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Gazprombank Group publishes condensed consolidated IFRS financial statements for 9M2016

Moscow, November, 29 Gazprombank (Joint-stock Company) issued condensed consolidated IFRS financial statements for the nine months of 2016. Key financial indicators of the Gazprombank Group (the “Group”) are presented below.
billions of Roubles
30.09.2016 31.12.2015 Change
Total assets 4 928.2  5 122.2-3.8%
Equity 496.1530.4-6.5%
Cash and cash equivalents 590.2633.5-6.8%
Corporate loans [1] 3 063.13 198.0-4.2%
Retail loans [1] 326.8314.4+3.9%
Securities [2] 620.9707.9-12.3%
Corporate deposits 2 511.32 623.0-4.3%
Retail deposits 663.5658.7+0.7%
Borrowings in the capital markets [3] 399.9475.3-15.9%
Subordinated debts 188.5207.7-9.2%
9M2016 9M2015 Change 2016 / 2015
Net profit /(loss) 17.0 (31.1) -
Comprehensive income /(loss) 0.3 (16.2) -
30.09.2016 / 9M2016 31.12.2015 / 12M2015 Change
Total capital adequacy [4] 13.6% 14.2% -0.6 p.p.
Tier I capital adequacy [4] 10.0% 10.2% -0.2 p.p.
Non-performing loans [5] to gross loans to customers 3.0% 2.0% +1.0 p.p.
Allowance for impairment to gross loans to customers 8.4% 8.9% -0.5 p.p.
Loans [1] to deposits ratio 106.8% 107.0% -0.2 p.p.
Net interest margin [6] 3.0% 2.5% +0.5 p.p.
Cost of risk [7] 1.1% 3.7% -2.6 p.p.
Cost to income ratio [8] 41.8% 41.8% -

[1]  gross amounts (before allowance for impairment)
[2]  includes trading securities, investments available-for-sale, investments in associates and investments held-to-maturity
[3]  includes issued bonds and syndicated loans
[4]  according to Basel I Framework
[5]  loans are regarded as “non-performing” if the loan has been in default as to payment of principal or interest for 90 days or more
[6]  calculated as net interest income for the reporting period over the chronological average of the balances of interest earning assets as at the end of each three-month period included in the reporting period. Interest-earning assets include due from credit institutions, loans to customers and debt securities (all – before allowances for impairment)
[7]  calculated as impairment of interest earning assets for the reporting period over the chronological average of the balances of interest earning assets as at the end of each three-month period included in the reporting period
[8]  operating expenses include banking salaries, employment benefits and administrative expenses. Operating income includes net interest income, non-interest income and non-banking operating profits

Operating results 

In 9M2016, the Group has posted net profit in the amount of RUB 17.0bn and comprehensive income in the amount of RUB 0.3bn (additionally includes revaluation of available-for-sale investments and exchange differences on translation of foreign operations). The main driver of the net profit remains net interest income, which has posted a growth compared to the previous year.

In 9M2016, interest income amounted to RUB 288.5bn, 5.1% higher than in 9M2015. At the same time, interest expense decreased by 4.5% vs. 9M2015 and amounted to RUB 196.9bn. As a result, net interest income of the Group amounted to RUB 91.6bn, increasing by 34.0% vs. 9M2015.

Growth of net interest income resulted in a further increase of net interest margin, which  amounted to 3.0% in 9M2016, 0.5 p.p. higher than net interest margin for the whole 2015 and 0.1 p.p. higher than net interest margin for 1H2016.

Core banking business income, including net interest income and net fee income, amounted to RUB 101.8bn increasing by 26.0% vs. 9M2015. The share of core banking business income in the Group’s operating income amounted to 81.6%, 17.4 p.p. higher as compared to 9M2015, which was mostly driven by an increase of interest income as well as lower share of volatile income from trading and investments.

In 2016, the Group has lowered rate of impairment charges vs. its peak in 2015. In 9M2016, impairment charges amounted to RUB 34.7bn vs. RUB 110.6bn in 9M2015. As a result, the cost of risk amounted to 1.1% in 9M2016, which is 2.6 p.p. lower than the same ratio for 9M2015.

In 9M2016, the Group has posted gain from securities portfolio[9] in the amount of RUB 26.8bn, 29.2% lower than in 9M2015 due to the lower growth dynamic in income from investments.

Overall, in 9M2016 the Group’s operating income (before allowance for impairment of interest earning assets) did not change vs. the same period of 2015 and amounted to RUB 124.8bn.

