Dear shareholders, customers, and partners,
It has become customary for us to finally sum up
the preceding year at the General Shareholders
Meeting held in late June. This report on the Bank
operations in 2019 serves this same purpose.
However, the first half of 2020 was extraordinary
to the extent that our General Shareholders
Meeting has been postponed until September,
and that any assessment of the reporting period’s
results would hardly be complete without
regard to the specific nature of this year’s events.
The COVID-19 pandemic that has swept across
the globe, brought abrupt and radical changes
to virtually every aspect of our everyday lives.
It became the black swan, expected by nobody.
There was no way one could have got ready for this
state of emergency in advance. All Bank employees,
the management team and the bespoke Emergency
Response Center had to make an enormous effort
to curb the blow, radically rethinking the workflows
of all units in a time-pressed environment,
and making sure that the Bank operates normally
under abnormal conditions. Now, hopefully,
the biggest hazards have been left behind, we stood
up to the crisis and we won! At the same time,
this achievement was made possible not only
by the deep commitment demonstrated by our
team during the spring and summer months this
year, but also by the carefully chosen development
strategy that our Bank has now pursued for more
than two years. It was during this period that we
laid a solid foundation for the “bank of the future”,
based on state-of-the-art IT technology, that boldly
outsteps the boundaries of traditional banking
business and, which turned out to be of special
importance, is resilient to stresses and risks, even
totally new and unexpected ones. The experience
of the recent and still continuing crisis is yet
to be digested. This will become the theme of our
future annual report. Already today, however, we
look through the lens of past events to not only get
a vision of our future prospects, but to rigorously
assess our past year’s performance as well.
According to FY2019 results, the Gazprombank
Group generated RUB 44.6 billion of net profit,
more than RUB 5 billion above the 2018 indicator
(RUB 39.5 billion). Core banking income (net interest
income and net fee and commission income) grew
Statement
of the Chairman
of the Management
Board
by 12.7%, from RUB 157.1 billion to RUB 177.0 billion.
The Group’s aggregate net interest margin remained
at 2.8% in 2019, same as in 2018.
Traditionally, strategic partnerships with Russia’s largest
companies, provision of a full range of state-of-the-art
financial services to such largest accounts as well as
all other corporate customers, has been a dominating
element in Gazprombank’s business. The Bank
participates in the implementation of national projects
and other government-sponsored initiatives, often
pioneering provision of the most advanced services
to those players in the key industries of the national
economy with whom it collaborates.
The Bank continuously enhances its
experience and track record on the project
and structured finance market. Participating
in the Project Finance Factory, implemented
on VEB.RF platform, Gazprombank has led a syndicate
for an aggregate loan of USD 1.79 billion, intended
for the development of the Udokan copper deposit,
ranking the largest in Russia and the third worldwide
among undeveloped copper deposits. The Bank
acted as the arranger, financial advisor and lender
with a commitment of up to USD 650 million.
This deal was the largest one closed by the Factory
and was named the best deal on Russia’s syndications
market in 2019 according to Cbonds. Construction
of a mining and metal plant with appropriate
infrastructure in the Trans-Baikal Territory will create
new jobs, reinforcing the region’s business potential
and positively affecting the economic development
of the country as a whole.
Gazprombank has reinforced its leading positions
in the financing of infrastructure and PPP projects,
primarily in the area of creating and rebuilding
roads and transport facilities. In the Moscow
Region, the Bank participates in the construction
of the Central Ring Road (TsKAD) Phases Three
and Four. In 2019, financial closure was achieved
under the Vinogradovo — Boltino — Tarasovka auto
road construction project, with the lending volume
in excess of RUB 20 billion. One of the most notable
2019 deals was the Lavna coal transshipment facility
construction project at the Murmansk sea port.
Once at full capacity, the new terminal will allow
for the transshipment of 18 million tons of coal,
thereby driving the development of the Northern Sea
Route. Jointly with VEB, financial closure was achieved
via the Project Finance Factory in the first federal
PPP project, development of a digital ecosystem
for countering illegal circulation of goods.
Gazprombank’s status of a systemically important
bank on the national scale, together with the high
reputation and customer confidence allow it, while
maintaining a strong foothold in the corporate
sector, to be a leader of the retail market as well.
The reporting year was one of robust retail business
growth for the Bank. In this business line, the Bank’s
loan portfolio amounted to RUB 564 billion
at the end of 2019 (a growth by RUB 105 billion).
