the Year and Business
According to preliminary estimates, global economic growth in 2019 was 2.9%, down from 3.6% in 2018. In the USA, growth slowed to 2.3%, a figure that matches the average annual GDP growth rate since the end of the 2008 crisis1.
Other countries experienced even more pronounced reductions in their economic growth rate. Germany was particularly heavily hit by the global trade decline, with its GDP growth rate down from 1.5% to 0.6% in 2019. The Euro zone as a whole, too, faced a slowdown in economic activity, aggravated by both slackening trade and the uncertainty around Brexit terms. In the UK, however, GDP grew at the same rate of 1.4% in 2019.
Japan’s 2019 results displayed modest GDP growth, notwithstanding a sales tax increase that caused GDP to drop in the 4th quarter. In China, GDP growth slowed to 6.1% in 2019, as a result of its prolonged trade dispute with the USA. The Chinese government consistently stimulated the economy throughout the year. Another 2019 development was the monetary policy reform, which, as China’s central bank anticipates, will allow it to increase the transparency of its operations.
The ongoing US-China trade conflict caused a noticeable erosion of global trading activity. According to IMF estimates, the global trade growth rate declined from 3.7% to 0.9% in 2019.
The developed countries switched to monetary policy easement. In the USA, the FRS started reducing the reference rate, bringing it down to 1.75% by the year end. The ECB reduced the deposit rate to -0.5% and relaunched its asset bailout program. The ECB also experienced a change in its management team, and the new head announced the regulator’s plans to reconsider ECB goals in the monetary policy area. The central banks of developing countries marched in lockstep with the world’s largest CBs.
Monetary policy easements in the major countries resulted in declining yields on their treasury bonds, causing money market rates to drop. For example, the year average yield on 10yr US Treasuries dropped from 2.9% in 2018 to 2.13% in 2019. 10yr Eurobond yields fell from 0.46% to -0.21% on average over the year. In China, the year average money market rate, SHIBOR, declined to 2.83% from 3.75%.
Notwithstanding rising protectionism, mild monetary policy contributed to less pronounced risk perceptions worldwide. The volatility index (VIX) remained relatively stable, with a FY2019 average of 15.3p, compared to 16.6p in 2018. The MSCI Global Index grew by 25.2% in 2019, while MSCI Emerging Markets gained 15%.
Russia’s economic growth continued despite slowing consumer activity
In 2019, the Russian economy grew by 1.3%, slightly less than in 2018 (+2.5%). Consumer demand remained the primary growth driver in 2019, albeit at lower rates than in 2018, due to a slowdown in consumer lending growth. Economic growth was underpinned by extra government spending on national projects.
As the global economic environment stabilized in 2019, FX interventions in accordance with the budgetary rule, having been suspended in 2H2018, were resumed. The average Ruble exchange rate in 2019 (RUB 64.7/USD) was robust due to the inflow of non-residents’ funds into OFZ, the continued trade account surplus (USD +73.5 billion) and a transitory liquidity shortage experienced by the banking system closer to the year end. Foreign capital inflow became one of the drivers behind the growth in the Moscow Exchange Index (+16.1%) and the RTS FX Index (+8.1%).
After the VAT increase in early 2019, there was a period of faster price growth, with inflation reaching its peak in March 2019 (5.3% YoY), before turning downward to reach 3% YoY by the year end. Slowing price growth rates and reduced inflation expectations eventually caused the Bank of Russia to switch to a milder monetary policy, reducing the key rate by 1.5 p.p. in 2019 (from 7.75% to 6.25%). The Russian stock and debt markets remained attractive for foreign investors. Activity levels remained high in the real sector of the economy throughout 2019. Industrial output grew (+2.3%), underpinned by growth in the extracting sector (+2.6%) and manufacturing industries (+2.5%). Among the manufacturing industries, the most impressive growth was in pharmaceuticals and materials (+22%), while among extracting industries, natural gas and condensate production (+9.9%) performed best.
There was a high level of activity on the labor market. Unemployment did not rise above 5% throughout the year, reaching a historical low of 4.3% in August 2019. Growing real wages (+2.7%) pushed up real household incomes (+1.5%) and retail sales (+1.6%) against a backdrop of slightly reduced volumes of commercial public services (-0.9%). The federal budget surplus amounted to 1.8% of GDP (2.7% of GDP in 2018). This reduction was the result of incremental budget expenditure on national projects.
Export revenues drove an increase in the National Welfare Fund from RUB 4 to 7.7 trillion, equivalent to 6.9% of GDP and just below the level at which some of the National Welfare Fund resources could be reinvested in the economy.
Notwithstanding the slowdown in consumer lending, banking sector earnings continued on their upward course
Banking system assets grew from RUB 94.1 to 96.6 trillion (+2.7%) in 2019. With FX revaluations and license revocations factored in, assets increased by 5.2% (+6.9% in 2018) to reach 88% of GDP. The share of the top five banks in banking system assets remained largely unchanged despite the rapid growth of second-tier banks.
Banking system assets growth was underpinned by an increase in retail lending (RUB +2.7 trillion, +18.6%; hereinafter, taking into account FX revaluations and bank license revocations). Mortgage loans grew by about RUB 1.1 trillion, and unsecured consumer loans by RUB 1.5 trillion. The corporate loans portfolio grew at a moderate pace (4.5%). The banking system maintained a significant liquidity surplus. The commercial banks’ net position with the Bank of Russia and the Ministry of Finance hovered around RUB 5–6 trillion throughout the year. The cash surplus resulted in consistently low interbank market rates.
The Bank of Russia persisted with its efforts aimed at keeping the banking system stable. The number of banks was reduced (from 484 to 442) through license revocations. Starting from 1 October, the Bank of Russia raised the risk ratios for unsecured consumer loans. Banks, in turn, improved their balance sheet quality: both provisions for possible losses in lower-quality class loans and capital adequacy grew, while overdue debt in the loan portfolio remained below 5.5%.
Record-setting banking sector earnings (RUB 2 trillion) were largely due to a change in report presentation standards and one-off impacts.
Alexander Sobol, Deputy Chairman of the Management Board, Bank GPB (JSC), notes: “Implementation of a strategy focused on the priority development of the retail business helped to maintain the Bank’s margin at the previous year’s level (2.8%) against the backdrop of significant interest rates decrease, and practically double its fee-based income, thus improving its performance stability in the period of financial markets volatility”
Gazprombank (Joint Stock Company) (hereinafter, “Bank GPB (JSC)” or “the Bank”) published consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) for 2019 and as at 31 December 2019.
Bank GPB (JSC) key financial indicators for 2019 / as at 31 December 2019:
|Overview of key financial indicators, RUB billion:|
|Assets||6 582,2||6 532,1||+0,8%|
|Shareholders’ equity (capital)||722,2||616,7||+17,1%|
|Cash and cash equivalents||739,0||1 049,3||-29,6%|
|Loans to corporate customers||3 985,4||3 733,0||+6,8%|
|Securities and investments in associates 2||647,7||754,6||-14,2%|
|Corporate customer accounts||3 748,5||3 822,7||-1,9%|
|Retail customer accounts||1 220,0||990,8||+23,1%|
|Capital market borrowings 3||267,6||326,6||-18,1%|
12 months of 2019
12 months of 2018
|Total Capital Adequacy Ratio 4||13,1%||12,4%||+0,7 p.p.|
|Tier 1 Capital Adequacy Ratio||11,9%||10,5%||+1,4 p.p.|
|Non-performing loans5 (NPL), % of gross loans||2,2%||2,4%||-0,2 p.p.|
|Ratio of loan loss provisions to gross loans accounted at amortized cost||4,4%||5,0%||-0,6 p.p.|
|Loan-to-deposit ratio||92,4%||88,1%||+4,3 p.p.|
|Group ROE||6,3%||6,8%||-0,5 p.p.|
|Group ROA||0,7%||0,6%||+0,1 p.p.|
|Net Interest Margin 6||2,8%||2,8%||0,0 p.p.|
|Cost of risk 7||-0,1%||0,5%||-0,6 p.p.|
|Cost-to-income ratio 8||65,1%||57,5%||+7,6 p.p.|
2 Including trading securities, investment securities, and investments in associates.
3 Including bonds issued both on the domestic and international markets.
4 In accordance with Basel I Framework.
5 Loans are deemed “non-performing” if their principal or interest is 90+ days overdue, as well as in the event of counterparty default.
6 The ratio of net interest income to the chronological mean of quarter-end interest bearing assets for the reporting period. Interest-bearing assets include those due from financial institutions, loans to customers and debt securities (all before loan loss provisions).
7 Loan loss provision charges and profit/loss on loans accounted at fair value as of the reporting period to the chronological mean of quarter-end interest earning assets for the reporting period.
8 Operating expenses include salaries, other personnel compensations and administrative expenses. Operating income includes net interest income, non-interest income and non-banking operating profits. Operating income does not include provisions and profit/loss on loans accounted at fair value.
The Group successfully completed the year of 2019, earning RUB 44.6 billion of net profit while its comprehensive income totaled RUB 39.0 billion, including foreign exchange gain/loss on the Group’s foreign investments. By comparison, the Group’s net profit and comprehensive income in 2018 amounted to RUB 39.5 billion and RUB 43.0 billion, respectively. The Group’s ROE was down 0.5 p.p. to 6.3% in 2019 against 2018. ROA reached 0.7% — up 0.1 p.p. against 0.6% at year-end 2018.
The Group’s net interest income in 2019 was up 2.9% against 2018 to RUB 142.8 billion, with interest income up 9.6% to RUB 409.5 billion and interest expenses up 13.6% to RUB 266.7 billion. The net interest margin in 2019 remained intact at 2.8%.
The Group’s recurring core banking income, including net interest income before loan loss provisions and net commission income increased by 12.7% in 2019 to RUB 177.0 billion compared to RUB 157.1 billion in 2018, with net commission income in 2019 (RUB 34.2 billion) up 1.9 times against 2018 (RUB 18.4 billion). The active development of retail banking made a higher commission income possible: 2019 saw the launch of out-of-the box insurance and service offers, both for lending and investment products for individuals.
Recurring income accounted for 95.4% in the Group’s operating income in 2019 compared to 91.9% in 2018. Comprehensive income from transactions in securities 9 in 2019 totaled RUB 35.5 billion against the income of RUB 3.2 billion in 2018: mostly due to positive revaluation of investments and income from associates as well as income from the disposal of subsidiaries. Non-banking segments ended 2019 with the operating loss of RUB 13.0 billion against RUB 1.7 billion in 2018. Impacted by the above factors, the Group’s operating income (before loan loss and impairment of assets provisions) reached RUB 185.5 billion in 2019 compared to RUB 171.0 billion in 2018.
Operating expenses reached RUB 120.8 billion in 2019 compared to RUB 98.3 billion in 2018. Higher expenses were due to the on-going implementation of technological transformation projects, including the retail business transformation. The cost-to-income ratio increased by 7.6 p.p. compared to year-end 2018 — from 57.5% to 65.1%
Expenses from loan loss provisioning reached RUB 10.5 billion in 2019 compared to RUB 6.8 billion in 2018. Positive fair value adjustment of loans and receivables amounted to RUB 14.5 billion in 2019 due to the recovery of impairment resulting from the repayment of several loans accounted at fair value and also from the adjustment of loans to market value following the key interest rate cut.
The Group’s cost of risk (with due regard to the fair value adjustment of loans and receivables) was -0.1% in 2019 against 0.5% at year-end 2018. NPLs (non-performing loans) in the gross loan book amounted to 2.2% in 2019 compared to 2.4% in 2018. The provisioning ratio (total loan loss allowance to the portfolio of loans accounted at amortized cost) was 4.4% as at 31 December 2019 against 5.0% as at 31 December 2018. At the same time, the loan loss allowance as at the reporting date exceeded NPLs two times (at year-end 2018, the coverage ratio was the same).
The Group’s total assets comprised RUB 6,582.2 billion as at 31 December 2019 — up 0.8% against RUB 6,532.1 billion as at 31 December 2018. In particular, cash and cash equivalents were at RUB 739.0 billion as at 31 December 2019 compared to RUB 1,049.3 billion as at 31 December 2018 mostly due to the reduction in fixed-term deposits in the Bank of Russia.
The loan book before loan loss provisions as at 31 December 2019 accounted for RUB 4,593.3 billion — up 8.3% compared to RUB 4,239.9 billion as at 31 December 2018. The loan book (net of loan loss provisions and profit/ loss on loans accounted at fair value) in the Group’s total assets accounted for 66.8% compared to 61.8% at the end of December 2018.
Corporate loans were up 6.8% in 2019 to RUB 3,985.3 billion as at 31 December 2019 compared to RUB 3,733.0 billion at year-end 2018. Retail loans showed considerable growth of 19.9% in 2019 — from RUB 506.9 billion to RUB 608.0 billion as at 31 December 2019.
Mortgage loans form the bulk of the Group’s retail loans, accounting for RUB 393.0 billion as at 31 December 2019 — up 8.5% compared to RUB 362.2 billion as at 31 December 2018. Mortgage loans in the retail loan book were down 6.8 p.p. for 2019 — from 71.4% to 64.6%. Consumer loans grew in 2019 from RUB 138.6 billion to RUB 207.6 billion (up 49.8%).
Consumer lending grew owing to the implementation of several transformation projects, which allowed the Bank to show multiple expansion of the active user database in the new mobile bank (now 1.5 million users already); the Bank also started to process over 15 thousand loan applications a day. In 2019, the Bank posted fourfold growth in consumer loans’ disbursement a day and increased its sales through digital channels to 55%.
An increase in the retail loan book brought the share of retail loans within the total loan portfolio to 13.2% as at 31 December 2019 — an increase of 1.3 p.p. compared to that as at 31 December 2018.
The portfolio of securities and investments in the Group’s associates comprised RUB 647.7 billion as at 31 December 2019 — down by 14.2% (securities stood at RUB 754.6 billion as at 31 December 2018). The share of securities and investments in the Group’s associates in the total assets of the Group declined by 1.8 p.p. in 2019 to 9.8% as of the reporting date compared to 11.6% at year-end 2018. The profile of the portfolio of securities and investments in the Group’s associates mostly includes fixed income instruments such as investments in Russian government debt, bonds and promissory notes of Russian issuers, with debt securities up 10.2 p.p. in 2019 — from 70.4% to 80.6%.
Amounts due to banks fell by 21.3% in 2019 to RUB 319.4 billion (RUB 405.9 billion at year-end 2018). The share of amounts due to banks in total liabilities was down from 6.9% to 5.5% as at 31 December 2019. Corporate and retail deposits grew to RUB 4,968.5 billion as at 31 December 2019 compared to RUB 4,813.5 billion as at 31 December 2018 (the overall increase of 3.2%). At that, corporate deposits were down in the structure of raised funds — as at 31 December 2019 they comprised RUB 3,748.5 billion — 1.9% lower than at year-end 2018 (RUB 3,822.7 billion), whereas private deposits were up 23.1% from RUB 990.8 billion to RUB 1,220.0 billion in 2019. Private deposits were up 4.0 p.p. in customer deposits from 20.6% at year-end 2018 to 24.6% as at 31 December 2019. Customer deposits in Group liabilities accounted for 84.8% as at 31 December 2019 — up 3.4 p.p. (81.4% at year-end 2018).
