Gazprombank releases financial results for 1Q2019 in accordance with International Financial Reporting Standards (IFRS), with net income at RUB 13.5 bn
Moscow, May, 30, 2019 - Gazprombank (Joint Stock Company) (hereinafter, Bank GPB (JSC) or the Bank) has published consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) for the first quarter of 2019 and as at 31 March 2019.
“In the first quarter of 2019 the Bank retained its main positions it reached in 2018, including moderate risk appetite, with its return on assets improved and retail business volume further increasing”, Deputy Chairman of the Management Board, Mr. Alexander Sobol, said.
Bank GPB (JSC) key financial indicators for 1Q2019/ as at 31 March 2019:
The key financial indicators are presented below:
[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 earning assets for the year. Interest-bearing assets include time deposits in financial institutions, loans to customers and debt securities (all before allowances for 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
In 1Q2019, the Group recorded net income of RUB 13.5 bn. Its total comprehensive income, including foreign exchange gain/loss on the Group’s foreign investments, stood at RUB 9.6 bn. By comparison, in 1Q2018, the Group's net income and net comprehensive income amounted to RUB 14.9 bn and RUB 15.9 bn, respectively. The Group’s ROE increased in 1Q2019 by 1.3 p.p. to 8.1% against 2018. ROA in 1Q2019 reached 0.8% − up by 0.2 p.p. compared to 0.6% in 2018.
The Group’s net interest income in 1Q2019 grew by 13.6% to RUB 35.7 bn compared to RUB 31.4 bn in 1Q2018, with interest income up by 15.7% to RUB 102.4 bn, and interest expenses up by 16.8% to RUB 66.7 bn. The net interest margin in 1Q2019 was 2.8% − up by 0.1 p.p. against 1Q2018, remaining unchanged compared to 2018 as a whole.
The Group’s recurring core banking income, including net interest income before loan loss provisions and net commission income increased by 14.4% in 1Q2019 to RUB 40.4 bn compared to RUB 35.3 bn in 1Q2018, with net commission income in 1Q2019 (RUB 4.7 bn) up by 20.5% year-on-year (RUB 3.9 bn).
Combined income from transactions in securities [9] in 1Q2019 totalled RUB 9.2 bn − up by 94.7% compared to RUB 4.7 bn in 1Q2018 mostly due to positive revaluation of investments.
Recurring income accounted for 101.9% in the Group’s operating income in 1Q2019 against 87.7% in 1Q2018, while income from transactions in securities in the operating income was 23.2% − up by 11.5 p.p. against 1Q2018 (11.7%).
Non-banking segments ended 1Q2019 with the operating loss of RUB 4.0 bn compared to the operating profit of RUB 0.5 bn in 1Q2018.
Impacted by the above factors, the Group’s operating income (before loan loss provisions and asset impairment provisions) amounted to RUB 39.7 bn in 1Q2019 compared to RUB 40.3 bn in 1Q2018.
Operating expenses in 1Q2019 reached RUB 25.3 bn against RUB 19.4 bn in 1Q2018. Higher expenses were due to the on-going implementation of projects for technological transformation of business, including retail operations. The cost-to-income ratio increased by 6.1 p.p. compared to the year of 2018 – from 57.5% to 63.6%.
Assets quality
Loan loss provisions totalled RUB 0.7 bn in 1Q2019 compared to the loan loss recovery of RUB 1.2 bn in 1Q2018 due to the repayment of some major loans. The Group’s cost of risk (including profit/loss on loans and receivables accounted at fair value) was -0.5% in 1Q2019 due to the reversal of impairment following the repayment of some loans accounted at fair value, against 0.5% for 2018. Positive fair value adjustment of loans and receivables accounted at fair value totalled RUB 7.7 bn in 1Q2019.
NPLs (non-performing loans) in the gross loan book amounted to 2.6% as at 31 March 2019 – up by 0.2 p.p. compared to year-end 2018. The provisioning ratio (total loan loss allowance to the portfolio of loans accounted at amortized cost) was 5.2% as at 31 March 2019 compared to 5.0% at year-end 2018. At the same time, loan loss allowance as at the reporting date exceeded NPLs 1.9 times, whereas at year-end 2018 – the cover ratio was 2.0.
