Moscow Exchange (MOEX) today announces its financial results in accordance with International Financial Reporting Standards (IFRS) for Q1 2019. Record high fee and commission income (F&C) from the Money Market and Derivatives Market were key highlights in the quarter.
Unless stated otherwise, all figures below refer to performance in Q1 2019 and all comparisons are with the corresponding period last year.
KEY FINANCIAL HIGHLIGHTS FOR Q1 2019
- Fee and commission income was up 11.1% to RUB 6,117.5 mln on the back of strong performance of the Money and Derivatives Markets as well as Depository and Settlement Services.
- Operating Expenses remained strictly controlled, increasing by only 5.9%.
- Adjusted EBITDA was RUB 7,200.7 mln, up 0.6%.
KEY BUSINESS & CORPORATE HIGHLIGHTS FOR Q1 2019
- MOEX continues to serve as the main platform for capital raising by Russian corporates, with over RUB 433.9 bln in new bond placements in the quarter. 111 bond issues were placed by 56 corporates during the period.
- MOEX began calculating two sustainability indices – Responsibility and Transparency and Vector of Sustainability as interest from investors in sustainable investing increases. MOEX also joined the UN’s Sustainable Stock Exchanges (SSE) initiative.
- The universe of ETFs targeting Russian retail investors was expanded: two new Russian-law ETFs were listed, bringing the total to seven. There are also 16 foreign-law ETFs listed on MOEX.
- MOEX expanded its ecosystem of digital platforms by launching a marketplace for asset management companies (du.moex.com), which currently features 71 products offered by seven firms.
EVENTS OCCURRING AFTER THE REPORTING PERIOD
- Yury Denisov, a longstanding member of the Supervisory Board, became the CEO of Moscow Exchange effective 16 May 2019. MOEX’s Board plans to approve and present the Company’s new strategy to shareholders and clients by the end of September 2019.
- To further stimulate institutional trading of large blocks on the FX Market, MOEX launched an experimental USD/RUB order book with randomized execution delays thus eliminating technical access arbitrage.
- MOEX presented a new Money Market benchmark that tracks the value of secured money: the Russian Secured Funding Average Rate (RUSFAR). The new gauge is calculated based on CCP-cleared repo transactions in general collateral certificates. The new benchmark will underlie a futures contract on MOEX’s Derivatives Market and interest swaps on MOEX’s Standartised OTC Derivatives Market.
- MOEX introduced a new mechanism for international traders to access the market – International Clearing Membership (ICM) on the Derivatives Market. ICM on the FX Market is already available and MOEX plans to offer ICM on the Equities & Bond Market by year-end.
- MOEX deepened international cooperation by signing an MoU with BSE & India INX. The MoU provides for cross-listing of derivatives and ETFs and development of equity and fixed income products.
Maxim Lapin, Chief Financial Officer of Moscow Exchange, said:
"We continue to adhere to principles of operational excellence for our clients and strict control over costs. Topline operating income for the first quarter grew by 4.2% YoY, reaching RUB 10.3 bln, and we maintained an impressive adjusted EBITDA margin of 70% for the period.
"Moscow Exchange’s fee and commission income growth accelerated in Q1 2019 compared with the preceding two quarters, reaching 11.1% YoY. This occurred largely on the back of strong performance by the Money Market and Derivatives Market. Both the Unified Collateral Pool-linked tariff changes and our continued efforts to introduce value-added products while developing markets contributed to the result.
"In the first quarter of 2019, MOEX created one-off provisions totaling RUB 2,653.5 mln, the majority of which, RUB 2,358.6 mln, is management’s estimation of the risk related to increased levels of fraudulent activity in the grain market, as disclosed by the Company earlier in April.
"Net interest income (NII) remains in line with recent quarters. NII excluding the effect of the realized investment portfolio revaluation – i.e. core NII – reached RUB 3.91 bln in Q1 2019. Core NII was up 3.4% QoQ and down 1.7% YoY. Operating expenses excluding one-off effects remained under control and grew by 5.9% YoY, below the full-year guidance."