Capital market borrowings, including Eurobonds and local bonds declined as at 31 December 2019 to RUB 267.6 billion compared to RUB 326.6 billion at year-end 2018 (down 18.1% in 2019). The year of 2019 saw the redemption of local bonds totaling RUB 22 billion, and also of Eurobonds of USD 0.5 billion issued in 2017, Eurobonds of EUR 1 billion and Eurobonds of USD 0.75 billion, both issued in 2014. In 2019, placements included local bonds’ issues totaling RUB 92 billion with maturity in 2021–2025. As a result, capital market borrowings in the resource base declined by 0.9 p.p. to 4.6%.
The Group’s Basel I total capital based on consolidated IFRS financials comprised RUB 758.1 billion as at 31 December 2019 — up 12.1% in 2019 compared to RUB 676.4 billion at year-end 2018. In January 2019, the Group obtained financing from the Gazprom Group via the perpetual interest-free subordinated loan of RUB 90,000 million. The loan meets the criteria for it to be classified within Tier 1 Capital for calculating the capital adequacy ratio. In February 2019, the Bank of Russia approved the inclusion of the perpetual and interest-free loan in the additional capital when calculating capital adequacy in accordance with the national rules. At the same time, upon receiving an official authorization of the Bank of Russia, the Group exercised a call-option on subordinated Eurobonds of CHF 350 million in the second quarter of 2019. The Group’s risk-weighted assets grew 5.4% in 2019 to RUB 5,769.4 billion.
All in all, the Group’s capital adequacy indicators as at 31 December 2019 were as follows: the Group’s total capital adequacy ratio was 13.1% (12.4% at year-end 2018 — up by 0.7 p.p. for the year); the Group’s Tier 1 capital adequacy ratio was 11.9% (against 10.5% at year-end 2018 — up 1.4 p.p. for the year).
Share of Bank GPB (JSC) in the key indicators of the Russian banking system (RAS)
owed to corporate
|As of 1 January 2019||6,9%||6,8%||10,9%||3,2%||12,7%||3,3%|
|As of 1 January 2020||6,8%||6,8%||11,0%||3,3%||11,9%||3,8%|
Growth rates in 2019: Bank GPB (JSC) vs. the Russian banking system (RAS)
owed to corporate
|Bank GPB (JSC)||2,8%||7,4%||2,6%||19,9%||-4,1%||22,6%|
1 According to INTERFAX-100. Russian Banks, www.finmarket.ru/database/rankings/.
2 Regulatory capital (‘Total Capital (Equity)’ metric in the Capital Adequacy Report (Form 808)).
3 Including funds of individual entrepreneurs.
As of 31 December 2019, the following credit ratings were assigned to Gazprombank:
Gazprombank’s long-term foreign currency credit ratings were one step lower than Russia’s rating assigned by S&P Global Ratings, Moody’s Investors Service and Fitch Ratings.
On 8 February 2019, Moody’s Investors Service upgraded the sovereign rating of the Russian Federation to Baa3 with a stable outlook. Following this rating action, on 12 February 2019, Moody’s Investors Service upgraded Gazprombank’s rating to Ba1 with a stable outlook.
On 25 June 2019, Expert RA rating agency affirmed Gazprombank’s credit rating at ruAA+ with a stable outlook.
On 25 July 2019, S&P Global Ratings affirmed Gazprombank’s rating at BB+ with a stable outlook.
On 9 August 2019, Fitch Ratings upgraded the sovereign rating of the Russian Federation to BBB with a stable outlook. Following this, on 19 August 2019, the agency upgraded Gazprombank’s rating to BBB- and changed the outlook from positive to stable.
On 11 November 2019, Fitch Ratings affirmed Gazprombank’s rating at BBB- with a stable outlook. On 28 November 2019, ACRA upgraded the rating of Gazprombank to AA+(RU) and changed the outlook from positive to stable.
The Bank’s current ratings are traditionally underpinned by its strong position in the lending market, specifically due to loans to large corporations, the systemic importance of the Bank, high probability of receiving government support when necessary, low share of distressed assets compared to banking sector in general, adequate risk management system, and comfortable liquidity level adequate for debt servicing.
The strategic priorities of the GPB Group were formulated with reference to the development goals and current objectives outlined by the President and the Government of the Russian Federation.
In an era of rapidly developing technology and changing consumer behaviors, the Gazprombank strategy defines the key areas of the Bank’s operations based on current market prospects and capabilities, building upon existing competitive advantages and accumulated competencies.
Bank GPB (JSC) channels its efforts towards achieving its key strategic objectives, which include:
Corporate customers will remain a priority for the Bank. Retaining its status as a systemically important bank, Gazprombank will:
The Bank continuously monitors the status and outlook of those sectors of the Russian economy where the Bank has developed servicing competences: infrastructure and PPP projects, electricity generation, export-oriented industries, technical and technological refurbishment projects, petroleum and gas chemistry, and advanced import substitution. Development of cross sales, particularly in relation to complex products, will support the generation of returns by the Bank’s corporate business.
Gazprombank is endeavoring to actively develop its retail business as one of its most important strategic business areas, through:
The key objectives are as follows:
Achieving the Bank’s strategic goals in the development of the retail business will require a rigorous transformation and ambitious technological advancement of its operations, including:
Going forward, Gazprombank will enhance its regional network, taking into account the needs of its key customers and their partners. It is expected that incremental return on capital will be generated through technological transformation of the business, process improvements and migration of operations to remote channels.
In the challenging macroeconomic environment of 2020, the majority of the above-mentioned goals and objectives remain on the agenda, while their level of priority and the sequence in which they are addressed may be adapted to the current situation.
The past year’s key milestones were the establishment of a new failure-proof infrastructure designed to overcome technological constraints, and the synchronization of systems and processes for continued business upscaling, digital channel development, new banking products relaunch, customer base growth, and improvement in the stability and resilience of our banking systems.
Based on the new Retail Loan Pipeline (RLP 2.0) implemented in late 2018, new loan products were taken to the market throughout 2019, while existing products were improved in new channels. Partner programs were actively developed: the Bank implemented the option of applying for consumer loans via aggregators (Banki.ru, Sravni.ru), and Home Credit Bank and MegaFon were connected via OpenAPI. There was a particular focus on improving the performance and resilience of RLP 2.0: the pipeline processed up to 15,000 requests a day.
Another 2019 development was the implementation of Tessa, a Russian ECM platform, which served as the basis for the Bank’s new uniform customer file feature. Jointly with our ecosystem team, we implemented corporate customer onboarding procedures, as well as an archive of retail customer documents and integration with front-office systems.
In late 2019, Gazprombank, jointly with the FinTech Association and the Bank of Russia, became one of the first banks in Russia to launch a decentralized depository system (DDS) for mortgage deed accounting using blockchain technology. At present, the DDS system is used to track electronic mortgage deeds, while continued development work will see its application expanded to other kinds of securities as well. As data is stored in a distributed ledger system, there is less risk of fraud and the emergence of a gray market in mortgage deeds. The new technology reduces transaction costs by 30% relative to traditional securities accounting and storage processing technologies. The blockchain technology will significantly improve the stability and reliability of data on electronic mortgage deeds, thereby minimizing the risks of nonexistent pledges, and transactions will take less time to execute. DDS development also facilitates the securitization of mortgage deeds.
For the borrower, the system cuts the electronic mortgage deed execution and registration time from 9 days to 24 hours, while allowing the Bank to gradually digitalize mortgage transactions and grow their volume. Customers also benefit from faster registration of real estate titles.
Also, in 2019, the Bank launched pilot operation of the key modules of our Omni-Channel Platform:
A prototype of the Omni-Channel Customer Service — the credit card application feature — was launched on the Bank’s website.
The more a company knows about its customer and the faster it processes such data, the greater its market competitiveness. In 2019, the Bank started pilot operation of its Memory Caching component — a system designed to dramatically reduce the time a customer has to wait for data to load. This solution will enable faster RAM data interchange and an adaptive approach to data management.
In the area of retail bad loan recovery process automation, a whole range of activities were successfully completed in 2019. In particular, search and collection services for contact information in social media were implemented on the basis of Collection, the flagship automated banking system (ABS). Additional information is gathered through interaction with mobile operators’ services. The integration of Collection ABS with the Unified Federal Register of Bankruptcies takes debtor interaction at the bankruptcy stage to a new level. Compliance with Federal Law No. 76 regarding the implementation of a mortgage holidays calculator on the basis of Collection ABS optimizes Collection services, making them as convenient as possible for our customers. As Collection ABS is used to monitor the Bank’s insurance functions, it is already demonstrating an upward trend in outstanding insurance debt recovery and generally optimizing the Bank’s spend on this functionality. Development of digital channels became one of the Bank’s priority areas of activity.
In 2019, Gazprombank continued its course towards digitization. The Telecard 2.0 mobile app grew its audience three times over the year, reaching 1.5 million registered customers. Of these, 1 million uses the app every month, generating over 4.6 million transactions. As of December 2019, there were 1,083,253 active customers vs. 361,889 in December 2018: thus, the remote banking customer base grew by 199% over the year, with penetration in the active card customer base reaching 50% at the end of 2019.
Throughout 2019, the mobile app and the Internet bank were updated at least once a month. New functions were added: transfers via the Fast Payments System, transfers by telephone number inside the Bank, information and advertising push notifications, payment by QR code, loans without visit for salary customers, pre-approved loan offers, currency exchange and current account opening in six currencies (ruble, euro, US dollar, pound sterling, Swiss franc and Chinese yuan), partial and full loan prepayment, repeated payments and transfers from transactions history, sending of receipts to the email from transactions history, Your Success and For Savings deposits, brokerage account top-up, and auto payments (via the Internet bank)
All these changes did not go unnoticed on the Russian digital market. In September 2019, Telecard 2.0 won the “Fast Start” nomination in the Go Awards Banking rating as the best app brought to market in 2018. It also made it into the TOP 5 highest-rated apps in the app store and the TOP 10 best promotion strategies. As part of the New IT Infrastructure program implementation, projects to streamline Data Center operations and upgrade network infrastructure were completed in 2019. To ensure prompt release of IT resources and optimal use of server capabilities through virtualization, a Private Cloud platform was established and 66 automated systems were migrated to it, followed by implementation of automatic release of Private Cloud resources. A workplace virtualization program was undertaken (using Virtual Desktop Infrastructure (VDI) technology) and over 10,000 workplaces in the head office and across the branch network were migrated. The corporate mobility (MI) platform and a uniform communication system were implemented to enable prompt remote access to the Bank’s corporate Based on the new Retail Loan Pipeline (RLP 2.0) resources.
Implementation of a customer loyalty and satisfaction improvement project commenced: preliminary studies were undertaken and their results used to refine banking products.
It should be noted that the contract banking support service is developing at a lively pace. Bank GPB (JSC) continued working actively to put in place project banking support services for Russia’s largest oil and gas companies. At the same time, contract banking support provided to industry customers is arranged as an efficient comprehensive product, capable of supporting project implementation from investment idea to procurement procedures, financing and equipment manufacturing. Interaction with oil and gas sector companies in the area of contract banking support is a strategic area of the Bank’s operations. In 2019, banking support of oil and gas contracts became one of the fastest developing areas of activity. The total volume of contracts supported exceeded RUB 1.2 trillion as at 31 December 2019.
Special note should be made of a radically new product offered by the Bank since 2019 — Cross-Border Banking Support. This product helps to make maximum use of the best practices and experience acquired by the Bank in the course of providing banking support to projects within the Russian Federation. A particular feature of this banking support model is the involvement of a local partner bank in the country of project implementation and exchange of information, enabling the partner bank to act as an agent for Bank GPB (JSC) for individual account opening and servicing. Settlements via these accounts will be monitored by Bank GPB (JSC) specialists. In 2019, the first pilots were implemented in Belarus and Serbia. This area is one of the most promising for continued product development. The practice of providing banking support is also widely applied in proprietary procurement.
In particular, banking support was provided to major IT procurement and equipment supply operations to enable the functioning of the Bank’s new office on Ozerkovskaya Embankment in Moscow.
In 2019, the service was popular among the Bank’s corporate lending units. In addition, there were many more requests for this service from companies involved in projects co-financed by the government.
The Bank continues to support major infrastructure projects, including the construction of a bypass road in Khabarovsk, construction of the Zvezda Shipbuilding Facility in the Far East, and comprehensive development of the Murmansk transport hub.
The diversity of approaches taken to support the control procedures allows Bank GPB (JSC) to tailor its support arrangements to suit the needs of any customer. The Bank’s existing software, hardware and human resources enable us to guarantee that contractors will be connected to the system from anywhere in the Russian Federation, to ensure that payment requests are reviewed as quickly as possible, and to accept for review and provide structured storage of documents of any size and format via electronic channels, while also guaranteeing that customers and investors have real-time access to paymentrelated information.
Bank GPB (JSC) is involved in the implementation of major government projects, successfully providing joint treasury and banking support. Last year, the Bank’s high standard of service provision was confirmed by a three-year extension of its support for one of the largest multi-home residential property capital repairs funds.
In the reporting year, the Bank reinforced its status as a leader in the provision of services to ensure the legitimacy of spending by co-funded construction contractors, in accordance with the requirements of Federal Law No. 214-FZ dated 30 December 2014. The Bank also implemented an electronic reporting feature on escrow accounts for developers.
As part of our comprehensive financing product development for real-estate developers, we implemented support of residential estate construction projects in connection with the provision of project financing. Given that residential construction market participants are still in the early stages of adapting to the new realities, control of the legitimacy of spending dramatically reduces the risk that developers will divert loan proceeds to other projects.
Much attention is being paid to the development of state-of-the-art electronic services, and banking support is no exception. In 2019, we completed an ambitious Interactive Reporting Service development project that allows banking support results to be seen in real time, including the list of counterparties involved in a project, a database of evidences of title and analytics, as well as the ability to generate the necessary reports. This system is unique and unmatched on the market. For the Gazprom Group’s needs, a personal account section for banking support purposes has been developed and is continuously updated on the GPB Electronic Trading Platform. This provides an information platform for interaction not only between the Bank and the Gazprom Group, but also among the Group’s structural units.
In December 2019, Bank GPB (JSC) launched a tailored solution for energy sector companies, enabling centralized liquidity management (cash pooling) with an overdraft limit of RUB 15 billion, thereby confirming the Bank’s position as the leader on the transaction products market.
We actively developed our relations with IT industry players, including major system integrators, software vendors and cloud service providers across a wide range of products, from traditional loans to specialized complex settlement solutions. Over the reporting year, we succeeded in reinforcing our image as a contemporary Bank capable of satisfying the needs of the most progressive sector of the economy.