Business volumes
The Group’s total assets comprised RUB 6,158.7 bn as at 31 March 2019 – down by 5.7% against RUB 6,532.1 bn as at 31 December 2018.
In particular, cash and cash equivalents comprised RUB 887.8 bn as at 31 March 2019 compared to RUB 1,049.3 bn as at 31 December 2018.
The loan book before loan loss provisions was RUB 4,038.9 bn as at 31 March 2019 – down by 4.7% 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 62.3% against 61.8% at year-end 2018.
Corporate loans were down by 5.7% for 1Q2019 to RUB 3,518.3 bn as at 31 March 2019 compared to RUB 3,733.0 bn at year-end 2018. Retail loans comprised RUB 520.2 bn as at 31 March 2019 − up by 2.6% for 1Q2019 compared to RUB 506.9 bn as at 31 December 2018. Retail loans accounted for 12.9% of the gross loan book as at 31 March 2019 due to the growth of retail loan portfolio and the repayment of some corporate loans – exceeding the relevant figure as at 31 December 2018 by 0.9 p.p.
Mortgage loans form the bulk of the Group’s retail loans, accounting for RUB 372.1 bn as at 31 March 2019− up by 2.7% against RUB 362.2 bn as at 31 December 2018. Mortgage loans in the retail loan book were up by 0.1 p.p. for 1Q2019 from 71.4% to 71.5%.
Consumer loans to retail customers grew in 1Q2019 from RUB 138.6 bn to RUB 141.6 bn (up by 2.2%).
The Group’s portfolio of securities and investments in associates amounted to RUB 686.1 bn as at 31 March 2019 – down by 9.1% in 1Q2019 (as at 31 December 2018, securities totalled RUB 754.6 bn.). Securities and investments in associates in the Group’s assets fell by 0.5 p.p. in 1Q2019 to 11.1% as at the reporting date against 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 7.9 p.p. in 1Q2019 from 70.4% to 78.3%, which was mostly due to disposal of the investment in PJSC MegaFon.
Amounts due to financial institutions fell by 22.1% in 1Q2019 to RUB 316.2 bn. (against RUB 405.9 bn at year-end 2018.). Amounts due to financial institutions in liabilities were down in 1Q2019 from 6.9 to 5.8%.
Corporate and retail deposits were down to RUB 4,423.4 bn as at 31 March 2019 against RUB 4,813.5 bn as at 31 December 2018 (overall reduction was 8.1%). At that, corporate deposits were down in the structure of raised funds, with RUB 3,402.3 bn as at 31 March 2019 − down by 11.0% against year-end 2018 (RUB 3,822.7 bn), while private deposits were up by 3.1% to RUB 1,021.1 bn within 1Q2019 against RUB 990.8 bn.
Customer deposits in Group liabilities accounted for 81.3% as at 31 March 2019, remaining actually unchanged in 1Q2019 (against 81.4% at year-end 2018).
Capital market borrowings, including Eurobonds and local bonds were RUB 341.7 bn as at 31 March 2019 compared to RUB 326.6 bn at year-end 2018 (4.6% up for 1Q2019). 1Q2019 saw the repayment of local bonds totalling RUB 5.0 bn issued in 2016; the placement of RUB 10.0 bn local bonds, with maturity in 2023, and those of RUB 5.0 bn to be redeemed in 2024. As a result, capital market borrowings in the resource base were up from 5.5% to 6.3% in 1Q2019.
Capital adequacy
The Group’s Basel I total capital based on consolidated IFRS financials amounted to RUB 771.4 bn as at 31 May 2019 – up by 14.0% for 1Q2019 against RUB 676.4 bn at year-end 2018. In January 2019, the Group obtained financing from the Gazprom Group via a 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 national rules.
The Group’s risk weighted assets were down by 6.4% in 1Q2019.
