Moscow, June, 17, 2020 - Gazprombank (Joint Stock Company) (hereinafter, Bank GPB (JSC) or the Bank) has published condensed consolidated interim financial information prepared in accordance with International Financial Reporting Standards (IFRS) for 3M2020 and as at 31 March 2020.
Alexander Sobol, Deputy Chairman of the Management Board, said: “The end of the first quarter in the current year was marked by a new spiral of the world crisis in combination with the COVID-19 pandemic, which created a significant degree of uncertainty about further economic development not only in our country but also in the world. Given the current situation, the Bank set up additional loan loss provisions and yet maintained positive financial results in 3M2020.
The technology transformation programme that the Bank has been implementing since 2018 made it possible not only to reach a new level of banking products’ sales but also provided for an opportunity to set up mobile work environment for employees and their interactions with customers during the pandemic. In the shortest possible time, the Bank transferred over 10 thousand employees to working from home, ensuring seamless continuity of all functions in order to resolve matters of any complexity. The Bank also took all required measures to protect the health of its employees and customers. The main subsidiaries of the Gazprombank Group also put in place remote workplace standards that are integrated with the Bank.
We are comfortable with the Bank’s reserves of capital adequacy and liquidity and continue our work maintaining high-quality service both for corporate and retail customers”.
The key financial indicators of the Gazprombank Group (hereinafter, the Group) for 3M2020 / as at 31 March 2020:
- Net income totaled RUB 18.4 bn compared to RUB 13.5 bn for 3M2019;
- Normalized net income would be RUB 5.7 bn, with due regard to the net foreign exchange loss of RUB 12.7 bn on issued perpetual bonds (which the Bank reclassified to subordinated debt as at 31 March 2020 due to their announced early redemption).The net foreign exchange loss was recognized as equity according to IFRS.
All the other press release indicators were calculated on the basis of normalized net income of RUB 5.7 bn;
- Net commission income reached RUB 8.6 bn compared to RUB 4.7 bn in 3M2019;
- Net interest margin comprised 2.6% against 2.8% for 2019;
- Cost of Risk amounted to 1.1%, with due regard to the adjustment of loans accounted at fair value, compared to -0.1% in 2019;
- ROE and ROA were 3.2%* and 0.3%* respectively, compared to 6.3% and 0.7% in 2019;
- Cost-to-income ratio comprised 55.5%* compared to 65.1% at year-end 2019.
- Assets amounted to RUB 7,289.7 bn (against RUB 6,582.2 bn as at 31 December 2019);
- The total loan portfolio [1] comprised RUB 5,039.0 bn (against RUB 4,593.3 bn as at 31 December 2019);
- Non-performing loans (NPL) (overdue 90+ days or defaulted loans) in the total loan portfolio stood at 2.2% as at year-end 2019;
- The provisioning ratio remained at 4.4% as in 2019;
- Customer accounts comprised RUB 5,497.5 bn compared to RUB 4,968.5 bn at year-end 2019, while the loan-to-deposit ratio was 91.7% as at 31 March 2020 compared to 92.4% as at 31 December 2019;
- Basel I total capital reached RUB 766.6 bn compared to RUB 758.1 bn as at 31 December 2019, the total capital adequacy ratio stood at 12.2% as at the reporting date, and the Tier 1 capital adequacy ratio comprised 11.6%.
[*] Calculated with due regard to FX loss included in the equity as perpetual bonds issued.