By way of providing the cash balance pooling service on the basis of Bank GPB (JSC), 435 accounts of subsidiaries and branches, including nonresidents, were connected to enable efficient management of the Gazprom Group’s liquidity. As a result of this service implementation in 2019, the pooled cash balances on the rubledenominated master account amounted to more than RUB 1.5 trillion, with pooled FX balances of approximately USD 4.5 billion and EUR 440 million. In addition, to develop the Corporation Settlement Center service for Gazprom subsidiaries and affiliates, integration with the Gazprom Budget Management Automated System’s Settlement Management Subsystem was completed, and the process of connecting new participants to the service was started in 2019. The Bank continued providing its Integrated Solution for Direct Electronic Document Exchange from Gazprom Accounting System (host-to-host): 98 subsidiaries and over 170 branches (924 accounts) were connected. In 2019, the number of connected service participants grew by 30%.
The Bank implemented its customs duty payment service using Round payment cards issued by Multiservice Payment System LLC, the operator of the Round customs payment system. The service was implemented with a view to satisfying customer requirements for fast payment of customs duties, levies and charges, and reducing funds diversion to a minimum. Customs inspectors can see payments made via Round cards in the Personal Accounts system in real time, enabling prompt completion of the customs declaration and clearance process.
Bank GPB (JSC) continued to be actively involved in the activities of financial markets and financial institutions, enhancing its relevance and role in this area. Work is underway with industry associations, asset management market leaders and oversight authorities to create a common information space for professional market participants, such as management companies, specialized depositaries, and the Bank.
If all players use a common Client-Bank system, this will achieve the aim of providing accurate information on movements (or absence of movements) in the customers’ current, brokerage and deposit accounts. The system will also alleviate the workload on corporate customers’ operating units and back offices, and comply with the regulator’s requirements.
In 2019, the Bank continued to actively develop its online collection service using automated deposit machines, and remains the leader in this market in its own right. The number of stores offering this service doubled to 12,000 by the year end.
In 2019, a number of pilot projects were launched in the promising new segment of pharmacy chains. In 2019, the Bank actively developed its cooperation with transport industry players — a service that became one of its key growth points. Gazprombank has continued this project with a focus on railway transport entities.
The scope of cooperation with government investment funds was increased significantly. The Bank acts as a reliable business partner taking into account the specific features of their operations.
The Bank actively participated in a seamless integration under a major M&A transaction on the Russian insurance market, which built on existing technologies and services to allow corporate and retail clients to access high-quality insurance products as conveniently and promptly as possible.
In 2019, Bank GPB (JSC) won the “Retail Partner Bank” nomination in the Retail Week Awards 2019, a professional industry contest. The award ceremony took place at the 5th Russian Retail Week international business and government forum. Winning this distinguished award demonstrates the high repute in which the Bank is held by the industry community and proves that it is moving in the right direction, successfully developing useful and innovative services for retail companies.
To date, our collaboration with universities has brought the number of campus projects to 150, with over 400,000 campus cards issued and serviced, in particular, the co-branded card of the Bank and the Russian Union of Youth. Bank GPB (JSC) remains a leader on the Russian bond market. In 2019, it focused on issuing bonds for developers, resulting in the receipt of a mandate for the issuance of bonds worth RUB 15 billion for companies engaged in residential construction pursuant to Federal Law 214-FZ.
In addition, in 2019, Bank GPB (JSC) became the leader among Russian banks in terms of arranging Eurobond issues for companies in the mining and metals sector.
In 2019, we continued to actively develop cooperation with telecoms, IT, and media companies. The Bank remained the primary debt market partner of major telecommunication companies, acting as the arranger of listed bond issues with a total value of RUB 97.5 billion. Despite the challenging situation in the oil, chemical and petrochemical industries, the Bank took part in arranging corporate bond issues for oil and gas and chemical sector companies for a total amount of more than RUB 150 billion. Bank GPB (JSC) has traditionally been the main partner of ROSSETI in arranging financing on the Russian and international debt capital markets. In 2019, the Bank acted as the arranger of bond issues with a total value of RUB 20 billion for the Group’s companies. In addition, the Bank performed several successful transactions on the public capital market during the year, placing three bond issues of the Moscow Integrated Power Company (MIPC) for a total amount of RUB 15 billion, and RusHydro Eurobonds for a total amount of RUB 15 billion.
In 2019, the Bank continued to expand the scope of its collaboration with machine-building industry companies through a number of projects, including:
Besides the above-mentioned transactions, work was initiated jointly with Gazprombank (Switzerland) in 2019 to establish cooperation with European TMH International on the provision of financing to the company.
Lending for current operations and financing of investment projects remained an important development vector in the Bank’s relations with mining and metals sector companies: a major loan transaction — the Udokan copper deposit development project financing — was implemented via the Project Finance Factory with the involvement of VEB.RF. The total project budget is approximately USD 2.9 billion, of which up to USD 1.79 billion is being raised as a loan from a syndicate of banks for a period of up to 12 years.
The Bank continued to work on hedging transactions for mining and metals sector companies. It should be noted, in particular, that for the first time on the Russian market, the Bank completed a price hedging transaction in respect of iron ore stock with 65% iron content. One of the key events was the syndicated loan agreement signed between Bank GPB (JSC), VEB.RF and Operator-CRPT company as a Project Finance Factory project in December 2019, with a limit of RUB 24.2 billion, to finance a product marking and traceability system project. Bank GPB (JSC) acted as the financing arranger. The project is being implemented using the public-private partnership (PPP) mechanism, via an agreement between Operator-CRPT and the Russian Ministry of Industry and Trade.
In 2019, the Bank started providing financing to a project in the Moscow Region to build four solid waste incineration plants using “waste to energy” technology. They will be capable of processing 2.8 million tons of waste per year, with a total installed capacity of 280 MW. The project budget amounts to RUB 137 billion. The lenders are a banking syndicate comprising Bank GPB (JSC) and VEB.RF. The project is being implemented as part of the Russian Government’s Clean Country priority project within Russia’s Environment Protection 2012–2020 National Program. The project limit has been set at RUB 68 billion until 2035. The Bank continued growing its loan portfolio of enterprises implementing investment projects in the area of conventional generation facility construction, and remains the undisputed leader in the financing of Russian “green” energy. The aggregate amount of the limits set by the Bank in 2019 for renewable energy projects exceeds RUB 60 billion.
Working capital financing of electricity industry companies was increased, with 48% volume growth during the year (from RUB 134 billion to RUB 199 billion). In a tightening competitive environment, the Bank continued collaborating with the major energy companies, including ROSSETI, maintaining the amount of lending extended to that company at RUB 48 billion. At SPIEF 2019, the Bank entered into a strategic cooperation agreement with T Plus, making it the largest lender to that company with a 46% share in its loan portfolio (RUB 54 billion). In addition to the traditional forms of collaboration in the areas of corporate lending, transaction banking and capital market transactions, this collaboration expanded into new areas such as projects implemented by ROSSETI within the Digital Transformation 2030 concept.
A memorandum was signed with ROSSETI on cooperation in the digital transformation of its treasury function. The first joint project, successfully launched in the summer of 2019, was a service for automated processing of incoming ruble payments made by corporate entities and individuals in favor of MOESK (the brand operated by Rosseti Moscow Region). Furthermore, at the Electricity Grids International Forum held in late 2019, the Bank, jointly with the Digital Horizon Fund, introduced the ROSSETI management team to the Edison smart blockchain platform, developed for the energy and utility market.
It is worth noting the growing scope of factoring operations (including agent factoring) in the limit set for key companies by industry. Factoring remains a popular settlement product among Russia’s largest media groups. For example, the Bank continued to provide TV series production financing through factoring transactions in 2019. In addition, the financing of UEFA 2020 and Olympics 2020 broadcasting rights was for the first time provided via factoring arrangements.
In 2019, the Bank continued to actively develop all-encompassing cooperation with regional administrations and their subordinate entities, in particular, by way of implementing major investment projects in PPP or concession agreement formats, providing banking support of contracts and attracting government-funded entities as Bank customers.
Developing new forms of collaboration with the Gazprom Group, the Bank in 2019 for the first time provided funding to Gazprom export LLC in the form of repo transactions with the natural gas owned by Gazprom and stored in various facilities throughout Europe.
The Bank continued developing its collaboration with aircraft industry companies, substantially increasing its documentary business volumes, in particular.
The Bank further developed its relationships with trading and pharmaceutical companies in the letter-of-credit business, achieving portfolio growth of over 40% in 2019.
In accordance with the decision by the Bank’s Management Board to develop a comprehensive product line for participants in co-funded multidwelling residential construction projects, financing of large residential properties was arranged in 2019. Throughout 2019, the Bank actively developed its collaboration with infrastructure construction companies, providing USD 180.6 million worth of banking guarantees to the Udokan mining and metal facility construction project. Collaboration with agricultural enterprises is one of the priority business development areas for the Bank as a key partner for many companies in that sector across the entire banking product range.
Active use of industry government support mechanisms, including the Agribusiness and Agricultural Industry Preferential Lending Programs (Russian Government Resolutions No. 1528 and No. 512), enabled the Bank to provide its customers with loan resources to finance their current operations and implement new investment projects, at rates not exceeding 5% per annum in rubles for periods of up to 15 years. Based on its 2019 results, Bank GPB (JSC) confirmed its leading position on the market.
By the end of 2019, the overall value of loan agreements executed by the Bank since the launch of the preferential lending programs exceeded RUB 400 billion. The majority of these funds was intended for the financing of new investment projects in cattle breeding, horticulture and deep processing of agricultural produce.
Agreements were made with the Ministry of Industry and Trade of the Russian Federation and the Russian Export Center, providing for subsidized interest rates on export loans issued in accordance with Russian Government Resolution No. 191 dated 23 February 2019. The Bank will be compensated at 3% per annum under each of the lending transactions.
Thus, following the execution of these agreements, the Bank became a full member of the International Cooperation and Export National Project.
During the reporting period, the Bank managed to maintain the optimal industrial structure of its loan portfolio. Loans were mainly extended to the basic industries of the economy, such as metallurgy, power generation, oil and gas production, transportation and refining, chemical and petrochemical industries, minerals extraction, agribusiness, engineering, and trade. The Bank is expanding cooperation with prospective customers in various sectors, at the same time maintaining relations with traditional creditworthy customers.
In 2019, the Bank continued dynamic collaboration with the Gazprom Group and was involved in financing and servicing its subsidiaries, affiliates and contractors within the framework of the Group’s investment program. Besides existing customers, such as the Gazprom Neft Group and the Gazprom Avtomatizatsiya Group companies, the Bank started providing loan products to the Gazprom Aktivy SPG Group, Gazprom Gazoraspredeleniye Group companies and contractor entities, such as MRTS, RusGazDobycha, and RusGazShelf.
Another completed transaction involved the use of Round customs cards for the Bank to process customs payments by Gazprom export LLC. During 2019, the Bank continued to actively develop its collaboration with oil and oilfield service industry enterprises, including both vertically integrated majors (Rosneft Group, Tatneft Group, etc.), and large and mid-sized independent regional oil producers / service providers.
In 2019, the following pilot transactions were completed in the oil industry:
An important area of development was the expansion of factoring operations, as well as credit and leasing transactions under the programs of the Russian Ministry of Industry and Trade and the Russian Export Center (acting as the agent) to subsidize interest rates of pre-export and postexport financing, as well as the program of the Russian Ministry of Industry and Trade to subsidize part of the cost of purchasing innovative rolling stock. In particular, in December 2019, the Bank became the first among Russian banks to enter into a trilateral agreement on subsidizing interest rates on export loans and other financing instruments within the International Cooperation and Export National Project, whereby the Bank will support export deliveries of polyamide produced by KuibyshevAzot.
Further business development is pursued with enterprises of the ferrous and non-ferrous metal industry, as well as the pipe segment. Among its customers, the Bank has Russia’s major metallurgical holdings: UGMK Group, EVRAZ Group, USMK Group, Russian Copper Company Group, Metalloinvest Group, IMH Group, PJSC MMC Norilsk Nickel, OJSC KUMZ.
In 2019, the Bank increased its working capital financing of electric power industry companies, generating volume growth of 48% over the year. In a tightening competitive environment, the Bank continued collaborating with major energy companies, including the Rosseti Group, and in particular:
The Bank also continued to provide support to a number of Russian regions.
Gazprombank is working with aviation industry companies among Russia’s TOP 5 carriers. In particular, the Bank provided funding to Ural Airlines. It also continued working within the fuel guarantee limit set for S7 Airlines. Several major transactions were made with the State Transport Leasing Company. Collaboration with agricultural sector companies is a priority area of business development for the Bank, which is a key partner for many companies in the industry across the entire product line. Active use of government support mechanisms, including the Agribusiness and Agricultural Industry Preferential Lending Programs (Russian Government Resolutions No. 1528 and No. 512), enabled the Bank to provide its customers with loan resources to finance current operations and implement new investment projects, at rates not exceeding 5% per annum in rubles for periods of up to 15 years.
Based on its 2019 results, the Bank was among the TOP 31 banks providing agribusiness financing under preferential lending programs, having re-asserted its leading market position. Since the launch of the preferential lending programs, the total amount of loans extended by the Bank has exceeded RUB 400 billion.
In 2019, the Bank significantly increased trading sector financing volumes both by increasing its share with existing clients (Dixi, Golden Apple, L’Etoile) and by acquiring new customers. More than 15 limits were set for the Bank’s new and existing customers in various food and non-food retail segments. The Bank implemented investment loans with the Magnit Group and several deals in the field of e-commerce (Wildberries, Ozon).
In 2019, a credit risk limit was set for, and the first transaction entered into with, the ILIM Group, a leading player in the pulp and paper industry both in Russia and globally
The Bank continued to hone its expertise in developing business with telecom, IT and media companies:
The Bank actively supports foreign trade activities of corporate customers, issuing bank guarantees and letters of credit, as well as providing settlement services and trade finance services (short, medium and long-term lending to foreign trade operations, including under the cover of export credit agencies). Documentary products related to servicing current operations of customers within the country are becoming highly relevant, in particular, bank guarantees and domestic ruble-denominated letters of credit, including deferred payment refunds and early repayment (discounting). New products were also introduced, such as electronic bank guarantees in favor of the Russian Federal Tax Service, which allow customers to secure obligations to the tax authorities without paper workflow, and discounting of deferred payments under letters of credit issued in favor of exporters. The total volume of the Bank’s documentary portfolio as at 1 January 2020 amounted to RUB 671 billion (year-on-year growth of 24%). The total volume of guarantees issued in 2019 exceeded the figure for 2018 and amounted to RUB 535 billion (4,767 guarantees in total). The volume of open letters of credit on behalf of corporate customers and counterparty banks increased by 91% and amounted to RUB 114 billion. In addition, 2019 saw an increase in the value and number of trade finance transactions executed on behalf of both corporate customers (year-on-year growth of 27% in terms of value and 61% in terms of the number of transactions) and counterparty banks, where transactions with the Republic of Uzbekistan were the key growth factor as more than 150 transactions with the total value exceeding RUB 8 billion were executed.
