Moscow Exchange Announces 2Q 2016 Results

Moscow Exchange (MOEX) today announces its financial results under International Financial Reporting Standards (IFRS) for the second quarter 2016. Earnings growth was supported by an increase in fee and commission income from all trading markets across the Exchange's diversified business, particularly the Derivatives, Fixed Income and Money Markets.

KEY FINANCIAL HIGHLIGHTS FOR 2Q 2016

• Operating income increased 6.2% YoY to RUB 10.81 bln
• Fee and commission income increased 13.3% YoY to RUB 4.87 bln
• EBITDA increased 6.6% YoY, reaching RUB 8.47 bln; the EBITDA margin was 78.4%
• Operating expenses grew by 7.2% YoY
• Net profit grew by 6.8% YoY to RUB 6.41 bln; basic EPS increased by 5.9% to RUB 2.86

KEY CORPORATE HIGHLIGHTS FOR 2Q 2016

• New Money Market products launched: shares became eligible for the general collateral certificate (GCC) repo pool and a separate pool was created for OFZs, in addition to the GC Bonds pool launched in February 2016. The new pools are expected to significantly expand liquidity management opportunities for market participants and to boost trading volumes.
• Moscow Exchange introduced direct market access to the Money Market for corporate clients through M-deposits, which allow corporate customers to manage their liquidity position via on-exchange auction technology.
• NCC Clearing Bank introduced collateral for stress as an additional layer of its central counterparty (CCP) safeguard structure. This move brought the CCP's operations in line with international best practices.
• MOEX expanded its relationships with CQG and IHS Markit to make access to MOEX's markets easier for international traders. CQG is a leading global provider of trading solutions and IHS Markit provides post-trade infrastructure services in FX that complement MOEX's products.
• MOEX became the first Russian financial institution to join the HyperLedger Project, a collaboration of global financial and IT companies aimed at advancing blockchain technologies.

EVENTS OCCURRING AFTER THE REPORTING DATE

• MOEX launched new deliverable futures contracts on USD/RUB, EUR/RUB and CNY/RUB, as well as a new currency pair CHF/RUB.
• The Emerging Markets Trading Association (EMTA) and CME Group started using Moscow Exchange's USD/RUB FX fixing as the major settlement rate for rouble derivatives. This fixing complies with IOSCO principles and was approved by the Central Bank of Russia.
• Moscow Exchange completed the first stage of moving its infrastructure to a new Tier III data centre, DataSpace1.
• NSD launched Corporate Information Center, a single source for corporate data in Russia.
• MOEX called an EGM for 2 September 2016 to vote on the consolidation of its 100%-owned subsidiaries CJSC MICEX Stock Exchange and MB Technologies. The restructuring will optimise the Group"s corporate structure, streamline customer relationships with Group companies and reduce costs both for customers and for the Exchange.

Alexander Afanasiev, Chief Executive Officer of Moscow Exchange, said:

"These strong results reflect our ongoing work to enhance our range of products by offering new instruments and services. Thanks to these efforts, even in an environment of decreased volatility across the major asset classes and declining trading volumes on many other exchanges globally, Moscow Exchange's volumes, and thus our fee and commission income, are growing.

"Going forward, our key priorities remain expanding opportunities for investors to place funds and manage liquidity, boosting the appeal and reliability of Russia's financial infrastructure, attracting new investors and issuers and increasing the number of bond and stock placements."

Evgeny Fetisov, Chief Financial Officer of Moscow Exchange, added:

"We are pleased to report that our fee and commission income increased year-on-year across all markets in the second quarter. We saw pronounced growth in fee and commission income from derivatives (+56.1%), money market products (+16.5%) and bonds (+37.7%). Achieving faster growth in fee and commission income vs. interest income is one of Moscow Exchange's strategic priorities. Through well thought-out and conservative management of assets, we were able to increase interest income, despite lower interest rates. The Company's costs are primarily fixed, and they grew roughly in line with inflation. The EBITDA margin remained strong at 78.4%, and our financial policy continues to be based on ensuring stable cash flow and providing returns to our shareholders in the form of dividends."

FINANCIAL HIGHLIGHTS

ANALYSIS OF 2Q 2016 FINANCIALS

Total Operating Income. Operating income grew 6.2% YoY to RUB 10.81 bln. Fee and commission income increased by 13.3%, mainly due to strong trading volumes growth in the Money Market (+16.5%), Derivatives Market (+56.1%) and Equities & Bond Market (+20.4%). Changes in the asset mix of the investment portfolio towards more fixed income instruments relative to bank deposits resulted in 1.3% YoY growth in interest income despite a decline in interest rates.

Securities (Equities & Bond) Market. Fee and commission income from the Securities Market increased by 20.4% and reached RUB 943.8 mln on the back of strong primary placements of corporate bonds and growth of listing fees. Fee and commission income from the Equities Market grew by 3.5% YoY, while equities trading volumes grew by 6.8% YoY to RUB 2.44 trln. The Equities Market's total capitalisation was RUB 31.74 trln (US$ 495.93 bln) as of 30 June 2016. Fee and commission income from the Fixed Income Market grew 37.7% YoY. Trading volumes on the Fixed Income Market increased by 27.5% YoY to RUB 3.41 trln. Listing and other services fees grew 42.0% YoY to RUB 113.6 mln.

