Moscow, August, 29, 2019 - Gazprombank (Joint Stock Company) (hereinafter, “Bank GPB (JSC)” or “the Bank”)
published its consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) for the first six months of 2019 as at 30 June 2019.
Bank GPB (JSC) key financial indicators for 1H2019/ as at 30 June 2019:
- Net income totaled RUB 36.1 bn compared to RUB 23.4 bn for 1H2018;
- ROE and ROA reached 10.5% and 1.2%, respectively, compared to 6.8% and 0.6% in 2018;
- Net interest margin comprised 2.7% compared to 2.8% in 2018;
- Net commission income amounted to RUB 10.9 bn compared to RUB 8.9 bn in 1H2018;
- Cost of Risk was -0.6% with due regard to the adjustment of loans accounted at fair value against 0.5% in 2018;
- Cost-to-income ratio reached 59.7% compared to 57.5% at year-end 2018.
- Assets amounted to RUB 6,081.9 bn (RUB 6,532.1 bn as at 31 December 2018);
- The total loan portfolio [1] was RUB 4,142.7 bn (RUB 4,239.9 bn as at 31 December 2018);
- Non-performing loans (NPL) (overdue 90+ days and defaulted loans) in the total loan portfolio were down to 2.3% compared to 2.4% as at 31 December 2018;
- The provisioning ratio comprised 4.5% compared to 5.0% as at 31 December 2018;
- Customer accounts comprised RUB 4,479.9 bn compared to RUB 4,813.5 bn at year-end 2018, while the loan-to-deposit ratio reached 92.5% as at 30 June 2019 compared to 88.1% as at 31 December 2018;
- Basel I total capital comprised RUB 731.8 bn compared to RUB 676.4 bn as at 31 December 2018, the total capital adequacy ratio was at 13.8% and the Tier 1 capital adequacy ratio comprised12.5%.
[1] Includes gross corporate and retail loans accounted at amortized cost before loan provisioning and also loans accounted at fair value
The key financial indicators are presented below:
RUB, bn.
|
|
30 June 2019
|
31 December 2018
|
% change
|
|
Assets
|
6,081.9
|
6,532.1
|
-6.9%
|
|
Shareholders’ equity (capital)
|
705.0
|
616.7
|
14.3%
|
|
Cash and cash equivalents
|
677.6
|
1,049.3
|
-35.4%
|
|
Loans to corporate customers
|
3,600.8
|
3,733.0
|
-3.5%
|
|
Retail loans
|
541.9
|
506.9
|
+6.9%
|
|
Securities and investments in associates [2]
|
668.5
|
754.6
|
-11.4%
|
|
Corporate customer accounts
|
3,384.7
|
3,822.7
|
-11.5%
|
|
Retail customer accounts
|
1,095.2
|
990.8
|
+10.5%
|
|
Capital market borrowings [3]
|
296.4
|
326.6
|
-9.2%
|
|
Subordinated debt
|
74.1
|
136.5
|
-45.7%
|
|
|
|
|
1H2019
|
1H2018
|
Change
|
|
Net income
|
36.1
|
23.4
|
+54.3%
|
|
Comprehensive income
|
32.3
|
24.1
|
+33.9%
|
|
|
|
|
30 June 2019 /
1H2019
|
31 December 2018 /
2018
|
Change
|
|
Total Capital Adequacy Ratio [4]
|
13.8%
|
12.4%
|
+1.4 p.p.
|
|
Tier 1 Capital Adequacy Ratio
|
12.5%
|
10.5%
|
+2.0 p.p.
|
|
Non-performing loans [5] (NPL) % of gross loans
|
2.3%
|
2.4%
|
-0.1 p.p.
|
|
Allowance for impairment to gross loans accounted at amortized cost
|
4.5%
|
5.0%
|
-0.5 p.p.
|
|
Loans-to-deposit ratio
|
92.5%
|
88.1%
|
+4.4 p.p.
|
|
ROE
|
10.5%
|
6.8%
|
+3.7 p.p.
|
|
ROA
|
1.2%
|
0.6%
|
+0.6 p.p.
|
|
Net Interest Margin [6]
|
2.7%
|
2.8%
|
-0.1 p.p.
|
|
Cost of risk [7]
|
-0.6%
|
0.5%
|
-1.1 p.p.
|
|
Cost to income ratio [8]
|
59.7%
|
57.5%
|
+2.2 p.p.
|
[2] Including trading securities, investment securities, and investments in associates.
[3] Including bonds issued both at the domestic and international markets.
[4] In accordance with Basel I Framework.
[5] Loans are deemed “non-performing” if their principal or interest is 90+ days overdue, as well as in the event of counterparty default.