The Bank cooperates with Russian exporters within the framework of state financial (guarantee, insurance) export support programs, as well as through trade finance instruments, including confirmation, post-financing and discounting of export letters of credit, and also participates in a program for subsidizing interest rates on export credits.
In 2019, a number of advance financing transactions were entered into in connection with commercial contracts for export deliveries of oil, oil products, and metal products. The total value of trade finance transactions entered into in 2019 exceeded USD 2.5 billion. New Bank transactions worth noting include the opening of advance financing facilities for several independent refineries, such as Slavyansk ECO Refinery and Ilsky Oil Refinery, for a total amount in excess of USD 100 million, whereby the Bank assumes the risk of both the production assets as such and of the first-class international traders that are the end buyers of the export products.
Furthermore, in 2019, the Bank continued working on full-cycle trade finance transactions: from vendor/manufacturer to buyer, with appropriate pledge of the product financed at various product movement stages. Building on the work performed last year, a USD 40 million credit facility was signed in February 2020 between the GPB Group and an international trader for the financing of European aluminum deliveries under a commercial contract with the RUSAL Group. The first drawdown on this facility was made in March 2020.
Syndicated lending market
In 2019, the Bank was active as an arranger of syndicated and club deal loans involving Russian and international banks. In particular, the Bank acted as one of the arrangers of financing for Eurotorg, the largest grocery store chain in Belarus, in the form of a RUB 5 billion syndicated loan under Russian law. The Bank acted as the documentation agent in the transaction. This loan is the first arm’s-length syndicated loan for a private corporate borrower from Belarus.
The Bank maintains partner relations with leading Russian banks and is developing interbank cooperation in lending to corporate customers via sales of participation shares in loans originally issued by the Bank. For example, in 2019, several deals to sell loans on the secondary syndicated lending market were closed for a total equivalent of ca. RUB 50 billion. Through such loan assignments, the Bank remains flexible in managing its loan portfolio, can minimize the load on capital and, provided that a loan is sold at a premium to its face value, earns commission income. The bank buying the asset, in turn, has the opportunity to acquire a high-quality and well-structured loan asset at minimal cost in terms of time and resources.
Being a leading player on the Russian syndicated lending market, the Bank is actively involved in the development of the syndicated lending and securitization market in the Russian Federation, and in particular, helps to improve the legislative and regulatory framework in this area. More specifically, the Bank played a key role in the drafting and adoption of the Federal Law “On Syndicated Credit (Loan)” in late 2017, and of amendments to that law in 2019. The law lent fresh impetus to the market’s development and laid the foundations of syndication infrastructure under Russian law.
Loan products in the field of structured finance
In 2019, the Bank structured and closed, for the first time on the Russian banking market, a deliverable repo transaction in relation to an exchangetraded commodity for an amount of ca. USD 1 billion via a platform of overseas subsidiary banks and companies. In 2019, the GPB Group and Gazprom export LLC successfully closed a repo transaction for the total of 7.6 bcm of natural gas. As a result of a series of transactions, the customer received financing of EUR 916.4 million.
million US dollars
Total amount of trade finance transactions entered into in 2019
Total amount of loan sales on the secondary market for syndicated lending
Funds raised in a repo transaction for natural gas with Gazprom export LLC
Thanks to the strategy chosen, the retail business financial outcome doubled in 2019, reaching RUB 8 billion.
The Bank’s key achievements in 2019
In the reporting year, Gazprombank was highly successful in developing its retail business. In a tightening competitive environment, the Bank implemented its earlier plans to reinforce its market position, upgrade product technologies and improve customer service quality.
Thanks to the strategy chosen, the retail business financial outcome doubled in the reporting year, reaching RUB 8 billion.
In 2019, Gazprombank outpaced the market’s growth rate. The Bank’s retail loan portfolio grew by 1.2 times in 2019, reaching RUB 564 billion (+RUB 105 billion). Consumer loans were the key growth factor. Gazprombank succeeded in growing its consumer lending business twice as fast as the market average, becoming No. 1 among the TOP 5 in terms of portfolio growth and No. 5 on the market in terms of portfolio volume, which was 2 p.p. up on the 2018 result.
A change in the portfolio structure towards highmargin consumer loans helped to boost return per customer by almost 50 percent, making the Bank the market’s No. 3 on this indicator.
Strategy adaptation to market specifics and flagship products
As Gazprombank’s retail product lines adapt to customer expectations and needs, some interesting and even unique service packages have evolved. The Smart Card — the only offer in its segment with a personalized cashback feature — has become a flagship product for growing the Bank’s active customer base. Gazprombank has been highly acclaimed among the expert community for this unique product, receiving, amongst other awards, the Frank Banking Award for the “Most Beneficial Premium Segment Debit Card with Cashback Feature” and the “Most Beneficial Premium Segment Card for Travelers”. Another innovative product on the market was the Bank’s co-branded virtual Motorist Card, issued jointly with the Gazpromneft retail fuel network via the partner’s mobile app.
Success in these new products is evidenced by the numbers, with 400,000 virtual cards having been issued over the 5 months since the program launch and applications for Smart Card service packages now at 100,000 per month. All this helped to drive a 1.3-fold increase in bank card turnover. Customer acquisition in the online environment is one of the key retail business priorities and Gazprombank is actively developing its digital service channels. In 2019, the Bank took first place in the Go Awards Banking ranking in the “Fast Start” nomination with its award-winning Telecard 2.0 customer mobile app.
The Bank’s share of digital sales increased by 55% in 2019. By saving time for its operating personnel, the Bank is able to offer better prices to its customers. In particular, with the launch of the Your Success monthly capitalization deposits, Gazprombank has remained the absolute leader in terms of deposit growth among all Russian banks for several months in a row. The growing quality of the Bank’s product line, efficient advertisement campaigns, and continuing product digitalization have increased the deposit portfolio to RUB 659 billion (+RUB 182 billion).
Partner channels development and commission income growth
To achieve the objective of improving performance, Gazprombank is developing its partnership programs by offering interesting and lucrative products, thereby compensating for the fall in customer demand for classical deposits that have ceased to be a capital gain instrument in a declining key rate environment. In 2019, 20% of aggregate deposits taken were composite deposits combining the advantages of a term deposit and the extra returns of investment solutions. By developing partnerships with leading insurance companies, the Bank was able to improve its return on operations through active cross sales of commission-based products. Insurance product penetration in the loan and deposit bases was 70% (TOP 3 on the Russian market) and 5% (TOP 7 on the Russian market), respectively. Commission income from insurance policy sales grew by 11 times over the reporting period, contributing significantly to the Bank’s overall financial result. The net commission income in retail was RUB 16 billion (+RUB 10 billion) in 2019, up by more than 2.5 times from the 2018 level.
High-quality service and plans for the future
High-quality service is an important aspect of competition for the retail customer. Gazprombank is endeavoring to save as much of its customers’ time as possible by introducing new remote service formats. Today, it interacts with more than 30% of its retail customers via remote channels, and every third cash loan is originated exclusively online with no branch visit.
In 2019, Gazprombank was named one of the best banks on the market in terms of customers’ willingness to recommend1 . One crucial parameter, queue waiting time, was reduced by almost 30% to 8 minutes. A country-wide advertisement campaign launched in 2019 on television, in the streets and on the Internet, contributed strongly to retail business growth, taking the active retail customer base up to 3 million people (+30%).
As the Bank overcomes technological barriers and continues on its path toward digital breakthrough, its brand strength, intrinsic innovation culture and experienced team provide grounds for forecasting continued retail business growth. It is expected that business volumes will grow by 1.7 times on average by 2023. On a general note, retail earnings should more than double to RUB 18 billion from RUB 8 billion in 2019.
Key metrics of Gazprombank’s retail business in 2019
Originations volume growth
Deposits volume growth in 2019
Financial result growth in 2019
Non-operating expense savings in 2019
were added to the assets managed by Gazprombank Private Banking
growth of the investment portfolio managed by Gazprombank Private Banking
is the size of the investment portfolio managed by Gazprombank Private Banking
Russia and Luxembourg1
regions of presence in Russia
In 2019, assets under the management of Gazprombank Private Banking added 14%. The average customer’s account size grew 12%. The achievement was made possible through improvement of the product line and introduction of a new managers incentive program.
Notwithstanding the overall downward trend in term deposit rates and the aggressive rate policies pursued by competitors, Gazprombank Private Banking not only preserved its asset portfolio but also succeeded in growing it by 10%, by offering efficient capital preservation and accretion solutions, as well as flexible solutions for liquidity management and placement of temporarily free cash.
The customer investment portfolio grew by 42% to more than RUB 100 billion. The product line was expanded through the addition of popular investment solutions earning income on a wide range of asset classes, as well as parity investment instruments in credit assets, matched by the Bank. The range of securities offered to customers by way of investment advice was also expanded.
In 2019, the Private Banking division, jointly with Gazprombank — Asset Management, expanded the range of solutions it offers, including structured notes and instruments enabling investment in alternative asset types.
Insurance solutions also remain popular with Private Banking customers. In 2019, the product range was expanded by adding tailored rental income solutions, as well as insurance products enabling customers to receive treatment at the best Russian and international clinics in any life situation, from out-patient services to treatment of critical diseases. A good level of protection is afforded through the high insurance limit, with the entire amount of premiums paid being refunded in full at the end of the insurance period. The solutions implemented in 2019 secured high insurance policy renewal rates. The amount of cash in investment and universal life insurance products amounted to RUB 4.7 billion.
In line with market trends, customer interest in lending has grown. The Bank introduced a multicurrency deposit-backed lending option, improved its credit cards line, optimized business processes, and closed a number of deals jointly with GPB International S.A.
In early 2019, Gazprombank Private Banking launched a new service package, centered around the first-on-the-market co-branded card combining the unique offerings of the Bank, Mastercard, and PRIME loyalty program privileges.
Russian Private Bank of the Year, Spear’s Russia Wealth Management Awards
Best Program for Heirs of Wealth Private Banking Market, Frank Private Banking Award
The Heirs program, launched as part of the total family asset management approach, won the Frank Private Banking Award 2019. The flagship product of this program was a kids’ card with 15% cashback (iTunes, books, souvenir shops, theaters, cinemas, museums). The Heirs Project magazine issued as part of this program was produced with contributions from participants in the financial literacy schools that operated for a third consecutive year. Last year, 30 classes were delivered.
2019 saw a radical change in the Private Banking regional block’s performance. Implementation of a vertical hierarchy of functions in regional sales management helped the Bank to achieve an 86% increase in the regional block’s investment portfolio, while expanding the investment customer base by 36%. The regional footprint of Gazprombank Private Banking was expanded. Developing its Lifestyle Management business, the Bank held approximately 70 events in Russia and internationally during 2019.
The Bank continued with its personnel development efforts, using in-class and remote learning formats in its employee training programs. In 2020, Gazprombank Private Banking intends to maintain its development vector, while focusing on the expansion of its investment offer and continuing to invest in infrastructure development, achieving impeccable service standards, raising the level of staff professionalism, and doing everything possible to make the discerning Private Banking customer feel as comfortable as possible.
For many years, Gazprombank has provided its Private Banking customers with services in the art market, with activities that range from servicing investments in works of art and sought-after collector’s items to specially designed programs that allow them to keep abreast of the main global events as well as the domestic art scene.
Gazprombank’s corporate collection has been the first and to date the only corporate collection with a focus on contemporary Russian art. Works from the Bank’s collection are sought after by curators of museum and other exhibition projects in Russia and abroad, including exhibitions in the State Tretyakov Gallery, the National Centre for Contemporary Arts, the Moscow Museum of Modern Art, the Multimedia Art Museum, the Garage Museum of Contemporary Art, the Albertina Museum (Austria), Bologna Museums Association (Italy), projects of the Moscow, Venice, Liverpool, and Ljubljana Biennial, the Thessaloniki Biennial and many others. In 2019, as part of the annual LOOP video art festival in Barcelona (Spain), an exhibition of selected works from the Bank’s collection was placed on display in Casa de Rusia as yet further evidence of evolving international cultural relationships and interest in Russia’s contemporary art.
The Bank draws on its competitive advantages, in particular, its considerable experience of financing projects with complex structures in the service of key sectors of the economy. The most ambitious and high-profile deals of 2019 were predominantly in the oil and gas refining, mining and metals, chemical, energy and residential construction sectors.
In December 2019, as part of a consortium of 22 international and Russian banks, Gazprombank signed the financial documentation extending a loan for the Amur Gas Processing Plant construction project. This multicurrency loan with a value equivalent to EUR 11.4 billion is the largest ever project finance transaction for the Gazprom Group and a landmark deal for the Russian market. The project is an important link in the process chain of the Power of Siberia gas pipeline. Gazprombank’s share of financing is RUB 60 billion for a period of 15 years.
The Project Finance Factory, created as an arm of state-owned VEB.RF corporation, began to play a notable role in the evolution of the Russian investment projects market in 2019. Its first deals were closed in the mineral fertilizer segment: chemical production facility construction projects for Kuibyshevazot, with a budget of RUB 6.3 billion, and Shchekinoazot, with a budget of EUR 310 million. In July 2019, Gazprombank, in a syndicate with VEB.RF and Sberbank, signed a syndicated loan agreement with the Baikal Mining Company (the USM Group) for the development of the Udokan copper deposit (the deposit is located in the Trans-Baikal Territory and is the largest undeveloped copper deposit in Russia and the third largest in the world). The project provides for Phase 1 construction of a mining and metal plant, with associated infrastructure. The total budget is USD 2.9 billion, including a loan facility of up to USD 1.79 billion for up to 12 years. Gazprombank is acting as the arranger of the financing, financial advisor and creditor with a commitment of up to USD 650 million. The Udokan project is the largest deal ever closed by the Project Finance Factory.
One important factor and development trend in the reporting year’s project financing business was the replacement of co-investors’ funds in residential construction projects with bank project financing, made available to developers via escrow arrangements. An agreement on Gazprombank’s largest loan under these new rules was signed in September 2019 with Glavstroy St. Petersburg for RUB 30 billion, intended for the financing of two residential quarters in St. Petersburg. Energy sector financing remains a substantial area of business, with a primary focus on renewable energy projects. The Bank is supporting projects by Fortum and ROSNANO for the construction of wind generation plants in Kalmykia and the Ulyanovsk Region with 250 MW of aggregate installed capacity, and a RUB 6.6 billion wind generation farm expansion project by VetroSGC (the Rosatom Group). In solar energy, the Bank provided RUB 30 billion of financing to power plant construction projects with a capacity of 329 MW. The projects implemented in the reporting year resulted in Gazprombank’s specialized lending portfolio reaching RUB 693 billion (IFRS-based) in 2019.
