Moscow, August, 28, 2020 - Gazprombank (Joint Stock Company) (hereinafter, “Bank GPB (JSC)” or “the Bank”) published its interim condensed consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) for the first half of 2020 as at 30 June 2020.
Key financial indicators of the Gazprombank Group (hereinafter, “the Group”) for 1H2020 / as at 30 June 2020:
All the other press release indicators were calculated on the basis of normalized net income of RUB 15.6 bn;
[*] Calculated with due regard to FX loss included in the capital as redeemed perpetual bonds.
[1] Includes gross corporate and retail loans accounted at amortized cost before loan provisioning and also loans accounted at fair value.
RUB, bn.
| 30 June 2020 | 31 December 2019 | Change | |
| Assets | 7,071.8 | 6,582.2 | +7.4% |
| Shareholders’ equity (capital) | 734.8 | 722.2 | +1.7% |
| Cash and cash equivalents | 893.8 | 739.0 | +20.9% |
| Loans to corporate customers | 4,209.1 | 3,985.0 | +5.6% |
| Retail loans | 666.4 | 608.0 | +9.6% |
| Securities and investments in associates [2] | 637.9 | 647.7 | -1.5% |
| Corporate customer accounts | 4,070.8 | 3,748.5 | +8.6% |
| Retail customer accounts | 1,381.3 | 1,220.0 | +13.2% |
| Capital market borrowings [3] | 261.5 | 267.6 | -2.3% |
| Subordinated debt | 78.8 | 74.6 | +5.6% |
| 1H2020 | 1H2019 | Change | |
| Net income | 28.3 | 36.1 | -21.6% |
| Normalized net income* | 15.6 | 36.1 | -56.7% |
| Comprehensive income | 34.1 | 32.3 | +5.6% |
| Normalized comprehensive income* | 21.4 | 32.3 | -33.7% |
| 30 June 2020 / 1H2020 | 31 December 2019 / 12M2019 | Change | |
| Total Capital Adequacy Ratio [4] | 12.6% | 13.1% | -0.5 p.p. |
| Tier 1 Capital Adequacy Ratio | 12.0% | 11.9% | +0.1 p.p. |
| Ratio of non-performing loans [5] (NPL) to gross loans | 2.4% | 2.2% | +0.2 p.p. |
| Ratio of loan loss provisions to gross loans accounted at amortized cost | 4.5% | 4.4% | +0.1 p.p. |
| Loans-to-deposit ratio | 89.4% | 92.4% | -3.0 p.p. |
| ROE | 7.8% | 6.3% | +1.5 p.p. |
| Normalized ROE* | 4.3% | 6.3% | -2.0 p.p. |
| ROA | 0.8% | 0,7% | +0.1 p.p. |
| Normalized ROA* | 0.4% | 0.7% | -0.3 p.p. |
| Net interest margin [6] | 2.7% | 2.8% | -0.1 p.p. |
| Cost of Risk [7] | 0.5% | -0.1% | +0.6 p.p. |
| Cost to income ratio [8] | 51.1% | 65.1% | -14.0 p.p. |
| Cost to normalized income ratio* | 59.3% | 65.1% | -5.8 p.p. |
Financial result
The Group ended 1H2020 with recorded net income of RUB 15.6 bn adjusted for FX loss included in the capital as perpetual bonds issued and the net comprehensive income of RUB 21.4 bn, including inter alia currency revaluations of the Group’s foreign investments. By comparison, year-on-year, the Group’s net income and its comprehensive income amounted to RUB 36.1 bn and RUB 32.3 bn, respectively. The Group’s ROE was down by 2.0 p.p. to 4.3%* in 1H2020 against that at year-end 2019. ROA was 0.4%* in 1H2020 – a drop of 0.3 p.p. against 0.7% at year-end 2019.
The Group’s net interest income was RUB 79.0 bn in 1H2020, which is 14.2% higher than that year-on-year (RUB 69.1 bn), with interest income up 2.2% to RUB 207.3 bn and interest expense down 4.0% to RUB 128.3 bn. The net interest margin in 1H2020 remained unchanged year-on-year − at 2.7%.
The Group’s recurring core banking income, including net interest income before loan loss provisions and net commission income, was up 19.6% to RUB 95.8 bn in 1H2020 compared to RUB 80.1 bn year-on-year. At the same time, net commission income for the same period (RUB 16.8 bn) was 1.5 times higher than in 1H2019 (RUB10.9 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 96.9%* against 94.8% in 1H2019.
Combined income from transactions in securities [9] in 1H2020 totalled RUB 0.1 bn compared to the income of RUB 15,0 bn in 1H2019 − mostly due to negative revaluation of securities, loss in associates and expense incurred from the disposal of subsidiaries.
Non-banking segments ended 1H2020 with the operating income of RUB 1.8 bn compared to the loss of RUB 0.8 bn in 1H2019.
Impacted by the above factors, the Group’s operating income (before provisions for loan loss and impairment of assets) reached RUB 98.8* bn in 1H2020 compared to RUB 84.5 bn in 1H2019.
Operating expenses amounted to RUB 58.6 bn in 1H2020 compared to RUB 50.4 bn in 1H2019. Higher expenses were driven by the continued implementation of projects for the business technology transformation, including transformation of the retail business. At the same time, the cost-to income ratio was down 5.8 p.p. to 59.3%* compared to 65.1% at year-end 2019.
