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Moscow, March, 24, 2020 -  Gazprombank (Joint Stock Company) (hereinafter, Bank GPB (JSC) or the Bank) published consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) for 2019 and as at 31 December 2019.

“Implementation of a strategy focused on the priority development of the retail business helped to maintain the Bank's margin at the previous year's level (2.8%) against the backdrop of significant interest rates decrease, and practically double its commission income, thus improving its performance stability in the period of financial markets volatility,” Deputy Chairman of the Management Board, Mr. Alexander Sobol, said.

Bank GPB (JSC) key financial indicators for 2019 / as at 31 December 2019:

• Net income totalled RUB 44.6 bn compared to RUB 39.5 bn in 2018;
• Net commission income amounted to  RUB 34.2 bn against RUB 18.4 bn in 2018;
• Net interest margin remained at the level of 2018 at 2.8%;
• Cost of risk comprised -0.1%, including profit/loss on loans and receivables accounted at fair value, against  0.5% in 2018;
• ROE and ROA stood at 6.3% and 0.7%, respectively, compared to 6.8% and 0.6% in 2018;
• Cost-to-income ratio reached 65.1% compared to 57.5% at year-end 2018;
• Assets amounted to RUB 6,582.2 bn (RUB 6,532.1 bn as at 31 December 2018);
• The total loan portfolio [1]  was RUB 4,593.3 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  declined to 2.2% against 2.4% at the start of 2019;
• The provisioning ratio comprised 4.4% compared to 5.0% as at 31 December 2018;
• Customer accounts comprised RUB 4,968.5 bn compared to  RUB 4,813.5 bn at year-end 2018, while the loan-to-deposit ratio reached 92.4% compared to  88.1% as at 31 December 2018;
• Basel I total capital comprised RUB 758.1 bn against RUB 676.4 bn as at 31 December 2018, the total capital adequacy ratio stood at 13.1% as at the reporting date, and the Tier 1 capital adequacy ratio comprised 11.9%. 

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[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.

	31 December 2019	31 December 2018		% change
Assets	6,582.2	6,532.1		+0.8%
Shareholders’ equity (capital)	722.2	616.7		+17.1%
Cash and cash equivalents	739.0	1,049.3		-29.6%
Loans to corporate customers	3,985.4	3,733.0		+6.8%
Retail loans	608.0	506.9		+19.9%
Securities and investments in associates[2]	647.7	754.6		-14.2%
Corporate customer accounts	3,748.5	3,822.7		-1.9%
Retail customer accounts	1,220.0	990.8		+23.1%
Capital market borrowings[3]	267.6	326.6		-18.1%
Subordinated debt	74.6	136.5		-45.3%
	2019	2018		% change
Net income	44.6	39.5		+12.9%
Comprehensive income	39.0	43.0		-9.4%
	31 December 2019/ 12 months 2019	31 December 2018 / 12 months 2018	% change
Total Capital Adequacy Ratio[4]	13.1%	12.4%	+0.7 p.p.
Tier 1 Capital Adequacy Ratio	11.9%	10.5%	+1.4 p.p.
Non-performing loans[5] (NPL) % of gross loans	2.2%	2.4%	-0.2 p.p.
Allowance for impairment to gross loans accounted at amortized cost	4.4%	5.0%	-0.6 p.p.
Loan-to-deposit ratio	92.4%	88.1%	+4.3 p.p.
ROE	6.3%	6.8%	-0.5 p.p.
ROA	0.7%	0.6%	+0.1 p.p.
Net Interest Margin[6]	2.8%	2.8%	0.0 p.p.
Cost of risk[7]	-0.1%	0.5%	-0.6 p.p.
Cost-to-income ratio [8]	65.1%	57.5%	+7.6 p.p.

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[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 profit/loss on loans accounted at fair value.