Based on the 2019 results, Gazprombank was No. 1 mandated lead arranger in Russia and the CIS according to Bloomberg, and also No. 5 on the EMEA markets and No. 12 globally according to Project Finance International. In the Project Finance & Infrastructure Journal rankings, Bank GPB (JSC) is ranked 7th in Europe among project finance arrangers, and 10th among financial advisors to infrastructure financing projects in Asia Pacific. The Bank also holds second place in the “Best Russian Bank on CIS Syndications Market” nomination according to Loans Cbonds Awards. Market expertise and positive market feedback in the form of recognized leading positioning, awards and good customer relations developed over years and tested in successful joint projects, together with a professional team and business scale, mean that Gazprombank is well positioned for continued confident progress in the field of project finance.
Private-Public Partnership (PPP)
Gazprombank’s 2019 results show growth in key financial metrics relating to transactions in the infrastructure and PPP fields.
Gazprombank succeeded in significantly increasing its loan portfolio through the financing of concessionbased projects providing for the construction of two toll segments of the Central Ring Road (TsKAD), Phases Three and Four.
In 2019, financial closure was achieved on the 16 km Vinogradovo — Boltino — Tarasovka auto road construction project in the Moscow Region. The facility cost exceeds RUB 36 billion. Opening of financing for the construction of a road bridge across the Pur River in the Yamal-Nenets Autonomous Area became a significant driver of Gazprombank’s portfolio growth. The project, once completed, will provide the local community with year-round road access. The project budget is RUB 9.6 billion.
In 2019, financial closure was achieved on the first federal PPP project, i.e. creation of a digital ecosystem for countering illegal circulation of goods. With the help of the “Chestny ZNAK” (Honest Mark) national electronic marking system, each piece of any product sold is tracked from the factory or the national border to the individual buyer. The system is expected to cost over RUB 24 billion. Gazprombank provides financing to this project in a consortium with VEB.RF through the Project Finance Factory.
A consortium of Gazprombank and BaltNedvizhServis entered into a concession agreement with St. Petersburg in relation to laying and operating a tram network on the Kupchino Underground Station — Shushary settlement — Slavyanka route in October 2019. On the basis of the 2019 results, the National Association of Concessioners and Long-Term Infrastructure Investors named Gazprombank the best infrastructure investor in credit financing.
Arranging transactions on the local debt capital market
Over the last five years (2015–2019), Gazprombank has reasserted its leading and strengthening positions on the local bond issuance market; the Bank’s market share grew from 26% in 2015 to 40% in 2018 and 43% in 2019.
The overall result of these most recent five years is that the Gazprombank team retains leadership in the market ranking of bond issue arrangers on the Russian debt capital market (Cbonds). In 2019, Gazprombank acted as the arranger of 100 bond issuances on the local debt capital market with an aggregate face value of RUB 1 trillion, representing 50 issuers and setting a new record for the Bank over its entire history of operations on the local debt market.
2019 was also a record-breaking year for the majority of Gazprombank customers, many of which secured, at the individual issuer or sector levels, or for the Russian market as a whole, minimum coupon rates (over 20 records), maximum placement volumes (over 5 records), and maximum financing tenors (over 5 records).
In 2019, Gazprombank customers on the Russian debt market represented the oil and gas, extracting, chemical, metallurgy, retail, infrastructure and transport, construction, telecommunications and financial sectors, development institutions and sub-federal borrowers, as well as foreign corporate and sovereign borrowers.
According to the results of Cbonds Awards voting at the 17th Annual Russian Bond Congress — the largest event on the debt securities market in Russia and the CIS — Gazprombank won nine awards, of which five were in team categories and four were based on the results of transactions executed. Five team awards in prestigious categories include:
Separately noted unique transactions arranged by Gazprombank:
Landmark 2019 deals on the Russian debt market
Republic of Belarus
2019 milestone transactions on the Russian debt market
Steady growth of Gazprombank’s market positions, RUB trillion.
The market share was calculated on the basis of the nominal amount of issues. All statistical data exclude mortgage and structured products. Source: Cbonds
Arrangers rating at year end 2019 (bonds).
|Arranger||Share, %||Amount, RUB mln|
|1) Gazprombank||16,1%||325 158|
|2) Sberbank CIB||13,9%||279 726|
|3) REGION BC||11,5%||231 281|
|4) CREDIT BANK OF MOSCOW||11,4%||229 475|
|5) Sovcombank||10,2%||206 356|
|Total:||100,0%||2 016 355|
Source: Cbonds as at 31 December 2019
Cbonds Awards 2019
Arranging transactions on international debt capital markets
Gazprombank is a leader among arrangers and underwriters of debt instruments issued by Russian issuers in international capital markets. In 2019, the Bank was book-runner and underwriter of 21 international issuances of issuers from the Russian Federation and other CIS countries; the total amount exceeded (the equivalent of ) USD 14.4 billion in various currencies, including the US dollar, the euro, the Swiss franc and the Russian ruble. The Bank was placed at the top of rankings of underwriters of Eurobond issuers in 2019:
Arrangers rating at year end 2019 (Eurobonds).
Issues of CIS-based issuers
|Arranger||Share, %||Amount, USD bn|
|2) VTB Capital Plc||16,5%||5,0|
|3) J.P. Morgan||14,2%||4,3|
|5) Societe Generale||5,2%||1,6|
Source: Bloomberg as at 31 December 2019
2019 milestone deals on international debt markets
Several landmark deals were completed in 2019:
Selected Gazprombank deals in 2019
Operations on stock markets
Compared to 2018, 2019 was a successful year for the Russian stock market, both in the number and the volume of transactions.
Gazprombank is actively expanding its stock market footprint. In 2019, the Bank acted as the arranger of some of the largest deals on the Russian stock market, for an aggregate amount in excess of USD 5.7 billion.
Gazprombank is the corporate broker for Gazprom and Transneft. It provides a range of consulting services aimed at strengthening Russian companies’ positions on global stock markets, enhancing investment attractiveness, providing recommendations on interaction with the investment community, and arranging management road shows and investor days, as well as maintaining company stock in key stock indices.
Selected Gazprombank deals in 2019
Gazprombank acted as the global co-coordinator and book-runner of an accelerated offering of Polyus shares for a total amount of USD 390 million. This offering was the third joint transaction after the company’s re-IPO in 2017 and its convertible bond issue in 2018.
A secondary offering of shares in the PIK Group of Companies with a value of USD 75 million became Gazprombank’s debut deal in the real estate sector.
Gazprombank acted as the exclusive arranger of Gazprom’s two quasi-treasury stock offerings for a total amount of USD 5.1 billion. The second offering was the largest on the Russian market since 2007. The USD 125 million Petropavlovsk convertible bonds offering became the only convertible bond transaction among Russian issuers in 2019.
Debt securities trading and institutional sales
On the back of its operations in 2019, the Bank is among the debt securities market leaders, and, in particular, it is listed among:
In 2019, the Bank received a prize in one of the Cbonds Awards key nominations: the “Best Sales Team in the Bond Market” (1st place for the 3rd year in a row).
Thanks to active fostering of relations with a global pool of investors, successful placements of 100 local bond issues and 21 Eurobond issues were completed.
In 2019, active work continued to expand the geography of investors. Dialog was established with high-profile investors from the UK, the EU, South Korea, Singapore, China and the Middle East. The international sales team arranged a series of landmark events (roadshows, investor days and round-table discussions) for leading Russian issuers.
In 2019, the format of analytical reports and presentations was significantly improved and collaboration with European and Asian investors was revitalized (trips, thematic reports, calls, subscriptions for analytics). The result was more new customers involved in trading operations. New workshop formats and topics were prepared for local and international investors (workshops were held in Moscow, London and Zurich), and trips were arranged to Kazakhstan and Uzbekistan. As part of the Bank’s Russian economy and financial market analysis, detailed reviews of the Bank of Russia’s monetary policy, the budget rule, and ruble performance over time were issued.
Gazprombank analysts were the first to provide permanent coverage of major foreign high-yield markets, starting with bonds issued by Chinese developers. These initiatives helped to expand the trading operations toolkit and customer base. With the purpose of developing the Bank’s capital market operations, it provided analytical coverage of CIS economies and financial instruments (reports with investment recommendations on Uzbekistan and Kazakhstan).
The Bank launched an analytical portal that has become its primary customer communication tool. The analytics profile was further raised by participating in conferences and holding media workshops — the Bank’s media citation rate increased by 2.5 times.
On many occasions the Bank’s analysts made their expertise available for its capital market transactions. These efforts were acknowledged in the Cbonds annual investor survey, which named the Bank’s analytics team as the second best in Russia.
Transactions in precious metals
The Bank actively pursues financing and purchase transactions involving precious metals with the top leaders of the gold-mining industry. The customers of Bank GPB (JSC) include Polymetal International Plc. companies, PJSC Polyus, Millhouse Capital UK Ltd., NORILSK NICKEL, Petropavlovsk PLC, Yuzhuralzoloto (UGC), UMMC, Russian Copper Company, Highland Gold Mining Ltd., Russian Platinum, JSC Pavlik, Geopromining, refineries of JSC Uralelectromed, OJSC Krastsvetmet, JSC Prioksky Non-Ferrous Metals Plant, and JSC Shchelkovo Precious Metals Recycling Plant. In 2019, the average financing volume provided to various enterprises of the industry exceeded RUB 102 billion. Loans were extended to goldmining and processing businesses to finance their operating and investment needs. During the reporting period, the Bank prepared a transaction of industry-wide significance, involving financing and complete support of Uzhuralzoloto’s acquisition of 28% of Petropavlovsk Plc shares and convertible bonds. Both companies are among the TOP 10 Russian gold mining groups and the transaction had a value of USD 270 million. DVP settlements on UK papers in Euroclear, and all subsequent transactions in relation to the transfer of shares to the depository of Bank GPB (JSC) were performed by Bank GPB International S.A. The transaction was completed in 2020.
Enlargement of the operations spectrum and improvement of their efficiency were given a lot of attention. In the area of narrow-scoped industry products, which have become widely popular, we could cite futher development of short-term and mid-term prepaid supplies of precious metals within the framework of trade agreements. In January 2019, for the first time in its history, the Gazprombank banking group successfully launched an important project to buy Doré bars, transport them and sell them to a foreign end purchaser (ICBC Standard Bank London). The basic infrastructure required for regular transactions with Doré bars has now been created, and the transactions have been made regular as part of a 2-year package of contracts between Bank GPB International S.A., GeoProMining Gold (Armenia) and ICBC Standard Bank London. Among other things, these contracts provide an opportunity to pay for deliveries in advance with the help of a credit facility opened by Bank GPB International S.A. The result is an example of efficient use of the strengths of the Gazprombank Group international network and an important stage in the expansion of cross-border interaction between Gazprombank Group units. In terms of purchases of precious metals from mining and processing enterprises, Gazprombank is one of the leaders in the Russian market of precious metals. Last year, purchases exceeded the record 70 tons in gold equivalent. Besides, the Bank is one of the major counterparties of the Central Bank of Russia in terms of gold bars sale and purchase. Besides, the Bank is one of the major counterparties of the Central Bank of Russia in terms of gold bars sale and purchase. Long-established exports to key global centers of spot trade in precious metals — London, Zurich, Hong Kong, Dubai, Singapore and Delhi — continued. Own export operations and exports under commission agency agreements equaled 34 tons in gold equivalent.
A separate area of business in commodity markets is development of the service segment to supply gas and petrochemical companies with hightech catalytic systems and equipment provided by the Bank’s 100% subsidiary, GPB-Metallinvest.
The strategic partners of GPB-Metallinvest are Gazprom, Rosneft, Gazprom Neft, SIBUR Holding, NOVATEK (Yamal LNG), LUKOIL, Krastsvetmet, and Surgutneftegas (KINEF). The subsidiary is the operator (arranger) of the precious metals circulation system at Gazprom Neft, the official dealer of Axens, a subsidiary of Institut Francais du Pétrole et Energies Nouvelles (IFPEN), has dealership status in supplying catalysts produced by Shell Global Solutions (Eastern Europe) B.V.
In 2019, GPB-Metallinvest as the sole supplier of Chevron (USA) catalysts for hydrocracking, hydrotreating, hydrogen production and isodewaxing to Rosneft’s refineries successfully delivered first batches of the said catalysts to RN-Komsomolsky Refinery LLC and JSC Achinsk Oil Refinery VNK.
In 2019, the volume of supplies of chemical products to companies of the gas and petrochemical industries in Russia grew steadily. The first framework contract was made with SIBUR Holding for the supply of Shell catalysts for ethylene oxide production in 2020–2022. Scheduled delivery of Deh-16 propane dehydrogenation catalyst and adsorbents manufactured by UOP (USA) to SIBUR Holding was successfully implemented.
The revenue of GPB-Metallinvest amounted to RUB 10.3 billion in 2019.
In late 2019, the Group had more than RUB 644 billion worth of assets under management. The Gazprombank Group is a market leader in the management of private and institutional investors’ assets.
Joint Stock Company Gazprombank — Asset Management (GPB–AM) is part of the Gazprombank Group’s asset management business and ranks 5th among Russian management companies in terms of customer assets under management. In 2019, Expert RA rating agency confirmed the company’s high service reliability and quality rating of A++.
Managing institutional investors’ assets
In the non-governmental pension funds segment, the Group’s business demonstrated multifold growth. Active expansion in the customer segment in 2019 led to growth of 403% in NGPF assets under the Group management to RUB 71.2 billion. Based on its 2019 results, Gazprombank once again reasserted its leading position on the Russian endowments market, having accumulated the largest number of endowments under management: 64 endowments (57 unique customers). At the same time, the Group business ranks 2nd on the Russian market in terms of endowment fund assets volume, according to Expert RA. The total value of endowment fund assets under management exceeded RUB 6.9 billion, up 18% on the previous year.
The Group currently manages the assets of 87 corporate customers, including major non-governmental pension funds, insurance company reserves, endowment fund assets and self-regulated companies.
Seeking to expand the range of institutional investors’ investment capabilities in the longer term, GPB–AM in 2019 proposed a unique product to the market that fully complies with the regulations on NGPF fund investment. The Company brought two exchangetraded unit investment funds to the market: Gazprombank — Corporate Bonds (2 Years) and Gazprombank — Corporate Bonds (4 Years), in conjunction with their corresponding benchmarks (indicators) calculated by the Moscow Exchange.
Closed-end unit investment funds
The Gazprombank Group is the undisputed leader in the closed-end unit investment funds (CEIF) market. GPB–AM manages 23 funds. For the third consecutive year, the company was rated No.1 by Expert RA agency in terms of customer assets in CEIF, which grew by 81% in 2019 to reach RUB 495 billion.
This vehicle allows investors to structure complex investment deals and do project financing, direct and venture investments. The opportunities provided by closed-end investment funds are popular among wealthy individual customers, too, as they are useful in addressing a wide range of tasks, from property and securities management to financing of various investment projects.
The Gazprombank Group’s retail business likewise recorded healthy growth, with the number of individual customers placing assets under management reaching 55,000. At the same time, assets of individual investors in open-end unit investment funds (OEIF) and those held in individual investment accounts (IIA) increased by RUB 5.7 billion over the year, exceeding RUB 34.7 billion in total. The average open-end fund account size grew by 20% to RUB 660,000. The online business of GPB–AM also performed positively in 2019. In particular, the number of retail customers opening online accounts using the Personal Account feature increased 8 times as compared to the end of 2018, complemented by multifold growth in the amount of funds invested via the remote channel. According to the Moscow Exchange, the company is among the Russian market’s TOP 5 by the number of IIAs.
