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 placements for successful 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% |
|
6,561.8 | 5,927.2 | 10.7% | 6,117.5 | 7.3% |
|
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% |
|
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% |
|
(1,797.6) | (1,526.3) | 17.8% | (1,755.9) | 2.4% |
|
(1,238.0) | (1,123.1) | 10.2% | (1,204.9) | 2.7% |
|
(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% |
(one-off provisions and movements in allowance for ECLs under IFRS 9) |
(83.5) | 760.5 | nm | 2,435.2 | nm |
|
- | 84.8 | nm | - | nm |
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% |
(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).