Hence, the Group’s capital adequacy indicators as at 31 March 2019 were as follows: the Group’s total capital adequacy ratio− at 15.1% (against 12.4% at year-end 2018 − up by 2.7 p.p. for the quarter.); the Tier 1 capital adequacy ratio − at 13.1% (against 10.5% at year-end 2018 – up by 2.6 p.p. for the quarter).
[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 results, loss on transactions with financial liabilities designated as at fair value, where changes are shown in profit or loss from initial recognition, as well as gain from subsidiaries’ disposal.
“In the first quarter of 2019 the Bank retained its main positions it reached in 2018, including moderate risk appetite, with its return on assets improved and retail business volume further increasing”, Deputy Chairman of the Management Board, Mr. Alexander Sobol, said.
Bank GPB (JSC) key financial indicators for 1Q2019/ as at 31 March 2019:
- Net income totaled RUB 13.5 bn compared to RUB 14.9 bn in 1Q2018;
- ROE and ROA stood at 8.1% and 0.8%, respectively, compared to 6.8% and 0.6% in 2018;
- Net interest margin comprised 2.8%, which corresponds to the 2018 indicator;
- Net commission income amounted to RUB 4.7 bn compared to RUB 3.9 bn in 1Q2018;
- Cost of Risk stood at -0.5% with due regard to the adjustment of loans accounted at fair value compared to 0.5% in 2018;
- Cost-to-income ratio reached 63.6% compared to 57.5% in 2018.
- Assets amounted to RUB 6,158.7 bn (against RUB 6,532.1 bn at year-end 2018);
- The total loan portfolio [1] amounted to RUB 4,038.9 bn (against RUB 4,239.9 bn at year-end 2018);
- The share of non-performing loans (NPL) (overdue 90+ days and defaulted loans) in the total loan portfolio was 2.6% compared to 2.4% at year-end 2018;
- The provisioning ratio amounted to 5.2% compared to 5.0% at year-end 2018;
- Customer accounts comprised RUB 4, 423.4 bn compared to RUB 4,813.5 bn at year-end 2018, while the loan-to-deposit ratio was 91.3% as at 31 March 2019 compared to 88.1% at year-end 2018;
- Basel I total capital comprised RUB 771.4 bn compared to RUB 676.4 bn at year-end 2018, the total capital adequacy ratio stood at 15.1% as at the reporting date, the Tier 1 capital adequacy ratio was at 13.1%.
[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:
|
31 March 2019 |
31 December 2018 |
Change | |||
| Loans to corporate customers | 3,518.7 | 3,733.0 | -5.7% | ||
| Retail loans | 520.2 | 506.9 | +2.6% | ||
| Securities and investments in associates [2] | 686.1 | 754.6 | -9.1% | ||
| Corporate customer accounts | 3,402.3 | 3,822.7 | -11.0% | ||
| Retail customer accounts | 1,021.1 | 990.8 | +3.1% | ||
| Capital market borrowings [3] | 341.7 | 326.6 | +4.6% | ||
| Subordinated debt | 130.9 | 136.5 | -4.1% | ||
| 1Q2019 | 1Q2018 | Change | |||
| Net income | 13.5 | 14.9 | -9.4% | ||
| Comprehensive income | 9.6 | 15.9 | -39.5% | ||
| 31 March2019 / 3M 2019 | 31 December 2018 / 2018 | Change | |||
| Total Capital Adequacy Ratio [4] | 15.1% | 12.4% | +2.7 p.p. | ||
| Tier 1 Capital Adequacy Ratio | 13.1% | 10.5% | +2.6 p.p. | ||
| Non-performing loans [5] (NPL) % of gross loans | 2.6% | 2.4% | +0.2 p.p. | ||
| Allowance for impairment to gross loans accounted at amortized cost | 5.2% | 5.0% | +0.2 p.p. | ||
| Loans-to-deposit ratio | 91.3% | 88.1% | +3.2 p.p. | ||
| ROE | 8.1% | 6.8% | +1.3 p.p. | ||
| ROA | 0.8% | 0.6% | +0.2 p.p. | ||
| Net Interest Margin [6] | 2.8% | 2.8% | - | ||
| Cost of risk [7] | -0.5% | 0.5% | n/a | ||
| Cost to income ratio [8] | 63.6% | 57.5% | +6.1 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 earning assets for the year. Interest-bearing assets include time deposits in financial institutions, loans to customers and debt securities (all before allowances for 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
In 1Q2019, the Group recorded net income of RUB 13.5 bn. Its total comprehensive income, including foreign exchange gain/loss on the Group’s foreign investments, stood at RUB 9.6 bn. By comparison, in 1Q2018, the Group's net income and net comprehensive income amounted to RUB 14.9 bn and RUB 15.9 bn, respectively. The Group’s ROE increased in 1Q2019 by 1.3 p.p. to 8.1% against 2018. ROA in 1Q2019 reached 0.8% − up by 0.2 p.p. compared to 0.6% in 2018.
