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    Home Credit B.V.: IFRS consolidated results for the six month period ended 30 June 2013
    09/11/2013

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    Continued strong loan growth; Asian expansion boosts profits

    Amsterdam, 11 September 2013: Home Credit B.V. (‘HCBV’ or ‘Group’), the Netherlands-based holding company for Home Credit’s leading multi-channel consumer finance operations in CEE, CIS and Asia, announces its consolidated unaudited financial results for the six month period ended 30 June 2013, prepared in accordance with International Financial Reporting Standards (IFRS).

    "Our strategy of expanding into high-growth emerging markets across Asia and the CIS has paid off in the first half of 2013 as operations in China and Kazakhstan boosted results. The inclusion of HC Asia N.V. as well as the acquisition of Kazakh operations into HCBV means that we have a diversified footprint across a number of dynamic growth markets. Growth in these regions helped offset the impact of the weaker economic environment in Russia, where the quality of our business still puts us well ahead of our competitors and where we have taken swift steps to safeguard our superior position.

    Our loan portfolio and distribution network have continued to grow and deliver excellent results, while we have maintained our disciplined approach to costs and risk management and improved operational efficiency. We will continue to capitalise on our leading position in the POS market and improving position in the cash loan and credit card segment while maintaining responsible lending practices and working to improve financial literacy across all our markets.”

    Jiří Šmejc, HCBV Chief Executive Officer

    HIGHLIGHTS
    Net profit rose 33.5% to EUR 235 million at 30 June 2013compared to H1 2012 net profit of EUR 176 million. This result was driven by a strong performance in China and Kazakhstan as well as by an impact from the acquisition and consolidation of certain insurance operations in Russia and Belarus.Growth was achieved despite the decisionto strengthen the conservative approach to provisioning in Russia.
    Operating income increased 92.3 % year on year to EUR 1,298 millionin the first half of 2013 (H1 2012: 675 million) thanks to robust yields from a much larger loan portfolio in Russia and a strong performance in China and Kazakhstan.
    Net loan portfolio continued to grow, up12.9% in the first half to EUR 7,373 million as at 30 June 2013 (31 December 2012: EUR 6,531 million).
    HCBV’s strategy to diversify its funding base and grow its retail banking service offering proved to be successful with customer deposits rising 23.3% in H1 2013 to EUR 5,822 million, compared to EUR 4,724 million as at 31 December 2012.
    Continuing loan and deposit portfolio growth was supported by further distribution network expansionand, as at 30 June 2013, HCBV’s multi-channel network consisted of 125,006 distribution points of different formats: 121,029 points of sale, 2,874 post offices as well as a network of 1,103 retail bank branches.
    Due to the worsening outlook in Russia, the quality of the HCBV loan portfolio fell while provisioning increased. The NPL share of the gross loan book rose to 9.5% (from 7.6% as at 31 December 2012), and the NPL coverage ratio rose to 122.2%, illustrating HCBV’s conservative approach to risk management.
    HCBV’s capitalisation remained solid withtotal equity amounting to EUR 1,591 million as at 30 June 2013. 

    RESULTS
    Net profit increased 33.5% to EUR 235 million in H1 2013 compared to H1 2012 net profit of EUR 176 million. This strong result was achieved as profit from both China and Kazakhstan outweighed the impact of increased provisioning in Russia, validating Home Credit’s strategy to expand across Asia and the CIS. Net profit was also boosted by the acquisition and consolidation of certain insurance operations in Russia and Belarus.

    Net interest income for the six month period ended 30 June 2013 more than doubled to EUR 863 million, compared to EUR 406 million for the same period in 2012.

    Net fee and commission income rose 53% to EUR 343 million in H1 2013, up from EUR 224 million in H1 2012, as the business benefited from the performance of the Chinese and Kazakh operations and also continued its strategy of cross-selling insurance products.

    General administrative and other operating expenses rose 73% to EUR 431 million from H1 2012 due to the inclusion of HC Asia and Kazakhstan as well as continued expansion of distribution and customer service network in Russia, where 244 new bank branches have been added since the first half of last year. Importantly, the growth in costs was outpaced by revenue growth and HCBV improved its cost-to-income ratio to 33.2% over the six month period (FY 2012: 36.9%) as well as the ratio of cost to average net loans which improved to 12.4% in the first six months of 2013 from 15% at FY 2012.

