Moscow, May, 30, 2018 - Gazprombank (Joint Stock Company) (hereinafter, Bank GPB (JSC) or the Bank) has published its consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) for the first quarter of 2018 and as at 31 March 2018.
“ The Bank yields consistent results in all business lines due to conservative risk appetite which makes it possible to predict achievement of planned annual financial result in the range of RUB 35 - 40 bn. Key Bank development projects are those aimed in IT-modernization of business, primarily retail.”, Deputy Chairman of the Management Board of Bank GPB (JSC), Mr. Alexander Sobol, said.
Bank GPB (JSC) key financial indicators for 1Q2018 /as at 31 March 2018[1]:
Net income totalled RUB 14.9 bn compared to RUB 7.3bn in 1Q2017;
ROE and ROA stood at 10.6% and 1.0%, respectively, compared to 6.2% and 0.6% for 2017;
Net interest margin comprised 2.7% against 3.1% in 2017;
Net commission income amounted to RUB 3.9 bn compared to RUB 2.9 bn in 1Q2017;
Cost of Risk stood at -0.1% compared to 0.6% in 2017;
The cost-to-income ratio reached 51.9% compared to 49.5% in 2017.
Assets stood at RUB 6,144.4 bn (RUB 5,509.9 bn as at 01 January 2018);
The total loan portfolio[2] amounted to RUB 3,752.9 bn (RUB 3,745.7 bn as at 01 January 2018);
The share of non-performing loans (NPL) (overdue 90+ days or defaulted loans) in the total loan portfolio amounted to 2.4% compared to 2.5% as at 01 January 2018;
The loan loss provision ratio stood at 5.3% both as at 31 March 2018 and as at 01 January 2018;
Customer accounts totalled RUB 4, 443.3 bn as at 31 March 2018 compared to RUB 3,915.4 bn as at 01 January 2018, the loan-to-deposit ratio declined from 95.7% to 84.5% in the first quarter;
Basel I total capital reached RUB 683.2 bn as at 31 March 2018 compared to RUB 665.6 bn as at 01 January 2018, the capital adequacy ratio stood at 13.4%, the Tier-1 capital ratio – at 10.5% as of the reporting date.
The key financial indicators are presented below:
RUB, bn
|
31 March 2018 |
01 January 2018 |
Change |
|
|
Assets |
6,144.4 |
5,509.9 |
+11.5% |
|
Shareholders’ equity |
570.4 |
552.6 |
+3.2% |
|
Cash and cash equivalents |
1,238.2 |
649.0 |
+90.8% |
|
Loans to corporate customers [3] |
3,341.9 |
3,356.6 |
-0.4% |
|
Retail loans[3] |
411.0 |
389.1 |
+5.6% |
|
Securities [4] |
633.5 |
672.8 |
-5.8% |
|
Corporate customer accounts |
3,612.9 |
3,072.6 |
+17.6% |
|
Retail customer accounts |
830.5 |
842.9 |
-1.5% |
|
Capital borrowings[5] |
361.0 |
339.6 |
+6.3% |
|
Subordinated debt |
165.2 |
164.5 |
+0.4% |
|
|
1Q2018 |
1Q2017 |
Change |
|
Net income |
14.9 |
7.3 |
+102.8% |
|
Comprehensive income |
15.9 |
6.4 |
+146.4% |
|
31 March 2018 / |
01 January 2018 |
31 December 2017 / |
Change |
|
|
Total Capital Adequacy Ratio[6] |
13.4% |
12.6% |
|
+0.8 p.p. |
|
Tier 1 Capital Adequacy Ratio |
10.5% |
9.8% |
+0.7 p.p. |
|
|
Non-performing loans [7] (NPL) % to gross loans |
2.4% |
2.5% |
-0.1 p.p. |
|
|
Allowance for credit losses to gross loans to customers ratio |
5.3% |
5.3% |
- |
|
|
Loans-to-deposits ratio |
84.5% |
95.7% |
-11.2 p.p. |
|
|
Group’s ROE |
10.6% |
|
6.2% |
+4.4 p.p. |
|
Group’s ROA |
1.0% |
|
0.6% |
+0.4 p.p. |
|
Net Interest Margin[8] |
2.7% |
|
3.1% |
-0.4 p.p. |
|
Cost of risk [9] |
-0.1% |
|
0.6% |
-0.7 p.p. |
|
Cost-to-income ratio[10] |
51.9% |
49.5% |
+2.4 p.p. |
* Without adjustments as per IFRS 9 and IFRS 15
Financial results
In 1Q2018, the Group recorded net income of RUB 14.9 bn. Total comprehensive income, including currency translation differences of the Group’s foreign operations accounted for RUB 15.9 bn. By comparison, in 1Q2017, the Group’s net income and net comprehensive income amounted to RUB 7.3 bn and RUB 6.4 bn, respectively. The Group’s ROE increased in 1Q2018 by 4.4 p.p. to 10.6% due to both higher generated income and a negative accounting effect on capital from transition to IFRS 9. ROA in 1Q2018 reached 1.0% compared to 0.6% at year-end 2017.
