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Financial Statements

Gazprombank (Joint Stock Company) (hereinafter, Bank GPB (JSC) or the Bank) published interim financial results prepared in accordance with International Financial Reporting Standards (IFRS) for the nine months of 2017 and as of 30 September 2017.

“The positive dynamics of the Bank’s key performance indicators in 9M 2017 point to successful implementation of the Bank’s strategic goals: maintaining margins, increasing stable banking revenues, raising interest-bearing assets and ramping up borrowed funds with a focus on rolling out the retail business (retail deposits showed the strongest growth). Despite the possibility of traditional growth in provisions and operating expenses in Q4, the Bank expects to report year-end 2017 net income not lower than the 2016 amount and boost its business volumes”, Deputy Chairman of the Management Board, Mr. Alexander Sobol, said. 

Bank GPB (JSC) key financial indicators for 9M2017 / as at 30 September 2017:

  • Net income totaled RUB 32.9 bn compared to RUB 17.0 bn for 9M2016.
  • ROE and ROA stood at 8.3% and 0.8%, respectively.
  • Net interest margin comprised 3.1% compared to 3.0% in 9M2016. 
  • Net commission income amounted to RUB 10.9 bn compared to RUB 10.2 bn for 9M2016.
  • Cost of Risk stood at 0.5% compared to 1.1% in 9M2016.
  • Cost-to-income ratio reached 48.7% compared to 41.8% in 9M2016.
  • Assets increased to RUB 5,414.6 bn. (RUB 4,879.2 bn as at year-end 2016). 
  • The total loan portfolio amounted to RUB 3,651.4 bn compared to RUB 3,503.9 bn as at year-end 2016.
  • The share of non-performing loans (NPL) (overdue 90+ days and defaulted loans) in the total loan portfolio increased to 3.5% as at 30 September 2017 compared to 3.0% as at year-end 2016. 
  • The provisioning ratio decreased from 7.3% to 5.8% in 9M2017.
  • Customer accounts amounted to RUB 3,639.7 bn as at 30 September 2017 compared to RUB 3,330.8 bn as at year-end 2016, while the loans-to-deposit ratio stood at 100.3% as at 30 September 2017.
  • Basel I total capital increased to RUB 703.4 bn as at 30 September 2017, the total capital adequacy ratio stood at 14.4%, the Tier-1 capital adequacy ratio amounted to 11.0%.

The key financial indicators are presented below:
RUB, bn

30 September  2017

31 December 2016

% change

Assets 5,414.6   4,879.2   +11.0%
Shareholders’ equity 573.0   494.5   +15.9%
Cash and cash equivalents 735.9   473.5   +55.4%
Loans to corporate customers[1] 3,295.9   3,174.8   +3.8%
Retail loans [1] 355.5   329.1   +8.0%
Securities [2] 628.5   589.1   +6.7%
Corporate customer accounts 2,843.9   2,652.5   +7.2%
Retail customer accounts 795.8   678.3   +17.3%
Capital borrowings [3] 318.5   317.3   +0.4%
Subordinated debt 179.6   182.8   -1.8%
9M2017 9M2016 Change
Net income 32.9   17.0   +93.5%
Comprehensive income 33.7   0.3   +11 935.7%
30 September  2017/ 9M 2017 31 December2016 / 12 months 2016 Change
Total Capital Adequacy Ratio [4] 14.4% 13.5% +0.9 p.p.
Tier 1 Capital Adequacy Ratio 11.0% 10.0% +1.0 p.p.
Non-performing loans [5] (NPL), % of gross loans 3.5% 3.0% +0.5 p.p.
Allowance for impairment to gross loans to customers ratio 5.8% 7.3% -1.5 p.p.
Loans-to-deposit ratio[1] 100.3% 105.2% -4.9 p.p.
ROE 8.3% 5.6% +2.7 p.p.
ROA 0.8% 0.6% +0.2 p.p.
Net Interest Margin [6] 3.1% 3.0% +0.1 p.p.
Cost of risk [7] 0.5% 0.1% +0.4 p.p.
Cost-to-income ratio[8] 48.7% 46.5% +2.2 p.p.


