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23.08.2019 09:30

Moscow Exchange announces results for the second quarter of 2019

Moscow Exchange (MOEX) today announces its financial results in accordance with International Financial Reporting Standards (IFRS) for Q2 2019. Exceptional performance of the Bond Market as well as strong growth of the Money Market and Depository & Settlement Services helped to deliver record high fee and commission income (F&C).

Unless stated otherwise, all figures below refer to performance in Q2 2019 and all comparisons are with the corresponding period last year.

KEY FINANCIAL HIGHLIGHTS FOR Q2 2019

  • Fee and commission income was up 10.7% to RUB 6,561.8 mln on the back of strong performance of nearly all markets.   
  • Net interest income (NII) increased by 9.4%.
  • Net Income was RUB 5,902.6 mln, up 21.3%.

KEY BUSINESS & CORPORATE HIGHLIGHTS FOR Q2 2019

  • Strong activity by Russian corporate issuers continued with over RUB 0.9 trln in bond placements in Q2 2019. 147 bond issues were placed by 71 corporates during the period.
  • MOEX launched trading in derivatives on Russian Secured Funding Average Rate  (RUSFAR), the new money market benchmark. The Exchange began calculating USD-denominated RUSFAR from 19 August.
  • MOEX OTC bond platform users can now clear transactions through the CCP, expanding its reach to non-listed securities and using resilient and convenient on-exchange infrastructure as well as benefits of the central counterparty service.

EVENTS OCCURRING AFTER THE REPORTING PERIOD

  • Updated Listing Rules took effect, creating a Sustainability Sector for financing projects in the fields of environmental and social sustainability.
  • Two new Russian-law ETFs tracking Russian corporate bonds were listed, bringing the total number of ETFs traded on MOEX to 28.
  • The total number of private brokerage accounts reached 2.7 mln as of August 22.
  • Both sovereign and corporate issuers from Belarus have entered the Bond Market, raising RUB 15 bln.

Yury Denisov, CEO of Moscow Exchange:

"In the second quarter, we posted record fee and commission income and a very strong net profit. I would like to highlight growth in volumes and fee and commission income on the Equity & Bond Market, notably the primary bond segment. This reaffirms MOEX’s status as the premier marketplace for raising capital for the Russian economy. We are also seeing retail investors’ rising contribution to trading volumes, with over 100,000 new clients opening brokerage accounts monthly. We think this trend will continue, underpinned by enhanced digital sales channels.

"As MOEX seeks to become an investment hub for the region we are developing relationships with issuers and market participants in Belarus and other Eurasian Economic Union member countries. We hosted successful placements for sovereign and corporate bonds from Belarus in recent months.

"We are working hard to advance ESG principles in Russia. Earlier this month we established a Sustainability Sector for bonds of companies investing in environmental and social projects. We believe that our initiatives in this area will increase the investment appeal of the domestic securities market."

Maxim Lapin, Chief Financial Officer of Moscow Exchange, said:

"We delivered double-digit fee and commission growth (+10.7% YoY) this quarter. This was in line with the trend of the last several years, despite headwinds in the form of stagnating volumes in some markets. Four fee and commission lines posted all-time quarterly highs: Equity Market, Bond Market, Money Market and Depository & Settlement Services. Effective fees were supported by a higher share of value added products such as CCP repos and commodity derivatives, the surge in primary bond placements and tariff revision linked to the launch of the unified collateral pool (UCP).

"Net interest income (NII) improved versus recent quarters on the back of realized investment portfolio revaluation, adding 9.4% YoY and 15.0% QoQ. NII excluding this effect, or core NII, reached RUB 4.12 bln in Q2 2019, up 5.3% QoQ and virtually flat at -0.6% YoY. The resulting topline operating income expanded by 9.0% YoY to surpass the RUB 11 bln mark, coming in at RUB 11.10 bln.

"OPEX growth was kept in line with our guidance. The calendar effect of the reversal of a RUB 112 mln bonus provision in Q1 2019 contributed to a higher Q2 2019 cost growth since a similar reversal happened in Q2 of the base year 2018. However, on a semiannual basis operating expenses added only 8.3% YoY. We therefore revise the full year 2019 OPEX growth guidance down to 8-10% (net of one-offs).

