Moscow, November, 27, 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 9M2020 as at 30 September 2020.
Key financial indicators of the Gazprombank Group (hereinafter, “the Group”) for 9M2020 / as at 30 September 2020:
All the other press release indicators were calculated on the basis of normalized net income of RUB 17.3 bn;
[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:
| 30 September 2020 | 31 December 2019 | Change | |
| Assets | 7,567.1 | 6,582.2 | +15.0% |
| Shareholders’ equity (capital) | 716.1 | 722.2 | -0.8% |
| Cash and cash equivalents | 988.1 | 739.0 | +33.7% |
| Loans to corporate customers | 4,355.8 | 3,985.0 | +9.3% |
| Retail loans | 718.8 | 608.0 | +18.2% |
| Securities and investments in associates [2] | 757.0 | 647.7 | +16.9% |
| Corporate customer accounts | 4,358.3 | 3,748.5 | +16.3% |
| Retail customer accounts | 1,502.1 | 1,220.0 | +23.1% |
| Capital market borrowings [3] | 258.4 | 267.6 | -3.4% |
| Subordinated debt | 70.6 | 74.6 | -5.4% |
| 9M2020 | 9M2019 | Change | |
| Net income | 30.0 | 63.1 | -52.5% |
| Normalized net income* | 17.3 | 63.1 | -72.6% |
| Comprehensive income | 45.0 | 58.4 | -22.9% |
| Normalized comprehensive income* | 32.3 | 58.4 | -44.7% |
|
30 September 2020 / 9M2020 |
31 December 2019 / 12M2019 |
Change | |
| Total Capital Adequacy Ratio [4] | 12.1% | 13.1% | -1.0 p.p. |
| Tier 1 Capital Adequacy Ratio | 11.2% | 11.9% | -0.7 p.p. |
| Ratio of non-performing loans [5] (NPL) to gross loans | 2.3% | 2.2% | +0.1 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 | 86.6% | 92.4% | -5.8 p.p. |
| ROE | 5.5% | 6.3% | -0.8 p.p. |
| Normalized ROE* | 3.2% | 6.3% | -3.1 p.p. |
| ROA | 0.6% | 0.7% | -0.1 p.p. |
| Normalized ROA* | 0.3% | 0.7% | -0.4 p.p. |
| Net interest margin [6] | 2.7% | 2.8% | -0.1 p.p. |
| Cost of Risk [7] | 0.7% | -0.1% | +0.8 p.p. |
| Cost to income ratio [8] | 52.6% | 65.1% | -12.5 p.p. |
| Cost to normalized income ratio* | 57.9% | 65.1% | -7.3 p.p. |
Financial result
The Group ended 9M2020 with recorded net income of RUB 17.3 bn adjusted for FX loss included in the capital as perpetual bonds issued and the net comprehensive income of RUB 32.3 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 63.1 bn and RUB 58.4 bn, respectively. The Group’s ROE was down by 3.1 p.p. to 3.2%* in 9M2020 against that at year-end 2019. ROA was 0.3%* in 9M2020 – a drop of 0.4 p.p. against 0.7% at year-end 2019.
The Group’s net interest income was RUB 123.5 bn in 9M2020, which is 18.0% higher than that in 9M2019 (RUB 104.7 bn), with interest income up 0.4% to RUB 306.8 bn and interest expense down 8.8% to RUB 183.3 bn. The net interest margin in 9M2020 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 19.9% to RUB 151.6 bn in 9M2020 compared to RUB 126.4 bn year-on-year. At the same time, net commission income for the same period (RUB 28.1 bn) was 1.3 times higher than in 9M2019 (RUB21.7 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 96.1%* against 93.6% in 9M2019.
Combined income from transactions in securities [9] in 9M2020 totalled RUB 1.5 bn compared to the income of RUB 18.9 bn in 9M2019 − mostly due to negative revaluation of securities, loss in associates and expense incurred from the disposal of subsidiaries.
Non-banking segments ended 9M2020 with the operating income of RUB 1.6 bn compared to the loss of RUB 0.8 bn in 9M2019.
Impacted by the above factors, the Group’s operating income (before provisions for loan loss and impairment of assets) reached RUB 157.7* bn in 9M2020 compared to RUB 135.0 bn in 9M2019.
Operating expenses amounted to RUB 91.3 bn in 9M2020 compared to RUB 78.1 bn in 9M2019. 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 7.2 p.p. to 57.9%* compared to 65.1% at year-end 2019.