Operating expense amounted to RUB 52.2bn, 9.6% higher than in the same period of 2015. At the same time, cost to income ratio amounted to 41.8% in 9M2016, remaining flat as compared to the whole 2015.

Volume of business

The Group’s total assets remained almost flat. They amounted to RUB 4 928.2bn, decreasing by 3.8% vs. the end of 2015. The main driver was Rouble appreciation against USD and Euro during 9M2016, which has impacted Rouble valuation of assets denominated in foreign currencies. 

Gross loans[10] have decreased by 3.5% since the end of 2015. Share of net loansin the total assets increased by 0.5 p.p. to 63.0%. Gross corporate loans amounted to 90% of the loan book, they decreased by 4.2% in 9M2016 and amounted to RUB 3 063.1bn. On the other hand, gross retail loans increased by 3.9% to RUB 326.8bn as at 30.09.2016.

Securities portfolio decreased by 12.3% in 9M2016 and amounted to RUB 620.9bn as at 30.09.2016. The decrease of the securities portfolio was mostly attributable to the sale of investments as well as maturity of certain securities in HTM and trading portfolios. The share of securities portfolio in the Group’s total assets amounted to 12.6%, having decreased by 1.2 p.p. since the end of 2015. The portfolio is comprised mostly of fixed income instruments (80.7% of total portfolio). 

The Group has comfortable liquidity position, including immediately available cash and equivalents, to meet customer claims. Cash and cash equivalents amounted to RUB 590.2bn as at 30.09.2016 vs. RUB 633.5bn as at the end of 2015. 

Corporate and retail funds remained the principal source of the Group’s funding. By the end of 9M2016 they amounted to RUB 3 174.9bn decreasing by 3.3% vs. the end of 2015. Overall, the share of customer deposits amounted to 71.7% of the Group’s total liabilities, remaining unchanged as compared to the end of 2015. At the same time, even though affected by   devaluation of foreign currency funds, retail deposits increased by 0.7% and amounted to RUB 663.6bn. 

In 9M2016, borrowings in debt capital markets, including eurobonds, domestic bonds and syndicated loans, decreased by 15.9% to RUB 399.9bn as at 30.09.2016. In 9M2016 the Group timely repaid CHY 500bn, USD 120mn, RUB 20bn Eurobonds and rouble domestic bonds in the total amount of RUB 30bn and, at the same time, the Group has issued RUB 35bn of domestic bonds. As a result, the share of borrowings in the capital markets decreased by 30.09.2016 to 9.0% of the Group’s liabilities. 

As at 30.09.2016, borrowings from the CBR with loans pledged as collateral amounted to RUB 91.5bn. The CBR funding decreased by 24.3% since the end of 2015, and its share amounted to 2.1% of the Group’s total liabilities.

Asset quality 

The share of non-performing loans (overdue 90+ days and defaulted loans) amounted to 3.0% of gross loans as at 30.09.2016 vs. 2.0% as at the end of 2015. Allowance for impairment covered non-performing loans by 2.8 times. The loan loss provisions as a share of the gross loans decreased by 0.5 p.p. since the end of 2015 and amounted to 8.4% as at 30.09.2016.

Capital adequacy

As at 30.09.2016, the Group’s total capital calculated in accordance with the requirements of Basel I and based on consolidated IFRS statements amounted to RUB 626.7bn, decreasing vs. the end of 2015 by 9.1%. The decrease was attributable to revaluation of foreign currency denominated capital instruments and dividends distributed to preference shareholders.

At the same time, risk weighted assets were decreasing at a slower rate, by 5.0% in 9M2016. This resulted in a modest decrease in capital adequacy ratios: as at 30.09.2016, Tier 1 capital adequacy ratio amounted to 10.0% as compared to 10.2% as at 31.12.2015, total capital adequacy ratio amounted to 13.6% as compared to 14.2% as at the end of 2015. 

“In the nine months of 2016 Gazprombank Group has showed steady dynamics of the core banking revenues, namely interest income, while keeping operating expenses under control. Despite stabilization of a cost of risk ratio over the first three quarters of 2016, when it comes to the results of 2016, changing macroeconomic situation in Russia may cause some impairment of certain non-banking assets”, Deputy Chairman of the Management Board Mr. Alexander Sobol said.


[9]  includes realised and unrealised gain from securities, change of investment value and net derivatives results.
[10] before allowance for impairment of interest earning assets

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