[6] The ratio of net interest income to the chronological mean of quarter-end interest bearing assets for the year. Interest-bearing assets include those due from financial institutions, loans to customers and debt securities (all before allowances of loan loss provisions).
[7] Loan loss provision charges and profit/loss on loans accounted at fair value as of the reporting period to the chronological mean of quarter-end interest earning assets for the reporting period.
[8] Operating expenses include salaries and administrative expenses. Operating income includes net interest income, non-interest income and non-banking operating profits. Operating income does not include provisions and loan adjustments accounted at fair value.
Financial results
In 1H2019, the Group recorded net income of RUB 36.1bn. Its total comprehensive income, including foreign exchange gain/loss on the Group’s foreign investments, comprised RUB 32.3 bn. By comparison, in 1H2018, the Group's net income and net comprehensive income amounted to RUB 23.4 bn and RUB 24.1 bn, respectively. The Group’s ROE increased by 3.7 p.p. to 10.5% for 1H2019 against 2018. ROA in 1H2019 reached 1.2% − up 0.6 p.p. against 0.6% at year-end 2018.
The Group’s net interest income in 1H2019 remained actually intact year-on-year at RUB 69.2 bn (up 0.2%), with interest income up 11.4% to RUB 202.8 bn, and interest expenses up 18.2% to RUB 133.6 bn. The net interest margin in 1H2019 was 2.7% − down 0.1 p.p. compared to year-end 2018.
The Group’s recurring core banking income, including net interest income before loan loss provisions and net commission income increased by 2.8% in 1H2019 to RUB 80.1 bn against RUB 77.9 bn year-on-year, with net commission income in 1H2019 (RUB 10.9 bn) up by 23% year-on year (RUB 8.9 bn). Recurring income accounted for 94.9% in the Group’s operating income in 1H2019 compared to 94.4% year-on-year.
Combined income from transactions in securities
[9] in 1H2019 totalled RUB 15.0 bn against the loss of RUB 0.9 bn in 1H2018, mostly due to positive revaluation of investments and income from associates.
Non-banking segments ended 1H2019 with the operating loss of RUB 0.8 bn compared to the operating profit of RUB 0.1 bn in 1H2018. At the same time, the heavy machinery segment showed the profit of RUB 1.2 bn against the loss of RUB 2.3 bn year-on-year.
Impacted by the above factors, the Group’s operating income (before loan loss provisions and impairment of assets) reached RUB 84.4 bn in 1H2019 against RUB 82.6 bn year-on-year.
Operating expenses in 1H2019 reached RUB 50.4 bn against RUB 43.0 bn in 1H2018. Higher expenses were due to the on-going implementation of projects for technological transformation of business, including retail transactions. The cost-to-income ratio increased by 2.2 p.p. compared to year-end 2018 − from 57.5% to 59.7%.
Asset quality
Income from the recovery of loan loss provisions reached RUB 6.2 bn in 1H2019 compared to the expenses of RUB 0.8 bn in 1H2018. Positive fair value adjustment of loans and receivables amounted to RUB 9.8 bn in 1H2019 due to the recovery of impairment resulting from the repayment of several loans accounted at fair value and also from the revaluation of loans to market value following the reduction in the key interest rate.
The Group’s cost of risk (including profit/loss on loans and receivables accounted at fair value) was -0.6% for 1H2019 compared to 0.5% at year-end 2018.
NPLs (non-performing loans) in the gross loan book amounted to 2.3% as at 30 June 2019 – down 0.1 p.p. compared to 31 December 2018. The provisioning ratio (total loan loss allowance to the portfolio of loans accounted at amortized cost) was 4.5% as at 30 June 2019 compared to 5.0% as at 31 December 2018. At the same time, loan loss allowance created as at the reporting date exceeded NPLs 1.9 times, whereas at year-end 2018, the coverage ratio was 2.0.
Business volumes
The Group’s total assets comprised RUB 6,081.9 bn as at 30 June 2019 – down 6.9% against RUB 6,532.1 bn as at 31 December 2018.
In particular, cash and cash equivalents comprised RUB 677.6 bn as at 30 June 2019 compared to RUB 1,049.3 bn as at 31 December 2018 – mostly, due to a drop in fixed-term deposits in the Central Bank of the Russian Federation.
The loan book before loan loss provisions was RUB 4,142.7 bn as at 30 June 2019 – down by 2.3% against RUB 4,239.9 bn as at 31 December 2018.
The loan book (net of loan loss provisions and fair value adjustments) in the Group’s total assets accounted for 65.1% against 61.8% at year-end 2018.