"As a result, reported net income rose by 21.3% YoY and adjusted net income with provisions removed increased by 8.7% YoY. The EBITDA margin improved QoQ to 73.8%."

FINANCIAL HIGHLIGHTS

RUB mln Q2 2019 Q2 2018 YoY Q1 2019 QoQ
Operating Income 11,100.0 10,180.0 9.0% 10,283.1 7.9%
  • Fee and commission income
6,561.8 5,927.2 10.7% 6,117.5 7.3%
  • Net interest and other finance income (NII)
4,498.0 4,110.7 9.4% 3,910.9 15.0%
NII less realized gains on investment portfolio revaluation (core NII)[1] 4,118.8 4,142.2 -0.6% 3,910.2 5.3%
  • Other operating income
40.2 142.1 -71.7% 254.7 -84.2%
Operating Expenses (3,873.8) (3,502.6) 10.6% (3,736.9) 3.7%
  • Personnel expenses
(1,797.6) (1,526.3) 17.8% (1,755.9) 2.4%
  • D&A and IT maintenance
(1,238.0) (1,123.1) 10.2% (1,204.9) 2.7%
  • Remaining general and administrative expenses
(838.2) (853.2) -1.8% (776.1) 8.0%
Profit before other operating expenses and tax 7,226.2 6,677.4 8.2% 6,546.2 10.4%
Other operating expenses 83.5 (873.5) nm (2,653.5) nm
Net Profit 5,902.6 4,864.9 21.3% 3,095.5 90.7%
Basic earnings per share, RUB 2.62 2.16 21.3% 1.37 91.4%
           
Net Profit 5,902.6 4,864.9 21.3% 3,095.5 90.7%
  • Other operating expenses / (income)
(one-off provisions and movements in allowance for ECLs under IFRS 9)
(83.5) 760.5 nm 2,435.2 nm
  • Adjustment for the change in amortization schedules (2018 only)
- 84.8 nm - nm
  • Deferred taxes related to one-off provisions, movements
in IFRS 9 allowance and change in amortization schedules
16.7 (340.3) nm (487.0) nm
Adjusted Net Profit 5,835.8 5,369.9 8.7% 5,043.7 15.7%
           
EBITDA 8,196.0  6,638.3 23.5% 4,765.5 72.0%
  • Other operating expenses / (income)

(one-off provisions and movements in IFRS 9 allowance)

(83.5) 760.5 nm 2,435.2 nm
Adjusted EBITDA 8,112.5   7,398.8 9.6% 7,200.7 12.7%
Adjusted EBITDA margin 73.1% 72.7% 0.4 p.p. 70.0% 3.1 p.p.

PERFORMANCE OF KEY BUSINESS LINES

RUB mln Q2 2019 Q2 2018 YoY Q1 2019 QoQ
Equities Market          
Fee and commission income, RUB mln 540.6 516.1 4.7% 414.4 30.5%
Trading volumes, RUB bln 2,994.2 2,888.7 3.7% 2,267.4 32.1%
           
Bond Market          
Fee and commission income, RUB mln 751.6 551.3 36.3% 537.2 39.9%
Trading volumes (excl. overnight bonds), RUB bln 6,337.6 5,266.6 20.3% 4,610.3 37.5%
           
FX Market          
Fee and commission income, RUB mln 885.7 1,044.5 -15.2% 871.6 1.6%
Trading volumes, RUB bln 79,996.4 90,379.0 -11.5% 75,804.7 5.5%
           
Money Market          
Fee and commission income, RUB mln 1,788.6 1,561.6 14.5% 1,771.3 1.0%
Trading volumes, RUB bln 84,473.5 91,694.7 -7.9% 79,139.8 6.7%
           
Derivatives Market          
Fee and commission income, RUB mln 642.7 612.8 4.9% 655.4 -1.9%
Trading volumes, RUB bln 19,221.8 21,839.9 -12.0% 18,689.7 2.8%
           