FINANCIAL HIGHLIGHTS
| RUB mln | Q1 2019 | Q1 2018 | YoY | Q4 2018 | QoQ |
|---|---|---|---|---|---|
| Operating Income | 10,283.1 | 9,870.8 | 4.2% | 10,028.0 | 2.5% |
|
6,117.5 | 5,505.7 | 11.1% | 6,296.6 | -2.8% |
|
3,910.9 | 4,333.6 | -9.8% | 3,723.5 | 5.0% |
| NII less realized gains/losses on investment portfolio revaluation[1] | 3,910.2 | 3,978.3 | -1.7% | 3,782.5 | 3.4% |
|
254.7 | 31.5 | 708.6% | 7.9 | 3124.1% |
| Operating Expenses | 3,736.9 | 3,527.9 | 5.9% | 3,914.4 | -4.5% |
|
1,755.9 | 1,707.1 | 2.9% | 1,723.6 | 1.9% |
|
1,204.9 | 1,114.9 | 8.1% | 1,185.7 | 1.6% |
|
155.5 | 101.1 | 53.8% | 164.9 | -5.7% |
|
620.6 | 604.8 | 2.6% | 840.2 | -26.1% |
| Profit before other operating expenses and tax | 6,546.2 | 6,342.9 | 3.2% | 6,113.6 | 7.1% |
| Other operating expenses | -2,653.5 | -856.4 | nm | 654.7 | nm |
| Net Profit | 3,095.5 | 4,285.6 | -27.8% | 5,463.4 | -43.3% |
| Basic earnings per share, RUB | 1.37 | 1.91 | -28.3% | 2.43 | -43.6% |
| Net Profit | 3,095.5 | 4,285.6 | -27.8% | 5,463.4 | -43.3% |
|
2,358.6 | 856.4 | - | -654.7 | - |
|
-218.3 | - | - | - | - |
|
- | 81.1 | - | 82.2 | - |
|
-487.0 | -11.3 | - | 110.0 | - |
| Adjusted Net Profit | 5,043.7 | 5,187.4 | -2.8% | 5,023.6 | 0.4% |
| EBITDA | 4,765.5 | 6,326.3 | -24.7% | 7,609.3 | -37.4% |
|
2,358.6 | 856.4 | - | -654.7 | - |
|
-218.3 | - | - | - | - |
|
294.9 | -24.4 | - | 22.7 | - |
| Adjusted EBITDA | 7,200.7 | 7,158.3 | 0.6% | 6,977.3 | 3.2% |
| Adjusted EBITDA margin | 70.0% | 72.5% | -2.5 p.p. | 69.6% | 0.4 p.p. |
PERFORMANCE OF KEY BUSINESS LINES
| RUB mln | Q1 2019 | Q1 2018 | YoY | Q4 2018 | QoQ |
|---|---|---|---|---|---|
| Equities Market | |||||
| Fee and commission income, RUB mln | 414.4 | 470.0 | -11.8% | 480.1 | -13.7% |
| Trading volumes, RUB bln | 2,267.4 | 2,621.4 | -13.5% | 2,730.8 | -17.0% |
| Bond Market | |||||
| Fee and commission income, RUB mln | 537.2 | 621.6 | -13.6% | 493.1 | 8.9% |
| Trading volumes (excl. overnight bonds), RUB bln | 4,610.3 | 5,685.2 | -18.9% | 5,109.1 | -9.8% |
| FX Market | |||||
| Fee and commission income, RUB mln | 871.6 | 926.2 | -5.9% | 989.3 | -11.9% |
| Trading volumes, RUB bln | 75,769.3 | 83,260.0 | -9.0% | 83,694.0 | -9.5% |
| Money Market | |||||
| Fee and commission income, RUB mln | 1,771.3 | 1,438.2 | 23.2% | 1,750.3 | 1.2% |
| Trading volumes, RUB bln | 79,139.8 | 80,101.8 | -1.2% | 96,173.7 | -17.7% |
| Derivatives Market | |||||
| Fee and commission income, RUB mln | 655.4 | 494.8 | 32.5% | 646.5 | 1.4% |
| Trading volumes, RUB bln | 18,689.7 | 20,551.5 | -9.1% | 24,784.4 | -24.6% |
| Depository and Settlement Services | |||||
| Fee and commission income, RUB mln | 1,186.5 | 1,046.1 | 13.4% | 1,265.2 | -6.2% |
| Average assets under custody, RUB bln | 45,495.5 | 41,265.0 | 10.3% | 43,807.4 | 3.9% |
| Other fee and commission income (IT Services, Listing and Other fee income) | |||||
| Information services, RUB mln | 212.7 | 176.3 | 20.6% | 227.4 | -6.5% |
| Sale of software and tech. services, RUB mln | 197.6 | 169.2 | 16.8% | 183.0 | 8.0% |
| Listing and other services, RUB mln | 131.4 | 79.2 | 65.9% | 101.9 | 28.9% |
| Other fee income, RUB mln | 139.4 | 84.1 | 65.8% | 159.8 | -12.8% |
| Net interest and other finance income | |||||
| Net interest and other finance income, RUB mln | 3,910.9 | 4,333.6 | -9.8% | 3,723.5 | 5.0% |
| Investment portfolio, RUB bln | 746.2 | 656.5 | 13.7% | 664.8 | 12.2% |
- Trading volumes on the Equities Market declined 13.5% on the back of subdued volatility. The total market capitalization of the Equities Market as of the end of the first quarter was RUB 41.48 trln (USD 636.90 bln).
- In the Bond Market, an increased share of new OFZ offerings relative to short-term CBR bonds helped to support the effective fee and resulted in an 8.9% increase in fee income quarter-on-quarter.
- Trading volumes in the Money Market were nearly flat year-over-year (-1.2%), while fee income showed growth of 23.2%. 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 (88.8% in Q1 2019 vs 80.8% a year ago).
- Derivatives trading volumes were down 9.1% on the back of lower activity in currency, index and single-stock contracts. At the same time, commodity derivative volumes grew 43.7% and interest rate contract volumes increased 3.8x. The shift in the structure of traded contracts in favor of commodity and interest rate contracts coupled with a UCP-linked fee rate change and strong activity in OTC derivatives helped achieve a 32.5% increase in fee income compared to Q1 2018.
- Sales of information services grew 20.6%, sales of software and technical services added 16.8% on the back of tariff unification. Income from listing and other services increased by 65.9%. Other fee income, the majority of which was comprised of income from the Commodities Market, grew 65.8%.
- The cash position[1] at the end of Q1 2019 was RUB 95.14 bln. The company had no debt as of the end of the quarter.
- CAPEX for the quarter was RUB 239.1 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 Q1 2019 are available on the Investor Relations section of the company's web site.The Q1 2019 IFRS Financial Results webcast is scheduled for 17 May 2019 at 4:00 pm (Moscow time).
