Moscow Exchange announces results for the first quarter of 2018

Moscow Exchange (MOEX) today announces its financial results in accordance with International Financial Reporting Standards (IFRS) for Q1 2018. Higher trading volumes in the Bond Market and Equities Market supported by continued solid performance of the Money Market drove strong growth in fee and commission income.

KEY FINANCIAL HIGHLIGHTS FOR Q1 2018

• Significant fee and commission (F&C) income (up 12.8% YoY to RUB 5.51 bln) on the back of strong volume growth on the Equities and Bond Market as well as good performance of new services.
• Net interest and other finance income was up 14.5% QoQ but down 5.4% YoY to RUB 4.33 bln as a result of declining interest rates in a low inflation environment.
• Operating costs excluding D&A expenses up only 4.7% YoY to RUB 2.69 bln.
• Adjusted EBITDA margin was 72.5%.
• Adjusted net income was RUB 5.19 bln, up 3.8% YoY.

KEY BUSINESS & CORPORATE HIGHLIGHTS FOR Q1 2018

• Strong primary bond market with 38 issuers raising over RUB 2.65 trln (excluding overnight bonds), an increase of 3.6 times YoY.
• Significantly expanded Money Market product portfolio with the launch of two new GCC pools (Government bonds and GC Expanded). In addition, settlement of GCC repo trades in USD was introduced.
• Tenth currency pair on MOEX FX Market, TRY/RUB, was launched.
• The number of retail accounts opened at the Exchange reached 140,000 during the quarter, bringing the total to 2.0 mln by the end of Q1 2018. The number of IIAs reached 328,000 at the end of Q1 2018 (year-end 2017: 302,000).
• Nordea Bank AB became the sixth international financial institution to start using SMA to MOEX’s FX Market.

EVENTS OCCURRING AFTER THE REPORTING PERIOD

• AGM approved a FY2017 dividend of RUB 5.47 per share. Shareholders as of 15 of May will receive the dividend by 20 of June. An interim dividend of RUB 2.49 per share was paid last year.
• Independent director Oleg Vyugin was elected as the new Chairman of the Supervisory Board. 7 of the 12 directors of the new Board are independent.
• MOEX held its ninth annual Exchange Forum – Russia's largest conference for the professional financial markets community – which attracted more than 2,200 Russian and international investors, financial market professionals and senior policymakers.

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

"The first quarter set new records for MOEX’s Bond Market in terms of both primary placements and total trading volumes, as we saw very strong demand among international and domestic investors for Russian government and corporate bonds. We are very happy with the performance of the Equities Market both in terms of growth of the indexes and trading volumes, which were up 17% year-on-year. Our new General Collateral Certificate instruments on the repo market were very well received by market participants and supported Money Market revenues.

"New products and technologies, regulatory initiatives and our education and marketing efforts are helping to attract more individuals to investing: during the quarter, the number of retail accounts increased by 140,000, more than half of the total for the past year.

"We are also pleased to note that international investors are not scaling back their operations on Moscow Exchange despite the geopolitical noise. Our strategy to diversify the product range and to attract new clients to the Exchange are yielding results."

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

"I am glad to report a significant growth in the company’s fee and commission income. It was driven by a solid performance of all our markets, most notably equities and bonds. We are also seeing a shift in trading volumes towards higher fee products on the Derivatives and Money Markets. Net interest income was strong as well and grew 14.5% compared to the previous quarter on the back of higher client balances, an increase in USD interest rates as well as realized gain on the redemption of part of our bond portfolio.

"In the first quarter, the company recognized a one-off provision in the amount of RUB 856 mln to fully cover the unsecured portion of the position of a defaulted market participant. The defaulted market participant’s lack of sufficient collateral occurred due to an unprecedented operating error, and we have taken measures to ensure such an error can not occur in the future. The actual financial impact of this event will be determined upon expiration of the participant’s obligations and debt collection procedures.

"Net income – adjusted for the abovementioned one-off provision, correction under IFRS 9 and changes in the amortization schedule – was up 3.8% YoY to RUB 5.19 billion".