[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 March 2020
|
31 December 2019
|
% change
|
|
Assets
|
7,289.7
|
6,582.2
|
+10.7%
|
|
Shareholders’ equity (capital)
|
729.2
|
722.2
|
+1.0%
|
|
Cash and cash equivalents
|
931.4
|
739.0
|
+26.0%
|
|
Loans to corporate customers
|
4,393.8
|
3,985.3
|
+10.3%
|
|
Retail loans
|
645.3
|
608.0
|
+6.1%
|
|
Securities and investments in associates [2]
|
640.2
|
647.7
|
-1.2%
|
|
Corporate customer accounts
|
4,161.1
|
3,748.5
|
+11.0%
|
|
Retail customer accounts
|
1,336.4
|
1,220.0
|
+9.5%
|
|
Capital market borrowings[3]
|
264.1
|
267.6
|
-1.3%
|
|
Subordinated debt
|
162.1
|
74.6
|
+117.3%
|
|
|
3M2020
|
3M 2019
|
% change
|
|
Net income
|
18.4
|
13.5
|
+36.3%
|
|
Normalized net income*
|
5.7
|
13.5
|
-57.8%
|
|
Comprehensive income
|
28.6
|
9.6
|
+197.9%
|
|
Normalized comprehensive income*
|
15.9
|
9.6
|
+65.6%
|
|
|
31 March 2020 / 3M2020
|
31 December 2019 / 12M2019
|
% change
|
|
Total Capital Adequacy Ratio [4]
|
12.2%
|
13.1%
|
-0.9 p.p.
|
|
Tier 1 Capital Adequacy Ratio
|
11.6%
|
11.9%
|
-0.3 p.p.
|
|
Non-performing loans [5] (NPL) to gross loans
|
2.2%
|
2.2%
|
-
|
|
Allowance for impairment to gross loans accounted at amortized cost
|
4.4%
|
4.4%
|
-
|
|
Loans-to-deposit ratio
|
91.7%
|
92.4%
|
-0.7 p.p.
|
|
ROE
|
10.1%
|
6.3%
|
+3.8 p.p.
|
|
Normalized ROE*
|
3.2%
|
6.3%
|
-3.1 p.p.
|
|
ROA
|
1.1%
|
0.7%
|
+0.4 p.p.
|
|
Normalized ROA*
|
0.3%
|
0.7%
|
-0.4 p.p.
|
|
Net Interest Margin [6]
|
2.6%
|
2.8%
|
-0.2 p.p.
|
|
Cost of risk [7]
|
1.1%
|
-0.1%
|
+1.2 p.p.
|
|
Cost-to-income ratio [8]
|
43.0%
|
65.1%
|
-22.1 p.p.
|
|
Cost-to-normalized income ratio*
|
55.5%
|
65.1%
|
-9.6 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] Charges of provisions for loan loss and loan adjustment accounted at fair value as of the reporting period to the chronological mean of quarter-end interest-bearing assets for the reporting period;
[8] Operating expenses include salaries, other allowances and benefits to the personnel, and banking-related 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.
[*] Calculated with due regard to FX loss included in equity as perpetual bonds issued
Financial results
The Group ended the 3M2020, with recorded net income of RUB 5.7 bn adjusted for FX loss included in the equity as perpetual bonds issued and the comprehensive income of RUB 15.9 bn, including inter alia currency revaluations of the Group’s foreign investments. By comparison, in 3M2019, the Group’s net income and its comprehensive income amounted to RUB 13.5 bn and RUB 9.6 bn, respectively. The Group’s ROE was down by 3.1 p.p. to 3.2%
* in 3M2020 compared to year-end 2019. ROA was at 0.3%
* for 3M2020 – down by 0.4 p.p. against 0.7% at year-end 2019.
The Group’s net interest income amounted to RUB 38.5 bn in 3M2020, which is 7.8% higher year-on-year (RUB 35.7 bn), with interest income up 0.5% to RUB 102.8 bn and interest expense down 3.5% to RUB 64.3 bn. The net interest margin was down 0.2 p.p. to 2.6% in 3M2020.
The margin was lower due to a surge in average interest-earning assets after the rouble slump at the end of 3M2020, which resulted in a considerable growth of currency assets in the rouble equivalent.
The net interest margin disregarding this factor would have been at 2.7%, showing just a minor decline of 0.1 p.p. compared to year-end 2019.