In 2019, retail customers were offered two new products: the FX Bonds IIA, which enables investment in foreign currency-denominated instruments; and the Gazprombank Plus IIA, aimed at promoting investment in the ruble bonds of Bank GPB (JSC), which combine attractive returns with high reliability.
High Net Worth Individuals
The HNWI asset management business offers wealthy individual customers a wide range of investment solutions tailored to their financial objectives, investment horizons and scopes. The product line comprises strategies with various risk-return ratios. High net worth individual investors have access to ruble and FX bonds, stocks, structured deposits and notes, and leveraged strategies, as well as alternative investment class solutions.
In 2019, the Group’s HNWI asset management business expanded its customer base. The amount of assets brought in by high net worth individual investors grew by 88% to reach RUB 20.5 billion. In 2019, the Group expanded its interval unit investment funds line. Qualified investors now have access to a new specialized leveraged fund called Gazprombank — Eurobonds plus EURO.
The machine engineering assets of the Gazprombank Group provide strategically important sectors of the Russian economy with integrated solutions and unique domestic-made technological equipment.
The highlights of 2019 are as follows:
In the nuclear energy sector:
In the petrochemical and oil and gas refining industries:
Air separation and LNG:
For the space industry:
In the field of new product capture:
The ground-setting document that mobilizes the international business community to handle global issues, is the Global Accord styled “Transforming our world: the 2030 Agenda for Sustainable Development”, approved by heads of states and governments at the UN Sustainable Development Summit in New York on 25 September 2015. This Accord sets forth 17 sustainable development goals aimed at improving the global well-being and protecting our planet.
A new model of the global economy within the sustainable development framework will only take shape if all economy sectors transform themselves in favor of the global agenda. Russian business gets ever more and ever deeper involved in this transformation, with business leaders acknowledging the significance of the UN goals and their role in accomplishing them.
Throughout our almost 30 years of history, we have always demonstrated our whole-hearted commitment to the principles of responsible and honest business conduct and adherence to corporate ethics.
In recent years, social and environmental criteria have become integral components of partnership and project investment. The Bank actively interacts with all stakeholders and makes its annual financial statements and non-financial operating results freely accessible to the general public. Notwithstanding our openness, information safety and customer data protection are our overarching priorities.
We understand the responsibility we owe to our people and endeavor to do everything we can for their well-being, health, safety, and security. The Bank is committed to rigorous observance of the human rights and equal treatment of all employees regardless of their sex, age, or beliefs.
We pay special attention to environmental matters, in particular, by reducing the environmental impact of the Bank’s business processes and by making efficient use of energy and other resources, largely through better management of consumables. The Bank places ever-higher priority on employee education and embedment of a corporate culture that facilitates the proliferation of sustainable development principles both inside and outside the Bank.
The transition from a conventional model of doing business to a sustainable one is a complex, long, and tedious process for entities in any sector of economy. Gazprombank has already embarked upon this course of change, setting new sustainable development goals every year and doing everything possible to achieve them.
In its activities, the Bank follows the principles of good corporate governance recommended by the Bank of Russia and the Basel Committee on Banking Supervision.
The Bank has adopted a Corporate Governance Code and enforces it to ensure that the Bank’s activities conform to international and Russian principles of corporate governance, promoting the risk and capital management system effectiveness on the Bank and the Group level, information transparency, management responsibility and accountability. The Bank’s governance bodies are improving the decision-making system and corporate control tools used to manage Bank assets. In accordance with the Bank of Russia recommendations and the applicable Code, a review of the status of the Bank’s corporate governance system was undertaken in 2019. Another such review will be undertaken in the 1st quarter of 2021.
The internal audit function, performed at the Bank by the Internal Audit Department, is an important element of assuring effective functioning of the Bank’s internal control system. The Internal Audit Department is part of the Bank’s system of internal control bodies and is an independent structural unit reporting and directly accountable to the Bank’s Board of Directors. The Internal Audit Department assists the Bank’s governance bodies in the assurance of efficient functioning of the Bank and Bank Group companies, guided by the principles of going concern, independence, fairness, and professional competence.
In an environment characterized by growing competition among leading banks and technology companies, together with tightening banking regulations, the Bank continued to pursue its Technological Transformation and Retail Business Development Strategy in 2019.
Our digital solutions are changing and reformatting the services to which our customers and employees are accustomed. The continued growth and diversification of our customer base, as well as digital infrastructure upgrades with concurrent improvements in reliability and functionality necessitate the recruitment of highly qualified IT specialists and customer relationship managers. Banking support of contracts for Russia’s largest oil and gas companies and lending to small and mid-sized businesses have also become priority areas of business that require HR reinforcement.
Building upon personnel management experience accumulated in the corporate segment, Gazprombank applies innovative approaches to HR processes setup, continuously endeavoring to improve the convenience, speed and quality of the HR services it provides. Priority is placed on searching the market for qualified specialists, helping personnel to adapt, improving the levels of employee qualification and training in breakthrough technology areas, and developing target-setting, motivation and retention mechanisms for key specialists.
Given the Bank management’s strategic focus on the prioritized development of individual areas of activity, in 2019 it became obvious that the institution of HR business partners needed to be established for the retail business, as well as for the IT support and digital technology areas. HR business partners directly interact on a day-to-day basis with HR service customers at various levels, helping to build a deeper understanding of the business’s current and longerterm needs in the area of personnel management. Work is currently ongoing to transform several functional areas associated with the relocation and centralization of support functions on the basis of regions with optimal labor costs, and to build a service organization toolkit. Cutting support function costs, reducing operational risk levels, and improving the quality and speed of the services provided, as well as internal customer satisfaction levels, help to free up HR resources for redeployment to other areas of the banking business with higher priority or better margins.
In 2019, the Bank’s headcount grew by approximately 3,000 people, mainly retail business staff and IT specialists. While net new hires grew by 50% from 2018, personnel turnover in 2019 remained below the minimum market level for the banking segment, which is explained by the Bank’s stability and reliability, intelligent recruitment, adaptation and training system, mature system of social benefits and guarantees, non-governmental pension schemes and voluntary health insurance, in addition to a corporate culture in which Bank personnel are perceived as the most valuable strategic asset. In its activities, Gazprombank traditionally endeavors to create optimal conditions for its personnel to act in an optimal manner, assisting them in unlocking their potential and fostering in each employee the ambition to be creative and useful for the Bank.
Over 1,100 of the Bank’s employees are qualified financial market professionals, approximately 50 hold MBA certificates, and over 100 have a Candidate of Science or Doctor of Science degree. Over several years, the Bank has relied on in-house personnel selection competences and, alongside recruitment via traditional channels, has developed new mechanisms of horizontal rotation. In particular, this means that freed up personnel from units involved in the support function transformation programs can be redeployed to other business areas and apply their longstanding experience and qualifications with minimum onboarding periods. The Bank welcomes the use of in-house expertise in the search for qualified personnel, and in late 2019 it launched REFriending, a federal program that allows Bank employees to nominate acquaintances and ex-colleagues on a competitive basis. The GPB Space digital portal implemented in 2019, intended for the presentation of the Bank’s events and activities in the information technology sphere, as well as specialized developer conferences held regularly in Bank forums, also helps the Bank to recruit unique specialists with new skill sets and to exchange experience.
To reduce labor input and optimize the timings for hiring mass trade employees (sales office personnel, underwriters, regional network relations managers, field sales staff, secretaries and personal assistants, etc.), Gazprombank has for several years employed the assessment center technology. The Bank has a strong focus on engaging talented young specialists. Students of financial and economic institutes in Moscow, St. Petersburg and other cities are offered traineeships in the Bank’s head office and branches and receive scholarships from the Bank. Graduates who successfully complete their theoretical course and earn a good reputation during their traineeships are offered employment with the Bank. In particular, the Bank’s sponsored chair at MGIMO University, which has existed for the past 8 years, has already trained five cohorts, most of whom are now employed by the Bank. A front-end development trainee school for third-party students has operated at the Bank for two years. The training program, developed jointly with a leading vendor, not only helps to establish close cooperation with the country’s key technical and economic universities, but also to train an external HR standby pool for the implementation of major IT projects within the Technological Transformation Strategy. Significant growth in headcount and mass hiring of different generations of talent, as well as representatives of different corporate cultures have prioritized issues around personnel onboarding, comprehensive integration of new hires into the Gazprombank corporate culture, increased levels of engagement, creation of a process of prompt feedback analysis, and implementation of new HR tools and procedures. Welcome Days are held for head office new hires on a weekly basis, providing them with all the information they need on the Bank, its strategy and goals, key banking units and services, and rules of behavior in extreme situations, as well as on their training, development and self-improvement capabilities. In addition to all the required materials, new hires receive assistance from an onboarding chat bot. In 2019, an updated automated Onboarding Program was launched for retail business new hires across the entire country.
From 2019, open meetings between senior management team members and head office and branch network management became a regular feature at the Bank. More than 400 managers have participated in these events so far, including via online channels. Company-wide and sports events held jointly with relevant units, as well as meetings with interesting personalities and motivational speakers have become regular events, helping to increase personnel engagement, develop horizontal relationships and implement the Gazprombank motto: “One Bank — One Team”. Personnel development is traditionally a strong focus area. In 2019, the number of employees completing in-class training more than tripled to over 9,000 people. Training programs are intended to support the development of contemporary skills and improve head office and branch managers’ leadership capabilities on the basis of modular programs and comprehensive training in professional topics, while regular sales and service training is provided for the Bank’s front office staff. In 2019, an open-ended hiring program format was launched in the Bank’s head office that allows any employee to complete a training course of interest to develop individual competences. The Bank has implemented a comprehensive approach to remote employee training (by year end, more than 18,000 people had been trained). During 2019, the Bank’s training programs portfolio expanded to include 22 new training courses and more than 100 e-courses. They currently offer 94 in-class and mixed training programs and 479 active e-courses. Online training formats are evolving, helping to expand training geographies and audiences.
Much has been done to automate the Bank’s HR services over recent years. In late 2019, a group of forward-looking initiatives in the personnel development and management area was incorporated into the Human Capital Management comprehensive program, aimed at building the Bank’s image as a contemporary and high-tech financial institution, improving performance through correct target-setting, supporting the feedback culture, attracting, retaining and developing talent, and providing customer-oriented HR services. A survey of internal customer satisfaction with service quality, conducted for the second consecutive year, is helping to optimize processes, promptly amend the Bank’s internal regulations, and shift management’s focus to personnel management bottlenecks. In 2019, a country-wide pilot was undertaken with a view to assessing whether the most numerous category of Bank personnel, the retail business front office staff, are satisfied with their work for the Bank. Based on the project outcomes, changes were made to personnel training and motivation programs, information support processes associated with the Bank’s programs and products, and logistical support of operations, interaction and subordination procedures were optimized, and feedback was given to the respondents.
For several years, the Bank has been a co-organizer and active participant of one of the most authoritative forums for the exchange of opinions on relevant personnel management matters, the Human as Capital International Interbank Conference. In 2019, presentations were mainly focused on the most pressing trends in the HRM technology market in a digitizing economy. The Bank HR team’s merits have been acclaimed by the professional community for several years now. In 2019, the Bank was ranked third among Russia’s best employers according to Forbes, having significantly outpaced not only its colleagues in the financial sector, but also the largest industrial and high-tech companies. According to Forbes Woman, Gazprombank was among Russia’s TOP 10 employers for female careers, making its working environments as comfortable for female employees as possible. The Bank implements voluntary health insurance programs providing full coverage throughout pregnancy up to and including birth, grants financial aid to multi-child parents, single parents and parents supporting disabled children, and allows young mothers to choose flexible working arrangements. Previously, Gazprombank won the Randstad Award in the “Most Attractive Employer in Financial Services” nomination for three years on end.
Environmental protection is the dominant strand in the ESG (Environmental. Social. Governance) concept, and a company’s activities cannot be viewed as “sustainable” unless they include nature conservation measures, primarily those aimed at reducing the consumption of resources and generation of harmful emissions polluting our planet’s atmosphere and water bodies.
As its responsible investment concept, aimed primarily at creating positive social change and reducing negative environmental impact, takes shape, Gazprombank has come to pay more attention to investment in, and lending to, “green” projects.
In 2019, the Bank invested in Gazprom — Gas-Engine Fuel LLC, a company engaged in the establishment of infrastructure for the development of the gas engine fuel market in the Russian Federation. On average throughout the country, automobile transport is responsible for approximately 44% of overall pollution, reaching as high as 93% in major cities such as Moscow and St. Petersburg. Natural gas is a cleaner type of fuel compared to gasoline or diesel.
In the course of 2019, 28 new gas motor fuel infrastructure facilities were built or purchased. The transition to gas motor fuel will reduce the level of harmful atmospheric pollutants generated by the transport sector and thus allow city dwellers to breathe cleaner air. The company structure envisages further expansion of the fueling station network to make gas motor fuel more accessible for consumers.
The development of renewable energy is one of the most important trends in the Russian electric power industry and one of the fastest developing sectors in the global economy. It represents a step forward in terms of technology, digitization, and environmental standards.
At present, over 60% of domestic projects in the renewable energy field are implemented with credit support from Gazprombank, which confirms the Bank’s strong interest in green energy projects. The Bank team completed the industry’s first solar power plant construction financing deal back in 2015, and Gazprombank sees good prospects for the financing of more renewable energy projects.
In November 2019, Gazprombank and the portfolio company of the Wind Energy Development Fund (a joint investment fund established by Fortum and the ROSNANO Group on a parity basis) signed a loan agreement for the purposes of financing the construction of the 50.4 MW wind power plant No. 2 in Ulyanovsk and two wind generation plants with a total capacity of 200 MW in the Republic of Kalmykia. The wind generation farms will start supplying electricity to the wholesale electricity and capacity market (WECM) in the fourth quarter of 2020.
Technology and innovations
Technologies aimed at preserving our planet’s ecological resources are acquiring paramount importance for the sustainable development of the global economy. All innovations that reduce waste, cut emissions of pollutants, and help switch to more environmentally friendly materials enable companies to take a step towards responsible business conduct. In 2019, Gazprombank continued on its path towards digitalization, enabling, among other things, a big reduction in paper documentation flows. In particular, towards the end of the year, Gazprombank, jointly with the FinTech Association and the Bank of Russia, became one of the first Russian banks to launch a decentralized depository system (DDS) for mortgage deed accounting using blockchain technology. DDS enables the Bank to start gradually migrating mortgage deals to the digital channel and eliminate the need to use large amounts of paper. Application of this technology will also significantly improve the stability and reliability of electronic deeds data, reduce execution times, eradicate the risk of fraud and the emergence of a gray mortgage deeds market, and minimize the risks of non-existent pledges. As part of the Bank’s New IT Infrastructure program, a Private Cloud platform was created in 2019, to which 66 automated systems were migrated, followed by implementation of automated release of resources in the Private Cloud. A workplace virtualization program was undertaken (using the Virtual Desktop Infrastructure (VDI) technology) and over 9,800 workplaces in the head office and across the branch network were migrated to that technology. Over 850 employees registered on the corporate mobility (MI) platform, and over 300 mobile clients of the uniform communication system were installed, enabling prompt remote access to the Bank’s corporate resources and remote performance of certain tasks. This helped to reduce both employee time and other non-renewable resources spent on traveling to the office.