Asset quality
Loan loss provisions totalled RUB 7.9 bn in 1H2020 compared to RUB 6.2 bn in 1H2019. The negative adjustments of loans and receivables accounted at fair value were RUB 5.7 bn in 1H2020 against the positive adjustment of RUB 9.8 bn in 1H2019.
The Group’s cost of risk (including valuation adjustment of loans and receivables accounted at fair value) grew to 0.5% in 1H2020 compared to -0.1% at year-end 2019.
NPLs (non-performing loans) in the gross loan book accounted for 2.4% as at 30 June 2020 – up 0.2 p.p. against 31 December 2019. The provisioning ratio (total loan loss provisions to the portfolio of loans accounted at amortized cost) was 4.5% as at 30 June 2020 compared to 4.4% as at 31 December 2019.
At the same time, loan loss provisions created as at the reporting date exceeded NPLs 1.9 times against 2.0 times in 2019.
Business volumes
The Group’s total assets reached RUB 7,071.8 bn as at 30 June 2020 – up 7.4% against RUB 6,582.2 bn as at 31 December 2019.
In particular, cash and cash equivalents reached RUB 893.8 bn as at 30 June 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 4,875.5 bn as at 30 June 2020 − up 6.1% against RUB 4,593.3 bn as at 31 December 2019.
The gross loan book (net of provisions for loan loss and loan adjustments accounted at fair value) in the Group’s total assets was 65.9% compared to 66.8% as at the end of December 2019.
In 1H2020, corporate loans were up 5.6% to RUB 4,209.1 bn as at 30 June 2020 against RUB 3,985.3 bn at year-end 2019. Retail loans also grew, with their volume up 9.6% in 1H2020 – from RUB 608.0 bn to RUB 666.4 bn as at 30 June 2020.
Mortgage loans form the bulk of the Group’s retail loans, accounting for RUB 403.0 bn as at 30 June 2020 – up 2.5% compared to 31 December 2019. Mortgage loans share in the retail loan book were down 4.1 p.p. in 1H2020 − from 64.6% to 60.5%. Consumer loans to retail customers grew in 1H2020 from RUB 207.6 bn to RUB 256.4 bn. (up 23.5%).
In 1H2020, the Bank extended RUB 91 bn of retail loans, which is 70% higher than the figure in the same period of 2019. The first six months of 2020 saw the launch of some new products and services with an emphasis on developing remote service channels. Thus, the Bank entered the market of online car loans in February and launched a state-supported scheme of preferential mortgage loans at the rate 6% per annum in April.
Corporate loan book grew strongly in 1H2020, resulting in a small rise of retail loans share in the gross loan book profile as at 30 June 2020 (up 0.5 p.p. to 13.7%).
The portfolio of securities and investments in Group associates was RUB 637.9 bn as at 30 June 2020, down 1.5% (as at 31 December 2019: RUB 647.7 bn).
Securities and investments in associates share in the Group’s assets were down 0.8 p.p. in 1H2020 to 9.0% 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 down 0.2 p.p. − from 80.6% to 80.4%.
Amounts owed to financial institutions were down 7.3% in 1H2020 to RUB 296.2 bn (against RUB 319.4 bn at year-end 2019). Amounts owed to financial institutions share in the liabilities were down from 5.5% to 4.7% as at 30 June 2020.
Corporate and retail accounts grew to RUB 5,452.2 bn as at 30 June 2020 against RUB 4,968.5 bn as at 31 December 2019 (their total growth was 9.7%). At the same time, corporate accounts were up 8.6% to RUB 4,070.8 bn in the funds raised as at 30 June 2020 compared to that at year-end 2019 (RUB 3,748.5 bn), with retail accounts also up 13.2% in 1H2020 – from RUB 1,220.0 bn to RUB 1,381.4 bn. Retail accounts in the customer accounts profile edged up (by 0.7 p.p. − from 24.6% at year-end 2019 to 25.3% as at 30 June 2020).
Customer accounts in the Group liabilities comprised 86.0% as at 30 June 2020 − up 1.2 p.p. (against 84.8% at year-end 2019).
Capital market borrowings were down as at 30 June 2020 to RUB 261.5 bn against RUB 267.6 bn at year-end 2019 (down 2.3%). At the same time, capital borrowings in the resource base declined 0.5 p.p. to 4.1%.
Capital adequacy
The Group’s Basel I total capital based on consolidated IFRS financials amounted to RUB 770.4 bn as at 30 June 2020 − up 1.6% in 1H2020 compared to 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 into the 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 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, April 2020 saw the early redemption of USD 1 bn perpetual Eurobonds.
The Group’s risk weighted assets were up 5.6% to RUB 6,093.9 bn in 1H2020.
Hence, the Group’s capital adequacy indicators as at 30 June 2020 were as follows: the Group’s total capital adequacy ratio at 12.6% (compared to 13.1% at year-end 2019 – a drop of 0.5 p.p. for the first 6 months); the Tier 1 capital adequacy ratio at 12.0% (compared to 11.9% at year-end 2019 – up 0.1 p.p. for 1H2020).