The Group’s recurring core banking income, including net interest income before loan loss provisions and net commission income was up 16.3% to RUB 47.0 bn in 3M2020 against RUB 40.4 bn year-on-year. At the same time, net commission income in the same period (RUB 8.6 bn) was 1.8 times higher than the same indicator for 3M2019 (RUB 4.7 bn). Higher commission income resulted from continued active development of the retail business, which started in 2019 (sales of packaged offers, insurance and service ones, both on lending and investment products for individuals).
Recurring income in the Group’s operating income accounted for 86.6%
* against 101.8% in 3M2019.
Combined loss from transactions with securities [
9] in 3M2020 totalled RUB 1.9 bn against income of RUB 9.2 bn in 3M2019 mostly due to negative revaluation of securities, loss from investments in associates and expense incurred due to disposal of subsidiaries.
Non-banking segments ended 3M2020 with the operating income of RUB 2.0 bn compared to the loss of RUB 4.0 bn in 3M2019.
Impacted by the above factors, the Group’s operating income (before provisions for loan loss and impairment of assets) reached RUB 54.4
* bn in 3M2020 compared to RUB 39.7 bn in 3M2019.
Operating expenses amounted to RUB 30.2 bn in 3M2020 compared to RUB 25.3 bn in 3M2019. Higher expenses were driven by the continued implementation of projects for the business technology transformation, including retail transactions. At the same time, cost-to income ratio was down 9.6 p.p. to 55.5%
* compared to 65.1% at year-end 2019.
Asset quality
Loan loss provisions totalled RUB 11.8 bn in 3M2020 compared to RUB 0.7 bn in 3M2019. Negative valuation adjustments of loans and receivables accounted at fair value was RUB 3.7 bn in 3M2020 compared to the positive valuation adjustment of RUB 7.7 bn in 3M2019.
The Group’s cost of risk (including valuation adjustment of loans and receivables accounted at fair value) grew to 1.1% in 3M2020 against -0.1% at year-end 2019.
NPLs (non-performing loans) in the gross loan book remained in 3M2020 at the level of 2019 – at 2.2%. The provisioning ratio (total loan loss allowance to the portfolio of loans accounted at amortized cost) remained unchanged at 4.4% against that as at 31 December 2019. At the same time, loan loss provisions created as at the reporting date exceeded NPLs twofold just as they did in 2019.
Business volumes
The Group’s total assets reached RUB 7,289.7 bn as at 31 March 2020 – up 10.7% against RUB 6,582.2 bn as at 31 December 2019.
In particular, cash and cash equivalents reached RUB 931.4 bn as at 31 March 2020 compared to RUB 739.0 bn as at 31 December 2019 − mostly due to higher account balances in the Central Bank of the Russian Federation.
The gross loan book before loan loss provisions was at RUB 5,039.1 bn as at 31 March 2020 − up 9.7% against RUB 4,593.3 bn as at 31 December 2019.
The gross loan book (net of provisions for loan loss and valuation adjustments of loans accounted at fair value) in the Group’s total assets comprised 66.2% compared to 66.8% as at the end of December 2019.
In 3M2020, corporate loans were up 10.3% to RUB 4,393.8 bn as at 31 March 2020 compared to RUB 3,985.3 bn at year-end 2019. Retail loans also grew, with their volume up 6.1% in 3M2020 – from RUB 608.0 bn to RUB 645.3 bn as at 31 March 2020.
Mortgage loans form the bulk of the Group’s retail loans, accounting for RUB 400.2 bn as at 31 March 2020 compared to 1.8% as at 31 December 2019. Mortgage loans in the retail loan book were down 2.6 p.p. in 3M2020 – from 64.6% to 62.0%. In 3M2020, consumer loans to retail customers grew from RUB 207.6 bn to RUB 237.2 bn (up 14.3%).
