In preparation for the IPO

HKF Bank, which plans to hold an IPO at the end of the year, presented the first results of its activities according to international standards this year. Judging by the bank's reporting, it intends to present investors with a diversified business, reducing dependence on risky types of lending. The picture is worsened only by the structure of the bank's liabilities: it has not yet been able to implement plans to increase the volume of individual deposits, which forces the bank to increase activity in the debt markets.

HKF Bank, which is preparing to go public this year, reported its results for the first quarter of 2011 under IFRS. During this period, the bank earned a net profit of 3.1 billion rubles, which is 27% more than in the same period last year. The bank continued to diversify its business, increasing the volume of cash loans at a faster pace than commodity loans. Thus, over the past year, the volume of cash loans increased by 282% to 22.706 billion rubles, pos loans - by 47%, to 43.375 billion rubles. “Given that the cash loan market is many times larger than the pos-loan market, the prospects for growth in it are more obvious for us, so we are actively developing in this direction,” explained Ivan Svitek, Chairman of the Board of HCF Bank.

According to the analytical agency Frank Research Group, in the first quarter the volume of the pos-loan market amounted to 151 billion rubles, while HKF Bank is the leader in the sector, far ahead of other banks: it accounts for about 30% of the market. The volume of the non-targeted loans market, according to Frank Research Group, is about 2 trillion rubles, while here HKF Bank ranks only tenth with a market share of 1.2%.

We would like 50% of our funding base to be through deposits. Now they make up a third

— Ivan Svitek, head of HKF Bank, February 2011

Against the backdrop of increasing activity in the non-targeted lending segment, HCF Bank reduced the amount of credit card debt: compared to the first quarter of 2010, the reduction was 7.3%. This is due to the noticeably poorer quality of card loans compared to cash loans and trade loans. Thus, the share of loans overdue over 90 days (NPL) in the bank’s card portfolio amounted to about 10%, according to the results of the first quarter, while in the portfolio of POS loans and cash loans the share of non-performing assets is twice as low - 4.4% and 6.1%, respectively." The share of non-performing loans in the total loan portfolio of HCF Bank amounted to 6.7%, according to March 31, having decreased by 0.2 percentage points since the beginning of the year.

The structure of the bank's loan portfolio is currently formed by express loans (accounting for 52%), cash loans (27%), credit cards (13%), mortgage, auto and corporate loans (8%). As for the bank's passive base, funds from private clients decreased to 21.45 billion rubles. as of April 1, 2011 versus RUB 21.64 billion. as of April 1, 2010. The volume of funds raised from corporate clients more than doubled, but remains insignificant (RUB 5.3 billion). In general, the share of client funds in the bank’s liabilities at the end of the first quarter amounted to 25%, says Promsvyazbank analyst Dmitry Monastyrshin.

“The only negative aspects include the payment of record dividends in the amount of 13.2 billion rubles, which led to a decrease in the bank’s capitalization and an increase in borrowings,” notes Dmitry Monastyrshin. “In particular, HKF Bank increased the volume of its own securities issued by 10. 4 billion rubles and increased borrowings from the interbank lending market by 2.8 billion rubles." However, despite the withdrawal of a significant amount of capital by shareholders, the stability of HCF Bank is beyond doubt; the bank’s equity capital ratios and liquidity indicators significantly exceed the standards, the expert points out.

Ksenia Dementieva, Svetlana Dementieva, Vasily Nantai

HKF-bank replaces business