    The 12.9% loan portfolio growth was fuelled by the further growth of cash loans and credit cards in Russia, strong growth of cash loans in Kazakhstan and the expansion of the business in China.

    The quality of HCBV’s loan portfolio, which stood at EUR 7,373 million as at 30 June 2013, declined mainly due to the weaker economic outlook in Russia with the NPL ratio (gross non-performing loans more than 90 days overdue as a percentage of total gross loan book) up at 9.5%. However, a conservative provisioning policy was applied and the NPL coverage ratio improved to 122.2% as at 30 June 2013 from 118.9% as at 31 December 2012. Thanks to the Group’s performance during the previous period of economic weakness in Russia in 2008-2009, HCBV has used its experience to preserve the market-leading quality of its loan book, resulting in an intentional slowdown in the pace of growth in Russia.

    HCBV maintained a solid funding base and liquidity position, and the Group’s funding structure continued to diversify as the Group successfully attracted deposits from individual and corporate customers. Share of account balances and term deposits comprised 65.6% of total liabilities as at 30 June 2013 (31 December 2012: 59.6%).

    Note: HC Asia N.V. was acquired in July 2012 and a majority stake in SB JSC “Bank Home Credit” (Kazakhstan) in January 2013, thus these companies and their operations were not consolidated into H1 2012 results of HCBV but have been included in H1 2013 numbers.

    Financial summary
    Business Results As at Jun 30, 2013 As at Dec 31, 2012 As at Jun 30, 2012 YTD Change, % YO-Y Change, %
    Loans granted YTD (EUR millions) 5,182 8,088 2,959 (36%) 75%
    Number of active clients (millions) 7.1 6.6 4.4 8% 61%
    No. of distribution points 125,006 109,927 77,258 14% 62%
    Number of employees (thousands) 44.8 38.8 24.2 15% 85%
     
     
    Income Statement (EUR millions) 6M period ended Jun 30, 2013 6M period ended Jun 30, 2012 Change, %
    Net interest income 863 406 113%
    Operating income 1,298 675 92%
    Impairment losses on financial assets (567) (199) 185%
    Operating expenses1) (431) (249) 73%
    Net profit after tax 235 176 34%
     
     
    Balance Sheet (EUR millions) As at Jun 30, 2013 As at Dec 31, 2012 Change, %
    Total assets 10,468 9,426 11%
    Net loan portfolio 7,373 6,531 13%
    Shareholders' equity 1,591 1,505 6%
    Wholesale funding 2,588 2,871 (10%)
    Customer deposits 5,822 4,724 23%
     

    Notes: 1) Operating expenses comprise general administrative and other operating expenses

    Key ratios
    Income Statement Ratios As at Jun 30, 2013 As at Dec 31, 2012 As at Jun 30, 2012
    Net interest margin1) 19.1% 18.9% 18.8%
    Net interest income to operating income 66.5% 59.6% 60.2%
    Cost to average net loans2) 12.4% 15.0% 14.6%
    Cost to income3) 33.2% 36.9% 36.9%
    Cost of risk ratio4) 16.3% 11.0% 11.6%
    Adjusted RoAA5) 4.7% 8.1% 7.2%
     
     
    Balance Sheet Ratios As at Jun 30, 2013 As at Dec 31, 2012 As at Jun 30, 2012
    Net loans to total assets 70.4% 69.3% 71.8%
    NPL ratio6) 9.5% 7.6% 8.2%
    NPL coverage ratio7) 122.2% 118.9% 124.1%
    Deposits to total liabilities 65.6% 59.6% 63.5%
    Equity to assets 15.2% 16.0% 16.9%
    Equity and deposits to net loans ratio 100.5% 95.4% 97.0%
     

    Notes:
    1) Net interest margin is calculated as net interest income divided by average balance of net interest earning assets.
    2) Cost to average net loans is calculated as general administrative and other operating expenses divided by average net loans.
    3) Cost to income ratio is calculated as general administrative and other operating expenses divided by operating income.
    4) Cost of risk represents impairment losses divided by average balance of net loans to customers.
    5) Adjusted RoAA is calculated as net profit divided by average balance of total assets.
    6) NPL ratio is calculated as gross non-performing loans divided by total gross loans. The Group defines non-performing loans as collectively impaired loans that are overdue by more than 90 days as well as loans considered individually impaired.
    7) NPL coverage ratio is calculated as loan loss provisions divided by gross non-performing loans.

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