Moscow Exchange announces results for the second quarter of 2020
Moscow Exchange (MOEX) today announces its financial results in accordance with International Financial Reporting Standards (IFRS) for Q2 2020. Record fee income from the Money Market and Depository & Settlement Services as well as strong performance by the Equities Market helped MOEX achieve all-time high F&C income for the third quarter in a row.
Unless stated otherwise, all figures below refer to performance in Q2 2020 and all comparisons are with the corresponding period last year.
KEY FINANCIAL HIGHLIGHTS FOR Q2 2020
- Fee and commission (F&C) income grew 21.8% to RUB 7,990.9 mln, mainly driven by the performance of Equities, Money, and Derivatives Markets.
- Net interest income (NII) declined 10.5% due to declining domestic and global interest rates, despite the larger investment portfolio.
- Operating expenses remained under control, increasing by 6.8%, which is within the FY2020 guidance range.
- Adjusted net profit was up by 8.6% to RUB 6,340.3 mln.
KEY BUSINESS & CORPORATE HIGHLIGHTS FOR Q2 2020
- The Bond Market reported 155 new bond issues by 66 corporates (including eight newcomers) for a total of RUB 702 bln.
- The Equities Market is now open for trading nearly 14 hours a day following the launch of an evening trading session. The evening session is convenient for the growing retail investor base as well as for many western international traders.
- ETFs are an increasingly popular on-exchange product with five new Russian-law ETFs listed during the quarter, bringing the total number of ETFs traded on MOEX to 41 with a total NAV of approximately RUB 70 bln.
- A major Bond Market infrastructure upgrade was completed with all corporate bonds migrated from T0 to T+ settlement. The new settlement regime allows for partial pre-funding of trades.
- Non-state pension funds were admitted to deposit operations on the Money Market.
EVENTS OCCURRING AFTER THE REPORTING PERIOD
- The number of retail investors reached 5.9 mln as of mid-August. The number of Individual Investment Accounts now exceeds 2.5 mln.
- The trend of Russian companies incorporated abroad seeking a second listing in Moscow continued as Mail.ru Group GDRs began trading on MOEX.
- MOEX completed an acquisition of a minority stake in an operator of OTC FX trading platform NTPro. MOEX plans to consolidate a 100% ownership of the business within three years.
Yury Denisov, Chief Executive Officer of Moscow Exchange, said:
"Most MOEX employees have been working from home since the beginning of the pandemic, and I’m proud to report this has not hampered our ability to successfully grow the business. We continue to deliver new projects, offer new opportunities for investors and traders and launch new instruments. MOEX operates a highly resilient vertically integrated business model that performs well during economic and market turbulence. In the reporting quarter we delivered strong growth of trading volumes and, as a result, fee and commission income, in three of our five major markets. As I committed when first appointed as CEO, we have strengthened our senior management team. In particular I would like to highlight our new CIO, heads of digital platforms and compliance teams.
"We initiated the transformation of operations processes at CCP NCC, the central counterparty for MOEX’s markets, which will result in greater operational autonomy for NCC with a focus on operating efficiency and innovations. Eddie Astanin, who had been CEO at NSD for many years and achieved excellent results, is now leading NCC.
"We strive to offer the growing retail investor community wider opportunities to trade the on-exchange market: we launched the evening equity trading session and are set to begin trading in foreign stocks next week. The first results of the evening session (accounting for as much as 7% of total trading volume on some days), validate our strategy for extending trading hours on all markets.
"With the legislation adopted, we are now set to implement our strategic Deposits Marketplace initiative. More than a dozen banks are ready to use our platform; we hope that it will launch in test mode next month. I am confident that the project will attract more financial institutions, and we plan to expand the financial products offering."
Max Lapin, Chief Financial Officer of Moscow Exchange, said:
"We are pleased to report another strong quarter in terms of fee and commission income growth. Despite lower volatility compared to the first quarter, our total fee income reached a new all-time high of nearly RUB 8 bln. Every F&C business line posted double-digit growth except the Bond Market, which was impacted by a decline in primary offerings due to the uncertain economic outlook. Two fee and commission business lines delivered record highs in absolute terms: Depositary & Settlement Services and the Money Market. The latter surpassed the RUB 2 bln fees mark for the first time. We believe that implementation of our strategic initiatives such as extension of trading hours, new solutions for corporate clients and expansion of the product range create a strong foundation for the further growth of our business.