The Boardmaps automated system was brought into day-to-day use, enabling electronic circulation of preread materials for meetings of the Bank’s collegiate bodies and, ultimately, creating a paper-free office environment. Thirty-two collective advisory bodies are now connected to the system and over 80 meetings have been held to date.
Sorting of waste and recyclable items in Bank offices
This year, the Bank started migrating to the concept of “green” office, i.e. an office where consumption of resources is rational and sparing, and employees are actively involved in waste collection and recycling programs. In the second half of 2019, containers were installed in three Moscow offices to collect batteries, plastic cups and plastic lids in an initiative that is to be rolled out at all Bank sites. Batteries and plastics will continue to be collected in 2020 and will be handed over for recycling as sufficient volumes are accumulated.
In addition, starting from this year, all documents destroyed in the Bank’s Central Archives Store have been handed over for recycling (production of table napkins, toilet tissue, etc.). By the end of 2019, over 76 tons of scrap paper were collected, which helped to save about 760 trees, each of which produces enough oxygen for at least three people.
Protection of endangered fauna species
Preservation of our planet’s biodiversity is one of the most significant aspects of sustainable development, as the problem of species extinction becomes more and more urgent with every passing year. In 2014, Gazprombank committed to an unusual pet: Berry, a female Far Eastern leopard that lives in the Land of the Leopard reserve in the Primorye Territory. In the 20th century, forest fires, poaching and extermination, not so much of the leopard itself as of its traditional quarry, have put this carnivore on the brink of extinction. In the 1990s, no more than 30 of these animals remained, but today their number has increased to about 70, offering hope that this rare species can be preserved. Ninety percent of the Far Eastern leopard population dwells in the Land of the Leopard reserve.
In June 2015, Gazprombank started issuing its Leopardess Berry Cards featuring this remarkable animal. The Bank transfers 1% of every purchase made using the Leopardess Berry Visa Card to the Social Responsibility Charity Fund, for subsequent spending on Berry’s sustenance. The primary goal of this program is to preserve the population of the Far Eastern leopard and help create conditions in which it can thrive. By year end, 2,284 cards in support of Berry the Leopardess had been issued. In 2019, Gazprombank made another annual donation to the Land of the Leopard Fund as a way of supporting its environmental protection efforts.
Every year, we implement over 300 charity and sponsor projects aimed at supporting low-income groups, cultural, academic, arts and educational establishments, public organizations, sports teams and clubs, applied science forums and conferences.
Supporting culture and the arts
Culture is both a stimulus and a vehicle of sustainable development, as it is closely connected with such crucial spheres of mankind’s harmonious development as economics and education. In a globalized environment where numerous communities are both interconnected and exposed, it is culture that helps to preserve the immanent values, historical experience and traditions of each individual country. For this reason, Gazprombank considers it its duty to support projects in the sphere of arts and culture, as well as to promote mutual cultural enrichment between Russia and other countries. One particular focus of the Bank’s culture and arts support program is cooperation with the Igor Moiseyev State Academic Ensemble of Popular Dance. This ensemble, whose repertoire includes dances from all over the world, combines the classical ballet school and popular dancing traditions. Gazprombank is a long-standing strategic partner of this glorious company, supporting its active touring activity. Another Gazprombank’s priority area of cooperation is contemporary Russian art. The Bank’s collection, launched in 2012, has become the first and, to this date, the only corporate collection devoted exclusively to Russian art from the beginning of the 1990s to the present.
From the very start, the collection was meant as a way to support contemporary Russian art and artists. Its main purpose is to create a cross-section of the time and give future generations a better understanding of our “today”. Buying art, Gazprombank is determined to adhere to the initial concept and integrity of the collection, giving preference to well-rounded projects rather than individual pieces. Besides, the Bank commissions new works to artists specifically for the collection.
The Bank’s collection is sought after by curators of museum and other exhibition projects in Russia and abroad. Works from the collection were exhibited in the State Tretyakov Gallery, the National Centre for Contemporary Arts, the Moscow Museum of Modern Art, the Multimedia Art Museum, the Garage Museum of Contemporary Art, the Albertina Museum (Austria), Bologna Museums Association (Italy), projects of the Moscow, Venice, Liverpool, and Ljubljana Biennial, the Thessaloniki Biennial and many others. In 2019, as part of the annual LOOP video art festival in Barcelona (Spain), an exhibition of selected works from the Bank’s collection was placed on display in Casa de Rusia as yet further evidence of evolving international cultural relationships and interest in Russia’s contemporary art.
In addition to supporting contemporary art, Gazprombank assists in the implementation of relevant projects by leading Russian museums, including the Tretyakov Gallery, the Pushkin State Museum of Fine Arts, and the Moscow Kremlin Museums.The Bank is a traditional partner of the Viennese Ball in Moscow, an annual charity event on an international scale. All funds raised are donated to support children’s organizations and foundations.
International cultural cooperation
The Bank invariably supports the international cultural cooperation agenda. In Verona, in the fall of 2019, the Tchaikovsky Symphony Orchestra, directed by maestro Vladimir Fedoseyev, gave a free concert. Arranged by Gazprombank, the concert was a landmark event in Russian-Italian cooperation in the humanitarian sphere.
By way of making a contribution to the promotion of healthy lifestyles, the Bank provides sponsorship to organizations involved in the development of sports such as football, hockey, rowing, tennis, handball, dancing sport, acrobatic rock and roll, and others, especially in relation to children and young people. We have been partners of the Zenit football club for many years. With the help of the Gazprombank — Zenit FC co-branded card, a charity program has been set up, to which the Bank will make donations from its funds in favor of Zenit FC Junior Sports School to train young footballers. The Bank is also the general partner of SKA hockey club in the CHL championship. As part of its cooperation with the Russian Football Union, Gazprombank is the official Bank partner of the Russian national football team for the 2020–2021 season. Gazprombank has for a long time supported competitions in various dancing sports arranged by the Russian Dancing Union and the Russian National Federation of Dancing Sports and Acrobatic Rock and Roll. Every year, championships and festivals held according to the Latin American and European programs, as well as domestic and international acrobatic rock and roll competitions, attract the best sportsmen from all continents.
Since the end of 2015, corporate acrobatic rock and roll clubs have been set up in 22 Russian cities, where anyone of any age or physical status can give this dynamic sport a try.
Supporting disadvantaged groups
Assistance to disadvantaged groups, such as veterans’ organizations, orphanages and boarding schools, occupies a prominent place in the Bank’s social program. Support for orphans is one of the most important aspects in this area. For many years, the Bank has made donations to Children’s Villages — SOS, an interregional non-governmental charity. This is a unique alternative to orphanages — a model as close to a normal home as possible, where children live as in a regular family. There are currently six SOS villages in Russia: in Tomilino, Lavrovo, Pushkin, Kandalaksha, Vologda, and Pskov. There are also six Youth Centers (2 in St. Petersburg, 2 in Oryol, 1 in Lyubertsy and 1 in Murmansk). In total, there are more than 400 children living in Children’s Villages — SOS homes. The Bank is involved in the construction of family houses for children’s accommodation and provides financial assistance on an annual basis. We regularly allocate funds for the provision of targeted charitable aid to critically ill children and entire medical establishments, and also procure medicines and special equipment, including ambulances. Since 2009, we have run a traditional “I Believe in Father Frost” New Year Eve charity campaign for the benefit of orphaned children. On New Year’s Eve, Gazprombank employees start performing small miracles. Every child residing in an orphanage supported by the Bank is given the opportunity to share their most heartfelt wish. Envelopes containing letters from the children appear on Christmas trees at several Bank sites. To join the “Father Frost Team”, employees merely have to take an envelope and make the child’s dream come true. As many years of practice have shown, our colleagues are not afraid of addressing the children’s most challenging wishes, some of which require formidable commitment in terms of time and search abilities. During this campaign, Gazprombank staff have provided invaluable aid not only in procuring New Year presents, but also in purchasing specialized medical equipment, children’s furniture, and sports equipment.
Search for young talent
Customer funds remain the primary source of funding for Gazprombank’s lending and investment business, accounting for 85% of the Bank’s liabilities at the end of 2019. The Bank’s reputation as a reliable borrower and a competitive pricing policy have enabled it to retain a strong position on the corporate borrowing market, while active promotion of its settlement and deposit products, coupled with customer service improvements, have helped reinforce its position in the retail segment.
Capital market borrowings, including bond placements and subordinated debt, account for a further 5.8% of the resource base. In 2019, the Bank made scheduled repayments of several foreign currency-denominated debts, partly replacing them with new issues of local bonds and funds of the Bank’s corporate and retail customers, so that the share of capital market borrowings declined by 2.0 p.p. from the end of 2018, whereas that of customer account balances in liabilities increased by 3.4 p.p. As the borrowings focus shifted towards local funding sources, including retail customers, this was reflected in the currency structure of liabilities: the share of ruble-denominated funding grew to 70% from 59% over 2019.
Funds of corporate and private customers are a key component of the Bank’s resource base. The experience of many years of successful cooperation with major Russian companies and comprehensive servicing of their employees has allowed the Bank to expand its product offerings for current customers and attract new customers, thereby maintaining steady organic growth of corporate customers’ balances. At the same time, the Bank continued to implement the strategy for developing its retail business. The development of the retail deposit product line in accordance with seasonality trends in the customer base and the price environment in the market, along with vigorous marketing activities, providing convenient services to customers, and developing the omni-channel customer service platform, allowed the Bank to boost its retail account balances by 23% to RUB 1,220 billion.
Debt capital markets
The fundraising portfolio in capital markets constitutes a stable long-term funding base for the Bank and plays an important role in maintaining the net stable funding standard. As of end 2019, the portfolio amounted to RUB 342 billion (5.8% of the Bank’s liabilities). Most of it was raised by placing ruble-denominated bonds in the Russian market, the volume of such bonds grew 35% to RUB 268 billion in 2019. The loan portfolio is characterized by a smooth repayment schedule.
In 2019, the Bank actively developed its bond products offer for individuals. In particular, the amount of outstanding additional bond issues placed predominantly among individuals reached RUB 6.5 billion. As additional issues are placed, bids are executed in real time, while secondary market liquidity is achieved through market-making. In addition, the Bank has been offering index bonds to its retail customers since 2018. This product combines the features of a borrowing instrument and a derivative financial instrument, affording 100% capital protection and an opportunity to earn incremental income. The scope of index bond placements more than doubled in 2019, reaching RUB 3.3 billion.
Resource base structure as at 31 December 2019, %
The Bank’s depository is assigned the AAA reliability rating according to the national depository reliability rating scale, and is ranked first among the TOP 30 biggest depositories in terms of the market value of deposited securities.1
At the end of 2019, the Bank depository was serving over 430,000 depo accounts and maintaining securities registers for more than 1,200 issuers. In the course of the year, more than 1,250,000 depository transactions were carried out, securities income was distributed on more than 4,000 issuers’ corporate actions, and over 460,000 notifications of more than 9,200 issuers’ corporate actions were emailed to depositors. The Bank depository acts as the custodian in relation to storage and recording of the underlying asset for the issuance and redemption of ADRs on Gazprom shares. In 2019, the Bank continued its collaboration with DOM.RF as the depository providing mortgage deed accounting and custody services. At the end of 2019, the Bank depository had approximately 135,000 mortgage deeds in custody, with the total amount of the mortgage-secured obligations in excess of RUB 200 billion.
For the purposes of implementing its electronic mortgage deed depository accounting project, the Bank actively participated in the FinTech Development Association (FTDA) Task Force for the implementation of the Decentralized Depository System (DDS) developed on the Masterchain platform. The Bank has accepted the DDS for pilot operation, with the first issue of electronic mortgage deeds scheduled for early 2020. To upgrade the depository’s software and hardware facilities, and to expedite the automation of its operations, the Bank in 2019 launched a project for the design, development and implementation of a new automated depository system for issuegrade securities. In 2019, the Bank depository implemented a project featuring electronic document exchange with corporate customers via the Remote Banking and Corporate Settlement Center system. This helped to improve the quality and convenience of using depository services and made it possible to initiate execution of depository operations without having to visit to a Bank service location. The Bank’s specialized depository was ranked among the TOP 10 of the national rating of specialized depositories on the back of its performance in 1H2019, and was in the nineth line on the TOP 10 list of specialized depositories in terms of assets in custody as of 30 June 2019. The value of assets held in custody was over RUB 135 billion as of 30 June 2019.
The Bank’s specialized depository supervises asset management of its customers, which include, in particular, mortgage bond issuers, mortgage pool managers, and state-owned corporations and funds established by the Russian Federation. In 2019, the Bank’s specialized depository once again won the tender of the State Space Corporation ROSCOSMOS; as a result it concluded a 2-years specialized depository services agreement for additional monitoring of investment of the coropartion’s idle cash.
In 2019, the Bank completed a transformation of the customer depository service model, aimed at improving the quality and service provided to depository customers. As a result of the action taken, over 70 Bank offices in a number of different country regions were designated to provide services to individual depositors. In regional service locations, depository customers can receive qualified advice on the procedure for conducting depository operations, submit depository orders and obtain statements and transaction completion reports. The Bank engages in depository operations on the securities market in strict accordance with the law, the Bank of Russia regulations and basic standards, with a view to satisfying customer needs as fully as possible, including development of the product range of services and instruments, optimization of business processes and tariff policy, and implementation of new service technologies. The model of the depository business adopted by the Bank will enable it to benefit from its competitive advantages — an extensive customer base, a strong brand, and a wide service network — as much as possible.
The Bank continues refining and developing a new pipeline of technologies, launching further process automation projects, as well as developing a portfolio limitation methodology, synchronizing financial planning and risk budgeting processes, and building a business continuity system.
Risk management system
The Board of Directors annually approves the Risk Appetite Statement, which includes both quantitative and qualitative indicators designed to provide high-level guidelines on the structure and values of risks and capital that the Bank and the Group are willing to take in pursuit of their strategic goals. The Bank and the Group then use the approved risk appetite parameters and operationalize them to the level of limits for separate risks and positions. The following key principles guide the Bank’s approach to risk management:
a) The Board of Directors adopts the general risk and capital management policy and determines the level of risk acceptability (risk appetite), strategic goals, fundamental risk management policies and the stress-testing scenarios. For the purpose of in-depth and all-around review of matters, the Audit Committee and the Compensation Committee operate under the Board of Directors. The Audit Committee’s mandate includes preliminary review of matters related to internal and external audit, and matters of risk and capital management coming within the terms of reference of the Board of Directors.