Financial results

The Group has successfully completed the year of 2019, earning RUB 44.6 bn of net income and the comprehensive income of RUB 39.0 bn, including foreign exchange gain/loss on the Group’s foreign investments. By comparison, the Group's net income and comprehensive income year-on-year amounted to RUB 39.5 bn and RUB 43.0 bn, respectively. The Group’s ROE was down 0.5 p.p. to 6.3% in 2019 against 2018. ROA reached 0.7%.− up 0.1 p.p. against 0.6% at year-end 2018.  

The Group’s net interest income in 2019 was up 2.9% against 2018 to RUB 142.8 bn, with interest income up 9.6% to RUB 409.5 bn and interest expenses up 13.6% to RUB 266.7 bn. The net interest margin in 2019 remained intact at 2.8 %.

The Group’s recurring core banking income, including net interest income before loan loss provisions and net commission income increased by 12.7% in 2019 to RUB 177.0 bn compared to  RUB 157.1 bn in 2018,  with net commission income  in 2019 (RUB 34.2 bn) up 1.9 times against 2018 (RUB 18.4 bn). The active development of retail banking  made a higher commission income possible: 2019 saw the launch of selling out-of-the box offers,  insurance and service ones, either for lending or  investment products for individuals.

Recurring income accounted for 95.4% in the Group’s operating income in 2019 compared to 91.9% in 2018.

Comprehensive income [9] from transactions in securities   in 2019 totalled RUB 35.5 bn against the income of RUB 3.2 bn in 2018: mostly due to positive revaluation of investments and income from associates as well as income from the disposal of subsidiaries.

Non-banking segments ended 2019 with the operating loss of RUB 13.0 bn against RUB 1.7 bn in 2018.
Impacted by the above factors, the Group’s operating income (before loan loss and impairment of assets provisions) reached RUB 185.5 bn in 2019 compared to RUB 171.0 bn in 2018.

Operating expenses reached RUB 120.8 bn in 2019 compared to RUB 98.3 bn in 2018. Higher expenses were due to the on-going implementation of business technological transformation projects, including retail transactions. The cost-to-income ratio increased by 7.6 p.p. compared to year-end 2018 ─ from 57.5% to 65.1%.

Asset quality

Expenses from loan loss provisioning reached RUB 10.5 bn in 2019 compared to RUB 6.8 bn in 2018. Positive fair value adjustment of loans and receivables amounted to RUB 14.5 bn in 2019 due to the recovery of impairment resulting from the repayment of several loans accounted at fair value and also from the adjustment of loans to market value following the key interest rate cut.

The Group’s cost of risk (including profit/loss on loans and receivables accounted at fair value) was -0.1% in 2019 against 0.5% at year-end 2018.

NPLs (non-performing loans) in the gross loan book amounted to 2.2% in 2019 compared to 2.4% in 2018. The provisioning ratio (total loan loss allowance to the portfolio of loans accounted at amortized cost) was 4.4% as at 31 December 2019 against 5.0% as at 31 December 2018. At the same time, loan loss allowance created as at the reporting date exceeded NPLs 2 times (at year-end 2018, the coverage ratio was the same).

Business volumes

The Group’s total assets comprised RUB 6,582.2 bn as at 31 December 2019 ─ up 0.8% against RUB 6,532.1 bn as at 31 December 2018.

In particular, cash and cash equivalents were at RUB 739.0 bn as at 31 December 2019 compared to RUB 1,049.3 bn as at 31 December 2018 mostly due to the reduction in fixed-term deposits in the Central Bank of the Russian Federation.

The loan book before loan loss provisions as at 31 December 2019 accounted for RUB 4,593.3 bn − up 8.3% compared to RUB 4,239.9 bn as at 31 December 2018.

The loan book (net of loan loss provisions and profit/loss on loans accounted at fair value) in the Group’s total assets accounted for 66.8% compared to 61.8% at the end of December 2018.

Corporate loans were up 6.8% in 2019 to RUB 3,985.3 bn as at 31 December 2019 compared to RUB 3,733.0 bn at year-end 2018. Retail loans showed considerable growth of 19.9% in 2019 – from RUB 506.9 bn to RUB 608.0 bn as at 31 December 2019.