Depository and Settlement Services          
Fee and commission income, RUB mln 1,313.2 1,099.1 19.5% 1,186.5 10.7%
Average assets under custody, RUB bln 47,020.9 42,544.7 10.5% 45,495.5 3.4%
           
Other fee and commission income (IT Services, Listing and Other fee income) 639.4 541.8 18.0% 681.1 -6.1%
Information services, RUB mln 217.6 189.5 14.8% 212.7 2.3%
Sale of software and tech. services, RUB mln 199.8 175.6 13.8% 197.6 1.1%
Listing and other services, RUB mln 153.1 80.3 90.7% 131.4 16.5%
Other fee income, RUB mln 68.9 96.4 -28.5% 139.4 -50.6%
           
Net interest and other finance income          
Net interest and other finance income, RUB mln 4,498.0 4,110.7 9.4% 3,910.9 15.0%
Investment portfolio, RUB bln 767.1 731.1 4.9% 746.2 2.8%
  • The total market capitalization of the Equities Market at the end of the second quarter was RUB 45.48 trln (USD 719.55 bln). MOEX Russia index in Q2 2019 increased 10.8%.
  • Fee and commission income from the Bond Market reached an all-time high of RUB 751.6 mln, representing growth of 36.3%. Bond trading volumes (excluding overnight bonds) added 20.3%. The effective fee was supported by a higher share of OFZ in both primary and secondary trading volumes as well as higher activity by corporate issuers in the primary market.
  • Trading volumes in the Money Market declined 7.9% due to lower interdealer repo trading volumes (down 38.5%) and volumes in the deposit and credit market (down 27.1%). The discrepancy between fee income and trading volume dynamics was due to increasing average repo terms, UCP-linked fee rate revision and a growing share of value-added repo through the CCP in total on-exchange repo volumes (86.4% in Q2 2019 vs 78.9% a year ago).
  • Derivatives trading volumes were down 12.0% as a result of lower activity in FX and index contracts. Trading volumes of commodity derivatives increased 20.8%, while single-stock derivatives rose by 27.2% and interest rate derivatives grew 320.3%. Volumes in the Standardized OTC Derivatives Market increased 46.4%. The shift in the structure of traded contracts in favor of commodity and equity contracts, together with a UCP-linked fee rate increase and robust activity in OTC derivatives helped achieve a 4.9% growth in fee and commission income.
  • Sales of information services added 14.8%; sales of software and technical services were up 13.8%. Income from listing and other services grew 90.7%. Other fee income, a line that includes the contribution from the Commodities Market, declined 28.5% YoY.
  • The cash position[2] at the end of Q2 2019 was RUB 84.14 bln. The company had no debt as of the end of the quarter.
  • CAPEX for the quarter was RUB 550.8 mln, all of which was spent on purchases of equipment and software as well as software development.

Moscow Exchange’s consolidated IFRS financial statements for Q2 2019 are available on the Investor Relations section of the company's web site.

The Q2 2019 IFRS Financial Results webcast is scheduled for 23 August 2019 at 4:00 pm (Moscow time).

Investor Relations: Public Relations:
Anton Terentiev
+7 495 363 3232
Lev Bystrov
+7 495 363 3232

NOTES TO EDITORS

About Moscow Exchange

Moscow Exchange Group operates Russia’s main trading platform for equities, bonds, derivative instruments, currencies, money market instruments and commodities. The Group includes the central securities depository (National Settlement Depository), and a clearing center (National Clearing Centre), performing the functions of central counterparty on the markets, which allows Moscow Exchange to offer its clients the full spectrum of trading and post-trading services. Moscow Exchange held the initial public offering of its shares on 15 February 2013 (ticker MOEX).

Disclaimers

Some of the information in these materials may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" the negative of such terms or other similar expressions. The Company wishes to caution you that these statements are only predictions and that actual events or results may differ materially. The Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in the Russian Federation, rapid technological and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations.

 
[1] Calculated as the sum of Interest and other finance income and Foreign exchange gains less losses less Interest expense (compared to Net interest and other finance income, excludes gains/losses on FVTOCI).
[2] 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, Liabilities related to assets held for sale, Current tax payables, Other financial liabilities and Tax agent liabilities regarding distributions payable to holders of securities.
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