The Group’s net interest income in 1Q2019 grew by 13.6% to RUB 35.7 bn compared to RUB 31.4 bn in 1Q2018, with interest income up by 15.7% to RUB 102.4 bn, and interest expenses up by 16.8% to RUB 66.7 bn. The net interest margin in 1Q2019 was 2.8% − up by 0.1 p.p. against 1Q2018, remaining unchanged compared to 2018 as a whole.
The Group’s recurring core banking income, including net interest income before loan loss provisions and net commission income increased by 14.4% in 1Q2019 to RUB 40.4 bn compared to RUB 35.3 bn in 1Q2018, with net commission income in 1Q2019 (RUB 4.7 bn) up by 20.5% year-on-year (RUB 3.9 bn).
Combined income from transactions in securities [9] in 1Q2019 totalled RUB 9.2 bn − up by 94.7% compared to RUB 4.7 bn in 1Q2018 mostly due to positive revaluation of investments.
Recurring income accounted for 101.9% in the Group’s operating income in 1Q2019 against 87.7% in 1Q2018, while income from transactions in securities in the operating income was 23.2% − up by 11.5 p.p. against 1Q2018 (11.7%).
Non-banking segments ended 1Q2019 with the operating loss of RUB 4.0 bn compared to the operating profit of RUB 0.5 bn in 1Q2018.
Impacted by the above factors, the Group’s operating income (before loan loss provisions and asset impairment provisions) amounted to RUB 39.7 bn in 1Q2019 compared to RUB 40.3 bn in 1Q2018.
Operating expenses in 1Q2019 reached RUB 25.3 bn against RUB 19.4 bn in 1Q2018. Higher expenses were due to the on-going implementation of projects for technological transformation of business, including retail operations. The cost-to-income ratio increased by 6.1 p.p. compared to the year of 2018 – from 57.5% to 63.6%.
Assets quality
Loan loss provisions totalled RUB 0.7 bn in 1Q2019 compared to the loan loss recovery of RUB 1.2 bn in 1Q2018 due to the repayment of some major loans. The Group’s cost of risk (including profit/loss on loans and receivables accounted at fair value) was -0.5% in 1Q2019 due to the reversal of impairment following the repayment of some loans accounted at fair value, against 0.5% for 2018. Positive fair value adjustment of loans and receivables accounted at fair value totalled RUB 7.7 bn in 1Q2019.
NPLs (non-performing loans) in the gross loan book amounted to 2.6% as at 31 March 2019 – up by 0.2 p.p. compared to year-end 2018. The provisioning ratio (total loan loss allowance to the portfolio of loans accounted at amortized cost) was 5.2% as at 31 March 2019 compared to 5.0% at year-end 2018. At the same time, loan loss allowance as at the reporting date exceeded NPLs 1.9 times, whereas at year-end 2018 – the cover ratio was 2.0.
Business volumes
The Group’s total assets comprised RUB 6,158.7 bn as at 31 March 2019 – down by 5.7% against RUB 6,532.1 bn as at 31 December 2018.
In particular, cash and cash equivalents comprised RUB 887.8 bn as at 31 March 2019 compared to RUB 1,049.3 bn as at 31 December 2018.