Consumer loans were the key product, displaying
growth at rates double the market average, which
enabled Gazprombank to be the first in terms
of portfolio growth, making it into the TOP 5 Russian
banks by portfolio volume. Active promotion
of bundled products resulted in a triple growth
of retail fee and commission income, which
amounted to more than a half of the Bank’s
aggregate fee and commission income.
The retail bottom line doubled, reaching RUB 8.0 billion,
almost one-fifth of the Group’s overall net profit.
This spectacular outcome was achieved due to a 30%
growth in the active customer base, increased crosssales, and product range development. The 2019
offerings include some truly unique products.
One of these is the Smart Card with a principally new
cashback mechanism. This card not only became
highly popular with customers, it was also rightfully
acclaimed by experts as an efficient loyalty program
tool. The Smart Card won Frank Banking Reward awards
in two nominations.
The Bank’s ability to develop its products and services
in accordance with customer needs enables
it to thrive in the private banking sector as well.
In 2019, the Private Banking investment portfolio
exceeded RUB 100 billion, having grown by 80%
over two years. For the second consecutive year,
Gazprombank Private Banking was named the
industry’s best and won the Spear’s Russia Awards
as the Best Russian Bank Providing Private Banking
and HNWI Capital Management Services.
For the team of professionals who have kept
Gazprombank among capital market leaders for many
years, the reporting year became yet another
one of new victories and landmark deals. On the
local debt capital market, the Bank acted as the
arranger of 100 bond issuances for the aggregate
face value of RUB 1 trillion, representing 50 issuers,
which became a record for the Bank over its entire
history of operations. Gazprombank’s market share
in initial offerings on the Russian local bond market
was 47.2%, that on the Eurobond market, 65%.
The Bank successfully closed 24 major transactions
of RUB 15 billion or more for 16 corporate issuers,
such as Gazprom, Rosneft, Russian Railways,
Norilsk Nickel and other domestic business giants.
Another record of the past year was the aggregate
amount of funds borrowed by the Moscow
Region, RUB 51.5 billion, in three issues of regional
bonds, with Gazprombank acting as the arranger and the general agent. This amount became
the largest of all raised by Russian regions over
the last five years.
The best (according to Cbonds) foreign bonds
offering on the Russian market, Series 03 and 04
of the Republic of Belarus bonds, is worth
to be specifically mentioned. This was not the only
Gazprombank’s project with a foreign issuer.
Other successful deals include bond issuances
of the Republic of Uzbekistan, of Eurotorg, Belarussian
largest retailer, and of KTZ, the Kazakh National
Railways.
The Bank’s success in the accomplishment
of a vast range of business objectives is largely
underpinned by the technological transformation,
kicked off at our Bank a couple of years ago and
still ongoing. The continuous improvement of our
services, products, and internal business processes
on the basis of cutting-edge digital technologies,
the search for, development, and consistent
implementation of innovations have become
an inseparable element of Gazprombank’s life.
As part of this technological transformation,
we have created a fail-safe and scalable
IT infrastructure which, in the tumultuous spring
of 2020, allowed our Bank to seamlessly migrate
to hassle-free and effective work-from-home
arrangements. Every employee required to work
from home was provided with a fully functional
workplace with access to all necessary Bank
systems both from corporate laptops, and from
personal devices.
Even before that, remote services became widely
popular among Bank customers. Over 2019,
1.5 million customers got registered in our mobile
app and the Internet Bank. In the mobile app,
we implemented such functions as no-visit lending,
money transfers using the rapid payment system,
currency conversions. New product and service
launches enabled us to achieve a triple growth
in the number of monthly active users of our mobile
app and Internet Bank, so that we had more than
one million active users in December. We have
added the remote product application functionality
to the Gazprombank website, including consumer
and auto loans, debit cards, and courier card delivery
service. In 2019, our website audience grew 4 times,
almost reaching 3 million visitors in December.
Summing up the digitization topic, we may say that,
having gone digital well in advance, Gazprombank,
even though it did not prepare for the pandemic, still
turned out to be rather well prepared to face up to it.
As it transitioned to predominantly remote customer
service, and migrated most of its staff to work-fromhome arrangements, the Bank was able to fully retain
its functionality and effectiveness across all lines
of its branchy, systemically important, and socially
significant business.
The hardships we’ve been through raise our morale
and enrich our experience. This is how we perceive
the recent events. Gazprombank turns 30 this year.
We have every reason to believe that our Bank
has met this anniversary proudly, in good spirits,
cognizant of its strength, and confident of its future.
Andrey I. Akimov
Chairman of the Management Board
