FINANCIAL RESULTS REVIEW

In 2023, operating income grew by 25.3% YoY to RUB 104.7 bln. Total fee and commission (F&C) income was up by 39.4%. The share of operating income accounted for by F&C was 50% in FY’23. F&C income increased on every market.

Operating expenses added 20.2% mainly driven by a rise of personnel expenses. EBITDA grew 65.6% YoY on the back of an increase in both F&C and interest income. EBITDA margin was 78.6%, up 19 pp YoY. Non-operating expenses, movements in allowance for expected credit losses (ECLs) and other impairment losses and provisions, put significant pressure on the EBITDA margin in the reporting period. This created the low base effect. CAPEX for the year stood at RUB 4.0 bln. Net profit was up by 67.5% to a record RUB 60.8 bln.

FEE AND COMMISSION INCOME

F&C income grew on the back of elevated client activity, the launch of new products and services, as well as the introduction of a new asymmetric tariff structure on a number of markets in 2022. Fee and commission income remained well diversified. The largest contributor to F&C income was the Money Market (23%).

Money Market

Trading volumes added 24.5%. Volumes of repo in General Collateral Certificates (GCC-repo), increased by 68.1% to reach almost RUB 224 trln. Trading volumes of repos with the CCP added 35.1%.

Depository and Settlement Services

The growth was primarily due to a 19.9% increase in the average value of assets under custody. The discrepancy between the growth rates of F&C income and assets under custody is the result of business lines beyond safekeeping, primarily clearing and collateral management services, which are the reflection of repo operations at the NSD.

FX Market

Spot volumes added 7.5%, while swap volumes grew by 31.4%. The effective fee dynamics is explained by two opposing factors: [1] the asymmetric tariff structure favoring liquidity makers on the spot market that came into effect on 1 August 2022, and [2] a shift in the volumes’ mix towards the less profitable swap segment.

IT services, listing, financial marketplace fees and other fees and commissions

This line was largely driven by Finuslugi revenues which increased by 141.7% due to the development of new features and the acquisition of new customers. Sale of software and tech. services improved by 34.0% driven by tariffs revision and the introduction of low-latency protocols for market data distribution and access – SIMBA ASTS and FIFO TWIME ASTS – to Equities and FX Markets. Listing and other services grew by 26.6% as primary market activity in equities and bonds recovered. Sales of information services rose by 20.7%, also on the back of RUB depreciation during the year. Other fee income shrank by 66.1% as base period revenues included additional fees on EUR balances of 0.2 p.p. above the non-positive ECB rate.

Derivatives Market

The trading volume stood virtually flat, adding just 3.7%. The discrepancy between fee income and volume dynamics was the result of a shift in volumes’ mix towards value-added commodity derivatives and the new asymmetric tariff structure implemented in June 2022.

Equities Market

The total market capitalization of the Equities Market at the end of 2023 was RUB 58.1 trln (USD 647.3 bln). Trading volumes grew by 30.9%. The discrepancy between fee income and trading volumes dynamics is largely explained by the introduction of a new asymmetric tariff structure providing more favourable terms for liquidity makers, which came into effect in November 2022.

Bond Market

Trading volumes were up 60.1% (excluding overnight bonds). Primary market (excluding overnight bonds) grew by 45.2%, mainly due to high activity of corporate borrowers. Secondary trading volumes increased by 74.6%. The effective fee in the Bond Market improved thanks to the updated tariffs that went live at the beginning of 2023 and migration of volumes to value-added CCP-based trading modes.

NET INTEREST AND OTHER FINANCE INCOME

Net interest income (NII) increased by 14.4% to RUB 52.2 bln on the back of higher average interest rates for the year and increased volume of the investment portfolio. NII less realized gains or losses on investment portfolio revaluation (core NII) grew by 14.5%.

OPERATING EXPENSES (RUB MLN)

OPEX for FY’23 increased by 20.2%. The key drivers of the increase in OPEX were: [1] the growth in personnel expenses, mainly driven by extra bonus provisions following the review of the compensation system and overachievement of corporate financial KPIs and new hires, [2] the increase in amortisation of intangible assets due to capital expenditure on development and acquisition of software and licences in 2023, [3] a significant increase in agent fees, reflecting insurance sales on the Finuslugi platform.

Capital expenditures

CAPEX for the year was RUB 4.04 bln, in line with the guidance range of RUB 3-5 bln for 2023. It was mostly attributable to purchases of software and equipment as well as software development.

Cash and cash equivalents

The cash position Cash position is calculated as the sum of Cash and cash equivalents, Financial assets at fair value through profit and loss, Due from financial institutions, Financial assets at fair value though other comprehensive income, Current tax prepayments and Other financial assets less Balances of market participants, Overnight bank loans, Distributions payable to holders of securities, Margin account, Liabilities related to assets held for sale, Current tax payables and Other financial liabilities.  at the end of 2023 was RUB 139.07 bln. The company had no debt as of the end of the reporting period.