portfolio of mortgage assets grew by 16.4%, or RUB 44,639 m from the beginning of the year, to RUB 316,710 m. Changes in the portfolio of mortgage assets were due to:
- expansion of the mortgage and stabilisation loan portfolio by 21.6%, or RUB 43,519 m from the beginning of 2017, mainly attributable to the acquisition of mortgage loans for the purpose of issuing one-tranche mortgage-backed securities guaranteed by AHML;
- growth in the MBS portfolio by 1.6%, or RUB 1,120 m;
As at 30 June 2017, loans issued increased by 88.8%, or RUB 3,763 m, totalling RUB 8,003 m. This was mainly due to the loan issued to Rosneftegaz under the rental housing development programme.
As at 30 June 2017, provision for impairment of interest earning assets reduced by 4.9%, or RUB 479 m, to RUB 9,368 m. This was mainly due to the reversal of the Military Mortgage provision. As at 30 June 2017, coverage by provisions for the impairment of mortgages and stabilisation loans 90+ dpd decreased by 2.5 pp to 87.6%.
As at 30 June 2017, investment property increased by 39.6%, or RUB 5,349 m, totalling RUB 18,844 m. This came on the back of the purchase of rights to the real property in the Symvol Housing Complex located at 11 Zolotorozhsky Val St., Bld. 30, Moscow. The investment property also includes apartments in the Liner Multifunctional Housing Complex located at 2 Khodynsky Blvd., and Match Point Multifunctional Complex located at 13 Vasilisa Kozhina St., Moscow.
As at 30 June 2017, liabilities increased by 30.1%, or RUB 54,276 m from the beginning of the year, totalling RUB 234,865 m. The increase was mainly driven by the issuance of one-tranche mortgage-backed securities guaranteed by AHML.
As at 30 June 2017, contractual and contingent liabilities decreased by 11.8%, or RUB 10,516 m from the beginning of the year, totalling RUB 78,936 m. The decrease was due to a RUB 2,926 m reduction in obligations to purchase mortgages and a decrease in sureties for mortgage-backed bonds by RUB 6 250 m, as well as a RUB 2,810 m reduction in obligations to extend loans under the Stimulus programme, with contractual and contingent financial liabilities increasing by the amount of contractual liabilities under the rental housing development programme worth of RUB 2,800 m.
As at 30 June 2017, capital adequacy ratio decreased by 4.0 pp to 30.6%.
AHML’s credit ratings as at 30 June 2017 and 31 December 2016 are shown in the table below.
|Rating agency||Scale||30 June 2017||31 December 2016|
|Standard & Poor’s||International||BB+||BB+|
1 Mortgages and stabilisation loans, mortgage-backed bonds classified as loans issued, including those pledged under repo agreements
2 Investment property (rental housing and apartments) and loans issued as part of the rental housing development programme
3 Equity to assets, contractual and contingent financial liabilities
4 Net income from transactions with securities at fair value through profit and loss, net income from transactions with available-for-sale securities, loss from initial recognition of financial assets, income less expenses on early redemption of financial assets, net income (expenses) from derivative financial instruments, net income (expenses) from transactions with real estate available for sale, provisioning for impairment of other assets and contingent liabilities (excluding those related to the transactions of the agent of the Russian Federation), other income
5 Net income from securities transactions at fair value through profit or loss, net income from transactions with available-for-sale securities
6 Mortgage-backed bonds classified as loans issued, including those pledged under repo agreements
7 Cash and cash equivalents, including amounts due from credit institutions
8 Securities at fair value through profit and loss, available-for-sale investment securities
9 Equity to assets, contractual and contingent financial liabilities