FINANCIAL HIGHLIGHTS

ANALYSIS OF Q1 2018 FINANCIALS

Fee and Commission Income

Securities (Equities & Bond) Market. Equities trading volumes increased by 16.5% YoY and amounted to RUB 2.62 trln. Fee and commission income from the Equities Market was a record RUB 470.0 mln, up 18.4% YoY.

As of March 30, 2018, total market capitalization of the Equities Market was RUB 38.72 trln (USD 676.50 bln).

Total Bond Market trading volumes (excluding overnight bonds) were up by 93.4% YoY to RUB 5.69 trln, of which primary placements totaled 2.65 trln, a 3.6-fold increase YoY, mostly due to robust government bond issuance during the quarter. Overnight bonds contributed an additional RUB 2.24 trln to total placements. Fee and commission income from the Bond Market totaled RUB 621.6 mln, a 96.2% YoY increase.

Listing and other service fees were RUB 79.2 mln, up 0.4% YoY.

FX Market. FX Market trading volumes were down 6.9% YoY to RUB 83.26 trln. Trading volumes in the spot segment declined by 8.4% YoY, as volatility of the ruble was below the level of the previous year. Swap and forward trading volumes declined 6.5% YoY. Swaps accounted for 77.6% of total FX Market trading volumes. Fee and commission income from the FX Market amounted to RUB 926.2 mln, down by 3.2% YoY.

Money Market. Fees and commissions from the Money Market increased 12.2% YoY, reaching RUB 1.44 bln, despite a 3.1% YoY drop in volumes to RUB 80.10 trln. This was due to continued growth in the share of repo with CCP, a higher fee instrument, in total volumes.

Derivatives Market. Derivatives trading volumes declined 7.2% YoY, with futures volumes down 9.6% YoY and options volumes up 20.8% YoY. Fees were RUB 494.8 mln, broadly flat year-on-year, with a shift to higher fee instruments offsetting the decline in total volumes.

Depository and Settlement Services. Fees totaled RUB 1.05 bln, up 5.6% YoY. The growth was driven primarily by rising assets on deposit (average assets were up 15.7% YoY to RUB 41.27 trln).

Other fee and commission income increased 18.7% YoY to RUB 429.6 mln. Sales of data and information services contributed RUB 176.3 mln of fee income, flat YoY. Income from sales of software and technical services was RUB 169.2 mln, up 8.1% YoY. Other fee and commission income, which includes the contribution from the Commodities Market, was RUB 84.1 mln, up 2.9 times YoY.

Interest & other finance income.

Net interest and other finance income^[1] declined 5.4% YoY and amounted to RUB 4.33 bln. During the quarter, the Company realized a gain in the amount of RUB 355.3 mln due to the redemption of bonds held in its investment portfolio. The average investment portfolio for 1Q 2018 was RUB 656.30 bln (2017: RUB 904.32 bln).  

Expenses

Operating costs were RUB 3.53 bln, up 7.5% YoY. Administrative and other operating expenses were up 8.4% YoY to RUB 1.82 bln, of which RUB 839.8 mln was depreciation and amortization expense. The latter increased by 17.6% YoY due to the revision of amortization schedules for certain intangible assets. The useful life for certain types of software was extended, while that of the client base was reduced. Personnel expenses rose by 6.5% YoY to RUB 1.71 bln.

Cash and cash equivalents

The cash position^[2] at the end of Q1 2018 amounted to RUB 89.61 bln. The company had no debt as of 31 March 2018.

Capital expenditures

CAPEX amounted to RUB 284.4 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 2018 are available on the Investor Relations section of the company's web site.

The Q1 2017 IFRS Financial Results webcast is scheduled for 18 May 2018 at 4 pm (Moscow time).

***

Contacts:

Investor Relations:                                                   Public Relations:

NOTES TO EDITORS

About Moscow Exchange

Moscow Exchange Group manages the sole multifunctional exchange platform in Russia 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 was formed in December 2011 as a result of a merger between 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, at the time the operator of Russia's leading derivatives market. This combination created a vertically integrated public trading market across most major asset classes named Moscow Exchange. 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.