1.Before allowance for impairment
2. Including trading securities, investments available for sale, investments  in associates and investments held to maturity
3. Including debt securities issued and syndicated loans
4. In accordance with Basel  I Framework
5. Defined as loans overdue over 90 days or facilities of defaulted borrowers
6. Net interest income to chronological mean of quarter-end interest earning asset for the year. Interest-earning assets include due from credit institutions, loans to customers and debt securities (all before allowances for impairment)
7. Impairment allowance charges to chronological mean of quarter-end interest earning asset for the year
8. Operating expenses include salaries and administrative expenses. Operating income includes net interest income, non-interest income and non-banking operating profits.


Financial results

For the 9 months of 2017 the Group recorded net income of RUB 32.9 bn. Total comprehensive income, including revaluation of non-trading investments and exchange differences on translation of the Group’s foreign operations, accounted for RUB 33.7 bn. By comparison, in the 9 months of 2016 net income and net comprehensive income amounted to RUB 17.0 bn and RUB 0.3 bn, respectively. The Group’s ROE stood at 8.3%, up by 2.7 p.p. from the same indicator as at year-end 2016. ROA amounted to 0.8%, up by 0.2 p.p. from year-end 2016.   

The Group’s net interest income for the first 9 months of 2017 totaled RUB 97.8 bn, up by 6.8% compared to RUB 91.6 bn a year earlier, meanwhile both components of the net interest income decreased: interest income fell by 5.0% to RUB 274.1 bn, and interest expenses dropped by 10.5% to RUB 176.3 bn. The net interest margin in 9M2017 reached 3.1%, up by 0.1 p.p. from the same indicator in 2016.

The provision charge for 9M2017 amounted to RUB 14.5 bn compared to RUB 34.7 bn for 9M2016. The Group’s cost of risk in 9M2017 totaled 0.5% compared to 1.1% in 9M2016.

The Group’s recurring core banking income, including net interest income before impairment of interest earning assets and net commission income, totaled RUB 108.6 bn for 9M2017 compared to RUB 101.8 bn for 9M2016, the growth was due mainly to interest as well as commission income. 
The share of core earnings in the Group’s operating income reached 97.3%, up by 15.7 p.p. in 9M2016.

Income from operations with securities  [9] totaled RUB 8.2 bn for 9M2017 compared to RUB 26.8 bn for 9M2016. 3Q 2016 reflected one-off gain from the sale of investments. At the same time, in 2017 due to the sale of a number of the Group’s investments the income from operations with securities reduced. 

Non-banking segments recorded an operating profit of RUB 1.4 bn for 9M2017 compared to operating losses of RUB 2 bn in 9M2016.

The abovementioned developments were factored into the Group’s operating income (before allowance for impairment of interest earning assets) of RUB 111.6 bn for 9M2017, down by 10.6% from 9M2016.

Operating expenses in 9M2017 reached RUB 54.4 bn compared to RUB 52.2 bn for 9M2016. At the same time, the cost-to-income ratio increased in 9M2017 by 6.9 p.p. to 48.7% compared to 9M2016. The change in this ratio was +2.2 p.p. from year-end 2016. 

Business volumes and assets quality

The Group’s total assets amounted to RUB 5,414.6 bn as at 30 September 2017, up by 11% from RUB 4,879.2 bn as at year-end 2016. 

Cash and cash equivalents amounted to RUB 735.9 bn as at 30 September 2017 compared to RUB 473.5 bn at year-end 2016. 

Loan book before provision for impairment as at 30 September  2017 stood at RUB 3,651.4 bn i.e. by 4.2% exceeding the same indicator as at year-end 2016 (RUB 3,503.9  bn). 