"Despite a 22.3% increase YoY in our investment portfolio, net interest income (NII) declined by 10.5% due to lower domestic and global rates. The share of F&C in operating income was around 67%, which is close to our long-term target of 70%. OPEX growth of 6.8% was in line with our full-year guidance range for OPEX growth. As we prepare to launch our deposits marketplace platform, we are allocating more resources to this project and updating full-year OPEX growth guidance to 7.0 - 8.5%.
"Other operating expenses resulted in a gain largely due to the partial release of IFRS 9 provisions, which were created in the first quarter because of the impact of Russia’s CDS rate increases on FVTOCI[1] bond portfolio. As market conditions normalized in the second quarter, we were able to unwind these provisions.
"Net profit for the quarter increased by 15.5% to RUB 6.82 bln. On an adjusted basis, which provides better comparability, net profit was up by 8.6%."
FINANCIAL HIGHLIGHTS
| RUB mln | Q2 2020 | Q2 2019 | YoY | Q1 2020 | QoQ |
|---|---|---|---|---|---|
| Operating income | 12,027.6 | 11,100.0 | 8.4% | 11,988.4 | 0.3% |
|
7,990.9 | 6,561.8 | 21.8% | 7,909.9 | 1.0% |
|
4,027.0 | 4,498.0 | -10.5% | 3,992.7 | 0.9% |
| NII less realized gains on investment portfolio revaluation (core NII)[2] | 3,816.9 | 4,118.8 | -7.3% | 3,290.9 | 16.0% |
|
9.7 | 40.2 | -75.9% | 85.8 | -88.7% |
| Operating expenses | 4,138.4 | 3,873.8 | 6.8% | 3,678.2 | 12.5% |
|
2,101.3 | 1,797.6 | 16.9% | 1,794.7 | 17.1% |
|
1,183.6 | 1,238.0 | -4.4% | 1,169.1 | 1.2% |
|
853.5 | 838.2 | 1.8% | 714.4 | 19.5% |
| Profit before other operating expenses and tax | 7,889.2 | 7,226.2 | 9.2% | 8,310.2 | -5.1% |
| Other operating gains/(expenses) | 599.8 | 83.5 | nm | -871.0 | nm |
| Net profit | 6,820.1 | 5,902.6 | 15.5% | 5,904.0 | 15.5% |
| Basic earnings per share, RUB | 3.02 | 2.62 | 15.3% | 2.62 | 15.3% |
| Net Profit | 6,820.1 | 5,902.6 | 15.5% | 5,904.0 | 15.5% |
|
-599.8 | -83.5 | nm | 871.0 | nm |
|
120.0 | 16.7 | nm | -174.2 | nm |
| Adjusted net profit | 6,340.3 | 5,835.8 | 8.6% | 6,600.8 | -3.9% |
| EBITDA | 9,310.1 | 8,196.0 | 13.6% | 8,234.9 | 13.1% |
|
-599.8 | -83.5 | nm | 871.0 | nm |
| Adjusted EBITDA | 8,710.3 | 8,112.5 | 7.4% | 9,105.9 | -4.3% |
| Adjusted EBITDA margin | 72.4% | 73.1% | -0.7 p.p. | 76.0% | -3.5 p.p. |
PERFORMANCE OF KEY BUSINESS LINES
| RUB mln | Q2 2020 | Q2 2019 | YoY | Q1 2020 | QoQ |
|---|---|---|---|---|---|
| Equities Market | |||||
| Fee and commission income, RUB mln | 975.9 | 540.6 | 80.5% | 1,117.2 | -12.6% |
| Trading volumes, RUB bln | 5,527.0 | 2,994.2 | 84.6% | 6,263.3 | -11.8% |
| Bond Market | |||||
| Fee and commission income, RUB mln | 707.2 | 751.6 | -5.9% | 655.1 | 8.0% |
| Trading volumes (excl. overnight bonds), RUB bln | 6,337.2 | 6,337.6 | 0.0% | 6,278.7 | 0.9% |
| FX Market | |||||
| Fee and commission income, RUB mln | 1,013.3 | 885.7 | 14.4% | 1,070.4 | -5.3% |
| Trading volumes, RUB bln | 75,193.8 | 79,996.4 | -6.0% | 80,851.4 | -7.0% |
| Money Market | |||||
| Fee and commission income, RUB mln | 2,032.5 | 1,788.6 | 13.6% | 1,722.2 | 18.0% |
| Trading volumes, RUB bln | 102,659.9 | 84,473.5 | 21.5% | 95,185.8 | 7.9% |
| Derivatives Market | |||||
| Fee and commission income, RUB mln | 834.0 | 642.7 | 29.8% | 1,099.1 | -24.1% |