The Bank’s retail business was successful in 3M2020: the sales plan was met 111%, the Bank ranks fourth among other banks in terms of lending, with commission income at RUB 3 bn. Considerable growth rates of consumer lending are maintained by continuing the implementation of some transformation projects, which allowed the Bank to reach manifold growth in the active user database of its new mobile bank – from 0.7 mln users in 1Q2019 to 1.7 mln by late March 2020, and also threefold growth in the number of mobile bank transactions in the same period.
Corporate loan book grew strongly in 1Q, resulting in a small share decline in retail loans in the gross loan book profile as at 31 March 2020 (down by 0.4 p.p. to 12.8%).
The portfolio of securities and investments in Group associates was RUB 640.2 bn as at 31 March 2020 – down 1.2% (with RUB 647.7 bn as at 31 December 2019).
Securities and investments in associates share was down in the Group’s assets in 3M2020 by 1.0 p.p. to 8.8% as at the reporting date against 9.8% at year-end 2019. The profile of the Group’s securities portfolio mostly consists of fixed income instruments such as investments in Russian government debt, bonds and promissory notes of Russian issuers, with debt securities up 0.5 p.p. in 3M2020 − from 80.6% to 81.1%.
Amounts owed to financial institutions were up 6.9% to RUB 341.3 bn in 3M2020 (against RUB 319.4 bn at year-end 2019). Amounts owed to financial institutions share in total liabilities were down from 5.5% to 5.2% as at 31 March 2020.
Corporate and retail accounts grew to RUB 5,497.5 bn as at 31 March 2020 compared to RUB 4, 968.5 bn as at 31 December 2019 (their total growth amounted to 10.6%). At the same time, corporate accounts were up 11% to RUB 4,161.1 bn in the funds raised against year-end 2019 (RUB 3,748.5 bn), with retail accounts also up 9.5% to RUB 1,336.4 bn in 3M2020 from RUB 1,220 bn. Retail accounts in the customer accounts profile were slightly down (by 0.3 p.p. – from 24.6% at year-end 2019 to 24.3% as at 31 March 2020).
Customer accounts in Group liabilities comprised 83.8% as at 31 March 2020 – down 1.0 p.p. (with 84.8% at year-end 2019).
Capital borrowings were down to RUB 264.1 bn as at 31 March 2020 against RUB 267.6 bn at year-end 2019 (down by 1.3%). At the same time, capital borrowings in the resource base declined 0.6 p.p. to 4.0%.
Capital adequacy
The Group’s Basel I total capital based on consolidated IFRS financials amounted to RUB 766.6 bn as at 31 March 2020 − up 1.1% in 3M2020 against RUB 758.1 bn at year-end 2019. Early in 2020, the Group obtained funding from the Gazprom Group in subordinated interest-free demand deposits totalling RUB 40,000 mln (in 2019 – RUB 90,000 mln). Since these deposits do not have any maturity date and are interest-free, the Group classified them to capital in the consolidated statement of financial position, and also as part of Tier 1 capital for the purposes of calculating the capital adequacy ratio. The Central Bank of Russia approved the inclusion of demand and interest-free deposits in the additional capital when calculating capital adequacy in accordance with the national rules. At the same time, due to the early redemption of USD 1 bn perpetual Eurobonds, the Group ceased to recognize such bonds as capital and reclassified them to subordinated debt securities in 3M2020.
The Group’s risk weighted assets were up 8.7% to RUB 6,270.9 bn in 3M2020.
Hence, the Group’s capital adequacy indicators as at 31 March 2020 were as follows: the Group’s total capital adequacy ratio at 12.2% (compared to 13.1% at year-end 2019 – a quarter drop of 0.9 p.p.); the Tier 1 capital adequacy ratio of 11.6% (compared to 11.9% at year-end 2019 – down 0.3 p.p. for the quarter).
[*] Calculated with due regard to FX loss included in equity as perpetual bonds issued
[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.