Moscow Exchange releases Q1 2017 results, FX trading volumes up 5% YoY

Moscow Exchange (MOEX) announced its financial results in accordance with International Financial Reporting Standards (IFRS) for Q1 2017.

Key financial highlights for Q1 2017

  • Fee and commission income from the Fixed Income Market increased 12.8% YoY thanks to strong primary placements, both in government and corporate bonds.
  • Fee and commission income from the Money Market grew 5.9% YoY driven by continued growth in trading volumes of repo with CCP.
  • Fee and commission income from the Equities Market remained flat YoY (-0.3% YoY) despite a modest decline in trading volumes (-3.2% YoY).
  • FX trading volumes grew slightly (+0.5% YoY); however, fee and commission income from the market decreased 24.8% YoY as the proportion of more profitable spot volumes vs swap declined to 23% from 40% a year ago.
  • Despite a 37.5% decline in trading volumes on the Derivatives Market, fee and commission income was down only 3.2% YoY, thanks to an increase in more profitable commodities futures trading.
  • Fee and commission income from depository and settlement services grew considerably (+18.2% YoY) mainly due to growth of assets under custody.
  • Expenses increased modestly (+6.7% YoY), which contributed to a strong EBITDA margin of 72.9%.

Key corporate highlights for Q1 2017

  • MOEX launched a new commodity market, sugar (deliverable forward and swap contracts).
  • MOEX began to offer swap contracts on grain in addition to deliverable forward contracts, which were launched at the end of 2015.
  • MOEX’s Derivatives Market added weekly options on the RTS Index, in addition to monthly and quarterly RTS Index options. The new maturity of option contracts will allow investors to implement a wide array of short-term strategies.

Events occuring after the reporting date

  • MOEX offered Russian corporates direct market access to its FX Market. Alrosa, Rosneft and insurance company AlfaStrakhovanie were the first companies to trade FX directly.
  • MOEX’s AGM voted to pay a dividend for 2016 of RUB 7.68 per share (69.4% of 2016 IFRS net profit).
  • The number of Individual Investments Accounts held by private investors reached 220,500 as of 15 May 2017, as compared to 180,000 at the beginning of the year.
  • MOEX held the Exchange Forum – Russia’s largest conference for the professional financial markets community – which attracted more than 2,000 Russian and international investors, financial market professionals and senior policymakers.

Alexander Afanasiev, MOEX

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

Our strategy to grow our markets is delivering real results. The simplified procedure to issue bonds, introduction of new fixed income instruments and our marketing efforts drove significant growth in the number of new offerings and as a result the Fixed Income Market delivered higher fee and commission income. Another important positive development is growing interest among domestic retail investors, as can be seen from the growth in Individual Investments Accounts and the success of Russian federal government bonds (OFZs) sold directly to retail investors. Strong growth of trading volumes continued across the Money Market, and in options and commodities futures. We also report a strong increase in income from depository and settlement services. At the same time, we posted significantly lower FX spot and FX futures volumes, which had a negative effect on our total fee and commission income in the quarter.
For a market to grow it is important to expand the number of participants. A major event this year was the launch of direct access for corporates to the FX Market. We believe that the number of companies trading FX directly on the Exchange will continue to grow, and that they will add new liquidity to the market.
Another source of growth for the Exchange is to continually develop trading in new asset classes. Thus, in the first quarter we launched trading in sugar as well as in grain swaps in addition to the previously available deliverable contracts.

Evgeniya Abrukina, Deputy Chief Financial Officer of Moscow Exchange, said:

In the reporting quarter Moscow Exchange achieved strong fee growth from the Fixed Income Market (+12.8% YoY) and the Money Market (+5.9% YoY) as well as a significant increase in fee income from Depository and Settlement Services (+18.2% YoY). Average volatility of the ruble-dollar currency pair declined nearly three times, which resulted in a 42% YoY decrease in FX spot trading volumes, a 52% YoY decrease in FX derivatives volumes and as a consequence lower fee and commission income on the FX and Derivatives Markets (-24.8% YoY and -3.2% YoY, respectively). As expected the proportion of interest income in total income declined (to 48%), as a result of lower interest rates, some decline in client balances and a change in the structure of balances with increased collateral in euros. Strict control over costs allowed us to maintain a strong EBITDA margin of 72.9%.

Financial highlights

RUB Mln Q1 2017 Q1 2016 YoY Q4 2016 QoQ
Operating Income 9,469.6 11,739.0 -19.3% 10,236.2 -7.5%
   Fee and commission income 4,881.4 5,010.5 -2.6% 5,165.1 -5.5%
   Net interest and other finance income 4,578.9 6,715.0 -31.8% 5,022.9 -8.8%
   Other operating income 9.3 13.5 -31.1% 48.2 -80.7%
Operating Expenses 3,281.4 3,075.5 6.7% 3,350.6 -2.1%
Operating Profit 6,188.2 8,663.5 -28.6% 6,885.6 -10.1%
Net Profit 4,998.1 6,978.2 -28.4% 5,505.6 -9.2%
Basic earnings per share, RUB 2.23 3.12 -28.5% 2.44 -8.6%
EBITDA 6,902.6 9,166.7 -24.7% 7,566.0 -8.8%
EBITDA margin 72.9% 78.1% -5.2 p.p. 73.9% -1.0 p.p.

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