Asset quality
Loan loss provisions totalled RUB 16.6 bn in 9M2020 compared to income of RUB 8.8 bn in 9M2019. The negative adjustments of loans and receivables accounted at fair value were RUB 14.0 bn in 9M2020 against the positive adjustment of RUB 15.3 bn in 9M2019.
The Group’s cost of risk (including valuation adjustment of loans and receivables accounted at fair value) grew to 0.7% in 9M2020 compared to -0.1% at year-end 2019.
NPLs (non-performing loans) in the gross loan book accounted for 2.3% as at 30 September 2020 – up 0.1 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 September 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 7,567.1 bn as at 30 September 2020 – up 15.0% against RUB 6,582.2 bn as at 31 December 2019.
In particular, cash and cash equivalents reached RUB 988.1 bn as at 30 September 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 5,074.6 bn as at 30 September 2020 − up 10.5% 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 64.1% compared to 66.8% as at the end of December 2019.
In 9M2020, corporate loans were up 9.4% to RUB 4,355.8 bn as at 30 September 2020 against RUB 3,985.3 bn at year-end 2019. Retail loans also grew, with their volume up 18.2% in 9M2020 – from RUB 608.0 bn to RUB 718.8 bn as at 30 September 2020.
Mortgage loans form the bulk of the Group’s retail loans, accounting for RUB 406.2 bn as at 30 September 2020 – up 3.4% compared to 31 December 2019. Mortgage loans share in the retail loan book were down 8.1 p.p. in 9M2020 − from 64.6% to 56.5%. Consumer loans to retail customers [10] grew in 9M2020 from RUB 215.0 bn to RUB 312.6 bn. (up 45.4%).
Nine months of 2020 saw the launch of some new products and services with an emphasis on developing remote service channels. Total number of the active Internet Bank users reached 1.7 mln people by the end of Q32020 - up 70% compared to December 2019.
Corporate loan book grew strongly in 9M2020, resulting in a small rise of retail loans share in the gross loan book profile as at 30 September 2020 (up 0.9 p.p. to 14.2%).
The portfolio of securities and investments in Group associates was RUB 757.0 bn as at 30 September 2020, up 16.9% (as at 31 December 2019: RUB 647.7 bn).
Securities and investments in associates share in the Group’s assets were up 0.2 p.p. in 9M2020 to 10.0% 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 up 1.7 p.p. − from 80.6% to 82.3%.
Amounts owed to financial institutions were up 17.7% in 9M2020 to RUB 375.9 bn (against RUB 319.4 bn at year-end 2019). Amounts owed to financial institutions share in the liabilities were 5.5% as at 30 September 2020, remaining the same as at 31 December 2019.
Corporate and retail accounts grew to RUB 5,860.4 bn as at 30 September 2020 against RUB 4,968.5 bn as at 31 December 2019 (their total growth was 18.0%). At the same time, corporate accounts were up 16.3% to RUB 4,358.3 bn as at 30 September 2020 compared to that at year-end 2019 (RUB 3,748.5 bn), with retail accounts also up 23.1% in 9M2020 – from RUB 1,220.0 bn to RUB 1,502.1 bn. Retail accounts in the customer accounts profile edged up (by 1.1 p.p. − from 24.6% at year-end 2019 to 25.6% as at 30 September 2020).
Customer accounts in the Group liabilities comprised 85.5% as at 30 September 2020 − up 0.8 p.p. (against 84.8% at year-end 2019).
Capital market borrowings were down as at 30 September 2020 to RUB 258.4 bn against RUB 267.6 bn at year-end 2019 (down 3.4%). At the same time, capital borrowings in the resource base declined 0.8 p.p. to 3.8%.
Capital adequacy
The Group’s Basel I total capital based on consolidated IFRS financials amounted to RUB 771.4 bn as at 30 September 2020 − up 1.8% in 9M2020 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 Central 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.
In July 2020 the bank placed USD 250.25 mln subordinated bonds. The Central Bank of Russia approved the inclusion of the above subordinated bonds in Tier 2 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. July 2020 witnessed the redemption of USD 400 mln subordinated Eurobonds on their maturity date.
The Group’s risk weighted assets were up 10.1% to RUB 6,349.5 bn in 9M2020.
Hence, the Group’s capital adequacy indicators as at 30 September 2020 were as follows: the Group’s total capital adequacy ratio at 12.1% (compared to 13.1% at year-end 2019 – a drop of 1.0 p.p. for 9M2020); the Tier 1 capital adequacy ratio at 11.2% (compared to 11.9% at year-end 2019 – a drop of 0.7 p.p. for 9M2020).