Loan book contributed 63.5% to the Group’s total assets, down by 3.1 p.p. from year-end 2016. At the same time, the Group’s corporate loans were at RUB 3,295.9 bn as at 30 September 2017, exceeding the same indicator by 3.8% as at year-end 2016 (RUB 3,174.8 bn), while retail book amounted to RUB 355.5 bn as at 30 September 2017, up by 8.0% from the year-start, accounting for 9.7% of the gross loan book (compared to 9.4% as at year-end 2016).

The share of non-performing loans (NPLs [10]) in the gross loan book reached 3.5% as at 30 September 2017 compared to 3.0% at year-end 2016. 

The provisioning ratio (the ratio of loan loss reserves to the loan book) comprised 5.8% as at 30 September 2017, down by 1.5 p.p. from 7.3% as at year-end 2016. The lower provisions resulted from the inclusion of a number of impaired assets in the non-performing loans (NPL) and their further write-off in the reporting period. At the same time, the loan loss provisions are 1.7 times higher than the non-performing debt (provisioning coverage was 2.5 times as at year end 2016).

The Group’s securities portfolio in 9M2017 expanded by 6.7% to RUB 628.5 bn compared to RUB 589.1 bn as at year-end 2016. The share of securities in the Group’s assets stood at 11.6% as of the reporting date compared to 12.1% at year-end 2016. The structure of the Group’s securities portfolio is characterized by the prevalence of fixed income instruments representing investments in Russian government debt instruments, bonds and promissory notes of Russian issuers, their share amounted to 80.6% as at 30 September 2017 compared to 79.2% as at year-end 2016.

Corporate and retail deposits also continued to grow; they amounted to RUB 3,639.7 bn as at 30 September 2017, up by 9.3% from RUB 3,330.8 bn as at year-end 2016. In particular, the volume of corporate deposits stood at RUB 2,843.9 bn as at 30 September 2017, up by 7.2% on the year-start. Retail deposits and accounts increased by 17.3% in 9M2017 to RUB 795.8 bn from RUB 678.3 bn at year-end 2016. The share of customer deposits in the Group’s liabilities stood at 75.2% as at 30 September 2017 compared to 76.0% at year-end 2016.

Borrowings from debt capital markets, including Eurobonds and local bonds, stood at RUB 318.5 bn as at 30 September 2017 compared to RUB 317.3 bn at year-end 2016. A CNY 1 bn Eurobonds, issued in 2014, and Eurobonds issued in 2012 with the total nominal value of USD 1,000 mln were redeemed, while RUB 49.2 bn bonds were placed. The share of borrowings on debt capital markets in the resource base declined in 9M2017 from 7.2% to 6.6% on the back of lower borrowings and increased customer funds.

As at 30 September 2017, borrowings from the Bank of Russia amounted to RUB 92.1 bn, i.e. 3.6% down from the same indicator of RUB 95.5 bn as at 31 December 2016. The share of borrowings from the Bank of Russian in Group liabilities as at 30 September 2017 totaled 1.9% compared to 2.2% at year-end 2016.


Capital adequacy 
The Group’s Basel I total capital based on consolidated IFRS financials amounted to RUB 703.5 bn as at 30 September 2017 compared to RUB 620.4 bn at year-end 2016. The capital growth was mainly due to the additional issue of the Bank’s ordinary shares (the effect of RUB 60 bn) and also due increased retained earnings. The Group’s risk weighted assets increased by 6.8% in 9M2017. As a result, the Group’s total capital adequacy ratio increased to 14.4% (13.5% at year-end 2016), while the Tier 1 capital adequacy ratio amounted to 11.0% (10.0% at year-end 2016).

______

[9] Includes both realized gains from securities, change of investment value and net derivative results, as well as expense from operations involving financial liabilities designated as at fair value, changes in which are reflected through profit or loss for the period upon initial recognition 
[10] Outstanding loans, failure to pay principle or interest on a loan for a period of 90 days or more, or for which default has been declared

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