Mortgage loans form the bulk of the Group’s retail loans, accounting for RUB 393.0 bn     as at 31 December 2019 − up 8.5% compared to RUB 362.2 bn as at 31 December 2018. Mortgage loans in the retail loan book were down 6.8 p.p. for 2019 − from 71.4% to 64.6%. Consumer loans grew in 2019 from RUB 138.6 bn to RUB 207.6 bn (up 49.8%).

Consumer lending grew owing to the implementation of several transformation projects, which allowed the Bank to show multiple expansion of the active user database in the new mobile bank (now 1.5 mln users already); the Bank also started to process over 15 thousand loan applications a day. In 2019, the Bank posted fourfold growth in consumer loans’ disbursement a day and increased its sales on digital channels to 55%.

An increase in the retail loan book led to the retail loans share growth to 13.2% within the total loan portfolio as at 31 December 2019 − the increase of 1.3 p.p. compared to that as at 31 December 2018.

The portfolio of securities and investments in the Group’s associates comprised RUB 647.7 bn as at 31 December 2019 – down by 14.2% (securities stood at RUB 754.6 bn as at 31 December 2018).

The portfolio of securities and investments in the Group’s associates share in total assets declined by 1.8 p.p. in 2019 to 9.8% as of 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 10.2 p.p. in 2019 − from 70.4% to 80.6%.

Amounts due to financial institutions fell by 21.3% in 2019 to RUB 319.4 bn (RUB 405.9 bn at year-end 2018). Amounts due to financial institutions in liabilities were down from 6.9% to 5.5% as at 31 December 2019. 

Corporate and retail deposits grew to RUB 4,968.5 bn as at 31 December 2019 compared to RUB 4,813.5 bn as at 31 December 2018 (the overall increase of 3.2%). At that, corporate deposits were down in the structure of raised funds – as at 31 December 2019 they comprised RUB 3,748.5 bn − 1.9% lower than at year-end 2018 (RUB 3,822.7 bn), whereas private deposits were up 23.1% from RUB 990.8 bn to RUB 1,220.0 bn in 2019. Retail funds share in the total customer deposits were up 4.0 p.p. from 20.6% at year-end 2018 to 24.6% as at 31 December 2019.

Customer deposits in Group liabilities accounted for 84.8% as at 31 December 2019 − up 3.4 p.p. (81.4% at year-end 2018).

Capital market borrowings, including Eurobonds and local bonds declined as at 31 December 2019 to RUB 267.6 bn compared to RUB 326.6 bn at year-end 2018 (down 18.1% in 2019). The year of 2019 saw the redemption of local bonds totalling RUB 22 bn, and also of Eurobonds of USD 0.5 bn issued in 2017, Eurobonds of EUR 1 bn and Eurobonds of USD 0.75 bn, both issued in 2014. In 2019, placements included local bonds’ issues totalling RUB 92 bn with maturity in 2021-2025. As a result, capital market borrowings in the resource base declined by 0.9 p.p. to 4.6%.

Capital adequacy

The Group’s Basel I total capital based on consolidated IFRS financials comprised RUB 758.1 bn as at 31 December 2019  − up 12.1% in 2019 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. The loan meets the criteria for it to be classified within Tier 1 Capital for calculating 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 grew 5.4% in 2019 to RUB 5,769.4 bn.

All in all, the Group’s capital adequacy indicators as at 31 December 2019 were as follows: the Group’s total capital adequacy ratio – 13.1% (12.4% at year-end 2018 − up by 0.7 p.p. for the year); the Tier 1 capital adequacy ratio − 11.9% (against 10.5% at year-end 2018 − up 1.4 p.p. for the year).

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[9] Combined income from transactions with securities includes both realized and unrealized gain from securities transactions and a change in the Group’s investments value, as well as net derivatives results, loss on financial liabilities designated as at fair value through profit or loss, as well as gain from subsidiaries’ disposal.