The Group’s net interest income in 1Q2018 increased by 8.0% and totalled RUB 31.4 bn compared to RUB 29.1 bn year-on-year, with interest income lowered by 0.6% to RUB 88.5 bn and interest expenses down by 4.8% to RUB 57.1 bn. The net interest margin in 1Q2018 comprised 2.7% and was down 0.1 p.p. compared to 2.8% in 1Q2017, or 0.4 p.p. compared to 3.1% in 2017. Net interest margin was affected by large amount of short-term corporate customers funds raised and put into interest-bearing assets at the end of the reporting period.
The Group’s recurring core banking income, including net interest income before impairment of interest earning assets and net commission income, increased in 1Q2018 by 10.3% and totaled RUB 35.3 bn compared to RUB 32.0 bn in 1Q2017, with net commission income in 1Q2018 (RUB 3.9 bn) 34.2% higher year-on-year (RUB 2.9 bn).
Income from operations with securities [11] in 1Q2018 totalled RUB 4.7 bn increased by 49.1% compared to RUB 3.2 bn year-on-year.
The recurring income reached 94.3% in the Group’s operating income structure (102.6% in 1Q2017), the share of income from operations with securities increased by 2.4 p.p. and reached 12.6%.
Non-banking segments recorded an operating profit of RUB 0.5 bn in 1Q2018, compared to RUB 0.9 bn in 1Q2017.
The abovementioned developments were factored into the Group’s operating income (before allowance for credit losses and allowance for impairment) of RUB 37.4 bn in 1Q2018 against RUB 31.2 bn year-on-year (up 19.9%).
Operating expenses in 1Q2018 reached RUB 19.4 bn compared to RUB 16.9 bn in 1Q2017. Higher expenses were due to the launch of some projects in retail banking and other business segments aimed in business development and performance improvement. The cost-to-income ratio (CIR) reached 51.9% in 1Q2018 increased by 2.4 p.p. compared to 49.5% in 2017 and decreased by 2.2 p.p. compared to 54.1% in 1Q2017.
Assets quality
In 1Q2018, the repayment of some large loans made it possible to recover allowance for credit losses of RUB 1.2 bn. By comparison, in 1Q2017 allowance for credit losses amounted to RUB 4.1 bn. The Group’s cost of risk – allowance for credit losses created (recovered) in the period to the average amount of interest bearing assets – was -0.1% in 1Q2018 (down against 0.6% at year-end 2017). At the same time the negative fair value adjustment of the loans accounted at fair value in 1Q2018 amounted to RUB 2.9 bn, which was mostly due to market changes, affected the loans valuation models, and not to loan credit quality.
The share of NPL (non-performing loans) in the gross loan book remained stable in 1Q2018 at 2.4% as at 31 March 2018 compared to 2.5% as at 01 January 2018. The loan loss provision rate (total loan loss provisions to the loan book) was also stable in 1Q2018 and stood at 5.3%.
The loan loss provisions exceeded NPLs 2.1 times (the coverage ratio as at 01 January 2018 stood at 2.0).
Business volumes
The Group’s total assets as at 31 March 2018 reached RUB 6,144.4 bn, up 11.5% against RUB 5,509.9 bn as at 01 January 2018.
In particular, cash and cash equivalents accounted for RUB 1,238.2 bn as at 31 March 2018 compared to RUB 649.0 bn as at 01 January 2018. The increase in this item as of the reporting date is due to the large corporate customers’ short-term funds raising and consequent investing to the high-liquid assets.