FX Market. Fee and commission income from the FX Market increased to RUB 1,031.3 mln (+2.6% YoY). Trading volumes increased 6.3% YoY to RUB 79.41 trln. Trading volumes in the spot and swap segments grew by 16.1% YoY and 2.4% YoY, respectively, reflecting improved liquidity and reduced currency volatility compared to the first months of 2016. 

Money Market. Fee and commission income from the Money Market increased by 16.5% YoY to RUB 1,151.3 mln. Total trading volume, including repo transactions and the credit & deposit market, increased by 48.2% to RUB 71.88 trln. Volumes in the repo segment grew by 47.1% YoY, mainly driven by repo with the Central Counterparty (CCP), which posted outstanding growth of +213.4% YoY. In 2Q 2016, repo with the CCP accounted for 61.1% of total repo market volumes versus 28.7% in the second quarter of last year. Volumes on the credit and deposit market grew by 56.4% YoY.

Derivatives Market. Fee and commission income from the Derivatives Market grew by a solid 56.1% YoY to RUB 502.1 mln. Trading volumes increased by 60.1% YoY to RUB 27.70 bln (up 35.4% YoY in contract terms to 471.7 mln contracts) thanks to robust growth across all types of derivatives, including commodity futures (up 392.9% YoY in contract terms), index futures (up 61.8% YoY) and options (up 63.9% YoY). FX futures comprised 50.8% of total futures trading volume versus 60.4% in the same period last year. The share of options in Derivatives Market trading volumes was 3.6% in 2Q 2016.

Depository and Settlement Services. Fee and commission income from depository and settlement services increased 1.9% YoY to RUB 890.4 mln. Assets on deposit at the National Settlement Depository (NSD) totaled RUB 32.22 bln as of 30 June 2016, up from RUB 31.72 bln as of 31 March 2016. Assets on deposit in 2Q 2016 averaged RUB 32.38 bln.

Other Fee and Commission Income. Other fees and commissions increased to RUB 353.7 mln (up 8.3% YoY). The growth was driven by both increases in sales of software and technical services (RUB 156.3 mln, +22.9% YoY) and revenue from information services (RUB 183.8 mln, +17.1%).  

Net Interest & Other Finance Income. Net interest and other finance income increased 1.3% YoY to RUB 5.93 bln as lower interest rates were offset by changes in the composition of the investment portfolio. Funds available for investment amounted to RUB 1.0 trn, down 17.1% YoY, due to lower client balances.

Expenses. Operating expenses grew by 7.2% YoY and amounted to RUB 2.85 bln in 2Q 2016. Administrative and other expenses grew by 19.7% YoY to RUB 1.53 bln. The main reason for the increased operating expenses is higher depreciation and amortisation on the back of continued investments into IT infrastructure and software as well as spending on maintenance of intangible assets (software). Personnel expenses decreased by 4.3% YoY to RUB 1.33 bln mainly due to a RUB 109 mln reversal of the bonus provision related to 2015.

Cash and Cash Equivalents. Moscow Exchange's cash position[1] at the end of the second quarter amounted to RUB 74.40 bln, up 16.7% YoY. The Exchange had no debt as of 30 June 2016.

Capital Expenditures for H1 2016 amounted to RUB 1.61 bln, RUB 1.20 bln of which was spent on IT and software development.

Moscow Exchange's consolidated IFRS financial statements for 2Q 2016 are available on the Investor Relations section of the company's web site.

A conference call and webcast covering the 2Q 2016 IFRS financial results is scheduled on 4 August at 5.00 pm Moscow time (3.00 pm London / 10.00 am New York).

NOTES TO EDITORS

About Moscow Exchange

Moscow Exchange Group manages Russia's main exchange platform for equities, bonds, derivatives, currencies, money market instruments and commodities. The Group includes Russia's central securities depository (National Settlement Depository) and a clearing centre (National Clearing Centre) that performs the functions of central counterparty on all markets, allowing Moscow Exchange to offer its customers the full spectrum of trading and post-trade services.

Moscow Exchange ranks among the world's top 25 exchanges by total volume of equities traded, and among the five largest exchange platforms for bond trading and for derivative trading. As of 30 June 2016 securities of 706 issuers were admitted to trading on Moscow Exchange's Equities & Bonds Market.

Moscow Exchange was formed in December 2011 from the merger of Russia's two main exchange groups – MICEX Group, the oldest domestic exchange and operator of the leading securities, foreign exchange and money market platform in Russia; and RTS Group, the operator of Russia's leading derivatives market. This combination created a vertically integrated public trading market across most major asset classes. Moscow Exchange held an initial public offering in February 2013 and trades under the ticker symbol MOEX.

Disclaimers

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