| Trading volumes, RUB bln | 27,214.6 | 19,221.8 | 41.6% | 33,561.6 | -18.9% |
| Depository and Settlement Services | |||||
| Fee and commission income, RUB mln | 1,473.5 | 1,313.2 | 12.2% | 1,393.6 | 5.7% |
| Average assets under custody, RUB bln | 51,370.9 | 47,020.9 | 9.3% | 51,281.8 | 0.2% |
| Other fee and commission income (IT Services, Listing and Other fee income) | 954.5 | 639.4 | 49.3% | 852.3 | 12.0% |
| Information services, RUB mln | 249.1 | 217.6 | 14.5% | 291.2 | -14.5% |
| Sale of software and tech. services, RUB mln | 216.6 | 199.8 | 8.4% | 210.9 | 2.7% |
| Listing and other services, RUB mln | 200.2 | 153.1 | 30.8% | 136.7 | 46.5% |
| Other fee income, RUB mln | 288.6 | 68.9 | 318.9% | 213.5 | 35.2% |
| Net interest and other finance income | |||||
| Net interest and other finance income, RUB mln | 4,027.0 | 4,498.0 | -10.5% | 3,992.7 | 0.9% |
| Investment portfolio, RUB bln | 938.1 | 767.1 | 22.3% | 756.0 | 24.1% |
- The total market capitalization of the Equities Market at the end of the second quarter was RUB 43.67 trln (USD 613.71 bln). Fee and commission income from the Equities Market grew by 80.5% on the back of the corresponding increase in trading volumes.
- Fees and commissions from the Bond Market were down 5.9%. Trading volumes excluding overnight bonds remained flat due to offsetting effects of the increase in secondary trading by 17.5% and the decrease in primary market activity by 13.7%. The effective fee in the Bond Market declined due to the smaller share of primary market volumes and the relatively modest amount of corporate placements amid the pandemic.
- Money Market fee income added 13.6%, reaching an all-time high of RUB 2 bln. Trading volumes were up 21.5%. The discrepancy between volume and fee trends was attributable to subdued performance of the Сredit Market and IFRS adjustments.
- Fee income from the FX Market grew 14.4%. Trading volumes declined 6.0% as volatility began to normalize compared to the first quarter. The trading volume mix shifted towards the more profitable spot segment, which added 31.5%, while swap volumes declined by 15.5%.
- Derivatives trading volumes increased by 41.6%, primarily on the back of very strong growth in FX and index derivatives trading volumes (77.1% and 63.7%, respectively). An equities derivatives trading volumes decline of 37.9% and modest commodity derivatives trading volumes growth of 4.5% resulted in a change in the Derivatives Market product mix and a less favorable effective fee structure. All in all, Derivatives Market fee income ended up adding 29.8%.
- The Other fee income line now includes an additional fee on EUR balances of 0.2% above the ECB rate that was introduced at the beginning of the year.
- The cash position[3] at the end of Q2 2020 was RUB 88.35 bln. The company had no debt as of the end of the quarter.
- Capex for the quarter was RUB 0.85 bln, 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 2020 are available in the Investor Relations section of the company's web site.
The Q2 2020 IFRS Financial Results webcast is scheduled for 21 August 2020 at 4:00 pm (Moscow time).
Contacts:
Investor Relations: Public Relations:
| Anton Terentiev, CFA +7 495 363 3232 ir@moex.com |
Lev Bystrov +7 495 363 3232 pr@moex.com |
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 op