The gross loan book as at 31 March 2018 stood at RUB 3,752.8 bn – close to that of RUB 3,745.7 bn as at 01 January 2018. The loan book contributed 58.0% to the Group’s total assets compared to 64.5% as at the beginning of the year.
Corporate loans changed insignificantly from the start of the year, reaching RUB 3,341.9 bn as at 31 March 2018 compared to RUB 3,356.6 bn as at 01 January 2018, while the retail book was up 5.6% in 1Q2018 to RUB 411.0 bn compared to RUB 389.1 bn as at 01 January 2018, with its share in the gross loan book up by 0.6 p.p. to 11.0%.
The Group’s securities portfolio declined by 5.8% in 1Q2018 to RUB 633.5 bn. The share of securities in the Group’s assets was down by 1.9 p.p. to 10.3% as of the reporting date compared to 12.2% as at the beginning of the year. The structure of the Group’s securities portfolio traditionally consists mostly of fixed income instruments invested in Russian government debt instruments, bonds and promissory notes of Russian issuers. However, the share of debt securities has been gradually declining – it was down by 2.8 p.p. to 70.3% in 1Q2018 compared to 73.1% as at the beginning of 2018, with the proportion of equity instruments increasing accordingly mostly due to the repayment of some debt instruments in 1Q2018.
In 1Q2018, corporate and retail deposits increased by 13.5% to RUB 4,443.3 bn as at 31 March 2018 compared to RUB 3,915.4 bn as at year-end 2017. In particular, corporate deposits reached RUB 3,612.9 bn as at 31 March 2018 – up by 17.6% from the start of the year mostly due to growing funds of state-run companies in Group accounts. Retail deposits and accounts declined by 1.5% in 1Q2018 to RUB 830.5 bn following the record growth of 24.3% in 2017 to RUB 842.9 bn as at 31 December 2017.
The share of customer deposits in the Group’s liabilities was up 0.7 p.p. in 1Q2018 to 79.7% as at 31 March 2018 against 79.0% as at year-end 2017.
Borrowings from debt capital markets, including Eurobonds and local bonds, stood at RUB 361.0 bn as at 31 March 2018 compared to RUB 339.6 bn as at year-end 2017. In the first three months of 2018, RUB 5.0 bn bonds issued in 2015 were redeemed and RUB 20.0 bn bonds maturing in 2023 were placed. The share of borrowings in capital markets in the resource base declined in 1Q2018 from 6.9% to 6.5% on the back of increased customer funds.
Capital adequacy
The Group’s Basel I total capital based on consolidated IFRS financials amounted to RUB 683.2 bn as at 31 March 2018 − up by 2.7% in 1Q2018 compared to RUB 665.6 bn as at 01 January 2018 mostly due to generated income. Concurrently, the Group’s risk weighted assets were down by 3.6% in 1Q2018. As a result, the Group’s capital adequacy indicators were up: the Group’s total capital adequacy ratio amounted to 13.4% (12.6% as at the start of 2018); while the Tier 1 capital adequacy ratio reached 10.5% (9.8% as at the start of 2018).
[1] From 01 January 2018 the Group’s reporting is prepared based on the requirements of IFRS 9 “Financial Instruments” and IFRS 15 “Revenue from Contracts with Customers”. Meanwhile, comparatives for 1Q2017, for the year 2017 and as at 31 December 2017 were not adjusted, whereas quarterly figures for 1Q2018, as at 31 March 2018 and as at 01 January 2018 are shown with due regard to the requirements of the new standards.
[2] Includes gross corporate and retail loans portfolio accountes at amortised cost and loans accounted at fair value
[8] Net interest income to chronological mean of quarter-end interest earning assets for the year. Interest-earning assets include those due from financial institutions, loans to customers and debt securities (all before allowances for credit losses)
[9] Credit losses allowance charges to the chronological mean of quarter-end interest earning assets for the year
[10] Operating expenses include salaries and administrative expenses. Operating income includes net interest income, non-interest income and non-banking operating profits.
[11] Includes both realized and unrealized gains from transactions in securities, and a change to investment value and net derivative results, and also expenses of transactions in financial liabilities designated as at fair value, changes in which are reflected through profit or loss for the period following initial recognition, as well as income from the disposal of subsidiaries.