Corporate loans were down by 3.5% for 1H2019 to RUB 3,600.8 bn as at 30 June 2019 against RUB 3,733.0 bn at year-end 2018. Reduction in corporate loans was due to a weaker rouble in 1H2019, which resulted in the negative revaluation of foreign currency assets, and due to repayments of several loans. Retail loans accounted for RUB 541.9 bn as at 30 June 2019 − up by 6.9% for 1H2019 against RUB 506.9 bn as at 31 December 2018.
Mortgage loans form the bulk of the Group’s retail loans, accounting for RUB 375.5 bn as at 30June 2019 – up by 3.7%, compared to RUB 362.2 bn as at 31 December 2018. Mortgage loans in the retail loan book were down 2.1 p.p. for 1H2019 − from 71.4% to 69.3%. Consumer loans grew from RUB 138.6 bn to RUB 159.9 bn (up 15.4%) in 1H2019.
An increase in the retail loan book and a reduction in the corporate loan book led to the growth of retail loans share to 13.1% in the total loan portfolio as at 30 June 2019, − the increase of 1.1 p.p. on the respective indicator as at 31 December 2018
The portfolio of securities and investments in the Group’s associates amounted to RUB 668.5 bn as at 30 June 2019 – down by 11.4% in 1H2019 (securities stood at RUB 754.6 bn as at 31 December 2018). Securities and investments in associates in the Group’s assets fell by 0.6 p.p. in 1H2019 to 11.0% as at the reporting date compared to 11.6% at year-end 2018. The profile of the portfolio of securities and investments in the Group’s associates mostly includes fixed income instruments such as investments in Russian government debt, bonds and promissory notes of Russian issuers, with debt securities up by 7.0 p.p. in 1H2019 − from 70.4% to 77.4%.
Amounts owned to financial institutions fell by 27.3% to RUB 295.1 bn (RUB 405.9 bn at year-end 2018). The share of amounts owned to financial institutions in liabilities was down from 6.9% to 5.5% in 1H2019.
Corporate and retail deposits were down to RUB 4,479.9 bn as at 30 June 2019 compared to RUB 4,813.5 bn as at 31 December 2018 (overall reduction of 6.9%). At that, corporate deposits were down in the structure of raised funds: as at 30 June 2019 they comprised RUB 3,384.8 bn – 11.5% lower than at year-end 2018 (RUB 3,822.7 bn), whereas retail deposits were up by 10.5%, to RUB 1,095.2 bn for 1H2019 from RUB 990.8 bn.
Customer deposits in Group liabilities accounted for 83.4% as at 30 June 2019 − up 2.1 p.p. for 1H2019 (81.3% at year-end 2018).
Capital market borrowings, including Eurobonds and local bonds, were RUB 296.4 bn as at 30 June 2019 compared to RUB 326.6 bn at year-end 2018 (down 9.2% during 1H2019). 1H2019 saw the redemption of local bonds totalling RUB 10.0 bn and Eurobonds of USD 0.5mln, issued in 2017, as well as Eurobonds of EUR 1 bn, issued in 2014. The placements of 1H2019 included local bonds’ issues totalling RUB 56 bn, with maturity in 2021-2024. As a result, capital market borrowings in the resource base were down 0.1 p.p. to 5.4%.
Capital adequacy
The Group’s Basel I total capital based on consolidated IFRS financials comprised RUB 731.8 bn as at 30 June 2019 – up 8.2% in 1H2019 compared to RUB 676.4 bn at year-end 2018. In January 2019, the Group obtained financing from the Gazprom Group via the perpetual interest-free subordinated loan of RUB 90,000 mln. Such loan meets the criteria for it to be classified within Tier 1 Capital in order to calculate the capital adequacy ratio. In February 2019, the Central Bank of the Russian Federation approved the inclusion of the perpetual and interest-free loan in the additional capital when calculating capital adequacy in accordance with the national rules.
At the same time, upon receiving an official authorization of the Central Bank of the Russian Federation in the second quarter of 2019, the Group exercised a call option on subordinated Eurobonds of CHF 350 mln.
The Group’s risk weighted assets were down by 3.4% in 1H2019 − mostly due to market risk mitigation.
Hence, the Group’s capital adequacy indicators as at 30 June 2019 were as follows: the Group’s total capital adequacy ratio − at 13.8% (12.4% at year-end 2018 − up by 1.4 p.p. for the first six months); the Tier 1 capital adequacy ratio − at 12.5% (against 10.5% at year-end 2018, − up 2.0 p.p. in fix six months).
[9] Combined income from transactions in securities includes realized and unrealized gain from securities transactions, change in the Group’s investments value and net derivatives with securities results, loss on transactions with financial liabilities designated as at fair value throughprofit or loss, as well as gain from disposal of subsidiaries.