The loan book before loan loss provisions was RUB 4,038.9 bn as at 31 March 2019 – down by 4.7% 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 62.3% against 61.8% at year-end 2018.
Corporate loans were down by 5.7% for 1Q2019 to RUB 3,518.3 bn as at 31 March 2019 compared to RUB 3,733.0 bn at year-end 2018. Retail loans comprised RUB 520.2 bn as at 31 March 2019 − up by 2.6% for 1Q2019 compared to RUB 506.9 bn as at 31 December 2018. Retail loans accounted for 12.9% of the gross loan book as at 31 March 2019 due to the growth of retail loan portfolio and the repayment of some corporate loans – exceeding the relevant figure as at 31 December 2018 by 0.9 p.p.
Mortgage loans form the bulk of the Group’s retail loans, accounting for RUB 372.1 bn as at 31 March 2019− up by 2.7% against RUB 362.2 bn as at 31 December 2018. Mortgage loans in the retail loan book were up by 0.1 p.p. for 1Q2019 from 71.4% to 71.5%.
Consumer loans to retail customers grew in 1Q2019 from RUB 138.6 bn to RUB 141.6 bn (up by 2.2%).
The Group’s portfolio of securities and investments in associates amounted to RUB 686.1 bn as at 31 March 2019 – down by 9.1% in 1Q2019 (as at 31 December 2018, securities totalled RUB 754.6 bn.). Securities and investments in associates in the Group’s assets fell by 0.5 p.p. in 1Q2019 to 11.1% as at the reporting date against 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 7.9 p.p. in 1Q2019 from 70.4% to 78.3%, which was mostly due to disposal of the investment in PJSC MegaFon.
Amounts due to financial institutions fell by 22.1% in 1Q2019 to RUB 316.2 bn. (against RUB 405.9 bn at year-end 2018.). Amounts due to financial institutions in liabilities were down in 1Q2019 from 6.9 to 5.8%.
Corporate and retail deposits were down to RUB 4,423.4 bn as at 31 March 2019 against RUB 4,813.5 bn as at 31 December 2018 (overall reduction was 8.1%). At that, corporate deposits were down in the structure of raised funds, with RUB 3,402.3 bn as at 31 March 2019 − down by 11.0% against year-end 2018 (RUB 3,822.7 bn), while private deposits were up by 3.1% to RUB 1,021.1 bn within 1Q2019 against RUB 990.8 bn.
Customer deposits in Group liabilities accounted for 81.3% as at 31 March 2019, remaining actually unchanged in 1Q2019 (against 81.4% at year-end 2018).
Capital market borrowings, including Eurobonds and local bonds were RUB 341.7 bn as at 31 March 2019 compared to RUB 326.6 bn at year-end 2018 (4.6% up for 1Q2019). 1Q2019 saw the repayment of local bonds totalling RUB 5.0 bn issued in 2016; the placement of RUB 10.0 bn local bonds, with maturity in 2023, and those of RUB 5.0 bn to be redeemed in 2024. As a result, capital market borrowings in the resource base were up from 5.5% to 6.3% in 1Q2019.
Capital adequacy
The Group’s Basel I total capital based on consolidated IFRS financials amounted to RUB 771.4 bn as at 31 May 2019 – up by 14.0% for 1Q2019 against RUB 676.4 bn at year-end 2018. In January 2019, the Group obtained financing from the Gazprom Group via a 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 national rules.
The Group’s risk weighted assets were down by 6.4% in 1Q2019.
Hence, the Group’s capital adequacy indicators as at 31 March 2019 were as follows: the Group’s total capital adequacy ratio− at 15.1% (against 12.4% at year-end 2018 − up by 2.7 p.p. for the quarter.); the Tier 1 capital adequacy ratio − at 13.1% (against 10.5% at year-end 2018 – up by 2.6 p.p. for the quarter).
[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 results, loss on transactions with financial liabilities designated as at fair value, where changes are shown in profit or loss from initial recognition, as well as gain from subsidiaries’ disposal.