The mandate of the Compensation Committee of the Board of Directors includes preliminary review of matters coming within the terms of reference of the Board of Directors and related to establishment and functioning of an effective remuneration system subject to accepted risks.
b) Within the risk and capital management strategy adopted by the Board of Directors, the Management Board provides overall risk management for the Group’s operations and regularly monitors actual risk levels to see how they conform to the approved risk appetite level.
c) Dedicated committees and commissions reporting to the Chairman of the Management Board and the Management Board of Bank GPB (JSC) (Credit Committee, Assets and Liabilities Management Committee (ALM Committee), Transformation Committee, Financial Markets Committee, ICAAP and Operational Risks Commission, Corporate Governance and Compensations Committee, Assets Restructuring Committee, and Retail Business Committee) are designed to address issues relating to individual risk types. Members of the committees are appointed by the Chairman of the Management Board.
d) Units of the Risk Management Service (RMS) are independent from business units, whose functions envisage risk-taking, and are supervised by the Head of the Risk Management Service reporting directly to the Chairman of the Management Board.
e) Risk management is applied in an integrated manner at all operational levels, considering the relationships and cross impact of various risks. The Bank’s RMS performs the function of managing Group risks.
f ) At the Group level, the Bank has adopted a Group Risk and Capital Management Strategy which defines the roles and objectives of the management bodies of the Group companies, including those of local Risk Management Services (if any), as they pertain to identification, assessment, monitoring and control of risks assumed by the Group companies.
The Group has an integrated risk management system, which enables it to:
The Group’s risk management system is underpinned by advanced standards, models and practices accepted by banking groups. In 2019, the Bank was focused on the following aspects of risk management:
Key risks in 2019
1. Credit risk
The Group is exposed to the risk of financial losses occurring due to a borrower or counterparty defaulting on their obligation to the Group (credit risk). Credit risk is managed in accordance with the regulations of the Bank of Russia, Basel Committee principles and guidelines concerning banking supervision, and internal documents developed to incorporate such principles.
The main objectives of credit risk management include but are not limited to:
Credit risk management is based on uniform methodological approaches and procedures within the framework of an integrated system of risk analysis, management and control. Credit risk management is performed at all stages of the credit process, from the review of a customer’s loan application to the full settlement of all liabilities. The credit risk management process includes the following key elements:
Qualitative assessment of credit risk is designed for a comprehensive analysis of deals with credit risk exposure taking into account non-quantifiable factors, which takes the form of conclusive expert opinions on acceptability of the requested deal parameters, identified risk factors and measures required to minimize credit risks taken in that regard. Quantitative assessment of credit risk provides a quantification of the credit risk taken, which is then used in the Bank’s and the Group’s internal processes. Quantitative credit risk assessment is exercised in accordance with the Group’s models based on the classification of credit claims:
Counterparties are assigned internal ratings based on the approved models for estimating the probability of borrower default. Internal credit ratings are used to take lending decisions and calculate expected losses, define price terms of deals and create provisions, conduct risk-weighted analysis of the loan portfolio and financial planning. Target credit risk levels are set in accordance with risk appetite. The Group sets ultimate risk limits for every borrower or a group of borrowers. Compliance with (and use of ) credit risk limits is monitored on an ongoing basis and takes the form of checking the terms and conditions of deals against the approved limits. Development and improvement of the credit risk limits system is a priority line of work for the Group. The key credit risk monitoring tools applied by the Bank and the Group are:
The outcomes of these monitoring and control procedures are integrated with the provisions creation system (RAS/IFRS) and procedures for identification of, and working with, potentially distressed and distressed assets of the Bank and the Group. Alongside credit exposure control at the level of individual operations (transactions) and customers, the actual exposure is continuously monitored based on the cumulative debt in the portfolio of lending operations. The degree of the actual utilization of the credit exposure portfolio limits is assessed compared to their critical and alarm levels designated by the authorized bodies. The results of the monitoring of compliance with credit exposure portfolio limits are included in the regular reports submitted to the Board of Directors, the Management Board, the Chairman of the Management Board, the Head of the Risk Management Service, heads of Risk Management Service divisions, members of the Bank’s relevant Committees and Commissions.
In the event of risks going above the prescribed alarm or critical values, decisions are made to address the situation by mitigating accepted risk, increasing the amount of available capital for risk coverage, or by redistributing pre-set limits among divisions and individual types of risk. Where negative trends are identified in the activities of counterparties that are legal entities, they are included in the relevant section of the Watch List Register information resource adopted by the Bank with the following status: Troubled Counterparties, Potentially Troubled Counterparties, and Watched Counterparties. Information is included into the Watch List Register depending on the selected strategy of further work with the assets and mechanisms that impose restrictions on transactions with counterparties.
The Group performs stress tests of credit exposure on a regular basis (at least once a year), in order to evaluate potential changes in the quality of the loan portfolio in the event of unfavorable changes in the economic situation. Stress testing includes scenario analysis, which assesses the effect of changes in a relevant set of macro factors, and sensitivity analysis, which evaluates the influence of distinct (discreet) events on the quality of the loan portfolio or the status of transactions with counterparties. As long as credit risk management in retail lending is concerned, analysis of the borrower’s credit risk and security analysis are of importance.
Transaction analysis and decision-making process includes application of the following procedures:
Following the above procedures, the decision on the counterparty’s loan application is made automatically (without the expert team involvement) and with due account of the motivated judgment based on the independent expert review completed by the expert team. Qualitative risk assessment also applies to partners who are legal entities, if they are involved in retail customers lending programs implementation, to decide on potential cooperation with a partner or define the terms of such cooperation.
2. Concentration risk
Concentration risk arises in connection with the Group’s exposure to big risks, which may cause significant losses with a potential to jeopardize the paying capacity of the Bank and the Group entities and their ability to continue operations. The Group performs on a regular basis:
The Group stress tests concentration risk regularly in order to evaluate potential losses in the event of adverse changes in the economic situation as part of the integration stress testing. The result of stresstesting is presented in the form of evaluation of the impact of negative scenarios on quantitative metrics of concentration risk, capital adequacy, and actions aimed at minimization of expected losses.
To limit the risk of concentration of financial claims, the Group has adopted limits per country, industry, region, per borrower (group of related borrowers), per one person affiliated with the Bank (group of persons affiliated with the Bank), per a fixed number of major counterparties (groups of counterparties), and limits for operations in financial markets. Limits of concentration risk are set and revised by the authorized body on a regular basis with due account of the appetite for risk and capital budget. Simultaneously with the setting / revision of limits of concentration risk for each type of the above limits, the following parameters are determined at the discretion of the authorized body:
Monitoring of the credit concentration risk starts as soon as a credit limit is imposed in relation to a counterparty and continues until the counterparty discharges all obligations to the Bank and the Group. The action plan aimed to mitigate concentration risk (setting risk limits, transfer to a third party, securitization, etc.) is defined on the basis of the accepted exposure level.
3. Country risk
Country risk is a risk of financial losses due to foreign counterparties defaulting on their obligations to the Group for economic, political or social reasons, or as a result of a limited access to the counterparty’s committed amounts denominated in foreign currency because of national legislation (irrespective of the counterparty’s creditworthiness).
The Group manages this risk as part of the overall credit risk management system in accordance with the Bank’s Country Risk Policy, which lays out the key principles and approaches to the evaluation of country risks and calculation of limits. The risk value depends on the country’s economy parameters (GDP level) and sovereign rating.
4. Liquidity risk
The Group manages its liquidity to ensure that sufficient liquidity is available to meet its commitments to customers, creditors and note holders, and to fulfill its business plans for active banking operations at all times. The Bank’s liquidity management system is an integrated solution of risk identification, evaluation and control across the Group’s banking segment. It is an essential part of the assets and liability management (ALM) system at the Group level, including the head office and regional branches. The liquidity management system consists of two main components:
The liquidity management policy is subject to approval by the Board of Directors upon submission by the Management Board. At the executive level, liquidity risk is managed by the ALM Committee. The ALM Committee determines the policy for asset and liability management that aims to build up a liquidity gap control framework considering maturity profiles for assets and liabilities. It also helps to provide effective diversification of funding sources and availability of sufficient funding in stressed conditions. The Risk Management Service monitors liquidity risks and reports on the status regularly to the ALM Committee, the Management Board and the RMS Head. Risk reporting includes qualitative and quantitative risk estimations, stress testing results, and evaluation of additional liquidity sources (liquidity buffer).
Liquidity risk management methods
The liquidity risk management system is integrated into the transaction planning processes in order to determine the required funding sources in normal and stressful situations. The Group applies limits on the following liquidity risk indicators to mitigate it:
Alarm risk levels are established in addition to critical ones. When an alarm risk level is achieved (which signals a high level of risk), escalation procedures are initiated to develop and implement mitigation measures.
Gap analysis estimates the forecast excess or shortfall of cash inflows over outflows grouped by maturity and currencies and thus allows identification and management of open liquidity exposures. Gap analysis is supported by scenario analysis, which includes a realistic scenario (business as usual) and liquidity stress scenarios. Scenario analysis is performed as part of regular risk evaluation:
As part of the liquidity risk management system, the Bank has a Contingency Funding Plan (CFP) that sets out the strategies for addressing liquidity shortfalls in emergency situations. The CFP is updated on an annual basis and outlines policies to manage a range of stress scenarios, and establishes lines of responsibility, including proactive emergency monitoring and CFP activation procedures.
5. Market risk
Managing market risk includes limitation and monitoring of market risks that affect the Group’s banking business. Responsibility for the decisionmaking process regarding acceptable market risk levels is vested in dedicated bodies: ALM Committee, Financial Markets Committee and the Chairman of the Management Board. The market risk management function is assigned to the Risk Management Service. The Bank’s existing market risk management system is based on:
The RMS supports the market risk management system on a regular basis, and, in particular:
Interest rate risk
Interest rate risk in the trading book comes from the bonds and derivatives present in the Bank’s trading portfolio. Interest rate risk in the banking book arises when there is a mismatch between the maturity profiles of rate-sensitive assets and ratesensitive liabilities.
The bank uses the following parameters to assess interest rate risks:
The Bank’s policy with respect to the interest rate risk exposure is reviewed on a regular basis and approved by the Board of Directors. The RMS prepares regular reports on the interest rate revision gaps, value at risk and scenario analysis (including interest risk stress-testing) for the Bank’s management bodies and the ALM Committee. In accordance with the Bank’s appetite for risk, the ALM Committee and the Financial Markets Committee have set the following indicators of interest rate risk:
The principal sources of currency risk include investment in foreign companies and banks, as well as the position arising from creation of provisions on currency assets that is subject to timely hedging. The Bank is free of significant currency positions opened for the purpose of speculative gains. Currency risks arising from transactions with customers are hedged by counter transactions with highly reliable counterparties.
The Financial Markets Committee sets limits on VaR and risk exposure on the Group level as well as on currency risk exposure for each portfolio (trading, investment, that of the Bank and each of its subsidiaries, etc.). For trading portfolios, maximum losses are also limited (stop-loss). Separate limits apply to operations involving derivatives. The Bank’s currency risk exposure limits comply with the minimum requirements of the Bank of Russia. The Bank assesses the value at risk and sensitivity of profit to foreign exchange rate fluctuations as part of a stress scenario. Stress testing provides conservative scenarios for fluctuations of currencies and precious metals against the ruble.
The Bank has investments primarily in sovereign securities and bonds of high-quality major Russian issuers. The Bank also assumes risks from nonmarket financial instruments (strategic and direct investments). These risks, however, are specific, due to the fact that no revaluation is required for this type of assets and the investments are long-term, which makes it possible to gain profit from projects once the economic environment becomes favorable. Derivatives are used for risk hedging. The VaR methodology is only applied to quoted instruments. Non-quoted instruments are not included in the traditional VaR model, and a separate model is used to calculate the capital value for these instruments. Therefore, the Bank does not exercise real-time monitoring of risks relating to these assets. The main tool for managing this risk is allocating capital to cover the risk of depreciation over the horizon of financial planning (one year).
The Bank also assesses the sensitivity to securities price changes as part of a systemic stress scenario. Stress testing includes analysis of conservative scenarios, where the stress level assumes a decrease in quotes for equities and an increase in YTM for debt securities. According to the Bank’s risk appetite, the Financial Markets Committee sets market risk limits (VaR limits, limits for sensitivity to interest rate fluctuations), limits for maximum losses (stop-loss), limits for exposure level (nominal limits, structural limits). The Committees also make decisions on the risk concentration limits for each issuer/financial instrument.
6. Operational risk
Operational risk is associated with the probability of direct and/or indirect losses arising as a result of:
The existing operational risk management methodology framework lays the foundation for implementing the operational risk proactive management strategy, enabling integrated management of operational risks and control procedures.
The operational risk management system is described in the Bank and Bank Group Operational Risk Management Policy and includes the following key elements:
These components, taken together, enable prompt identification and rectification of deficiencies in policies, processes and procedures for the effective operational risk management purposes. Special attention is paid to a systemic approach to regular operational risk monitoring and reporting and significant risks of loss from materialization of the Bank’s and the Group’s operational risks.
Group member subsidiary banks follow the approaches, principles and recommendations developed by the Bank in relation to the set-up of the Operational Risk Management System generally, as well as the individual tools and elements of that system.
The Bank and Group members will apply the following key principles in the aims of preventing all types of operational risks and mitigating potential financial losses:
For the purposes of mitigating the negative impact of individual types of operational risks, the Bank has in place a comprehensive insurance program, which includes:
In 2019, the Bank launched a multi-stage Cybersecurity Program, aimed at selecting and implementing means of information protection that are commensurate with contemporary threats.
The information security threats landscape changed in 2019. This was due to the impact of the following factors: sweeping development of the retail business, the creation of new online services, the engagement of external contractors with unique competences, and the application of new customer acquisition and service channels.
Previously, banks as a rule tried to foresee potential damage and prevent incidents. Today, Gazprombank has migrated to a risk-oriented approach based on the degree of protection analysis of the target system. This has helped to cut costs and reduce the time to market of popular banking products. In 2019, the following projects were implemented in the information protection area:
In the first half of 2019, two comprehensive regulator reviews were successfully passed, both of which touched upon information security aspects:
Following the reviews, the regulators assessed Gazprombank’s information security level as high in the financial industry context.
Geographic location of the branches across principal regions where the Bank has a foothold as of 6 April 2020:
|Regions||Number of branches||Locations|
|Central Federal District||3||Krasnogorsk (Moscow Region), Tula, Voronezh|
|Northwestern Federal District||2||St. Petersburg, Kaliningrad|
|Southern Federal District||1||Krasnodar|
|North Caucasian Federal District||1||Stavropol|
|Volga Federal District||1||Nizhny Novgorod, Ufa, Perm, Samara, Kazan|
|Ural Federal District||3||Yekaterinburg, Surgut, Novy Urengoy|
|Siberian Federal District||4||Tomsk, Novosibirsk, Krasnoyarsk, Kemerovo|
|Far Eastern Federal District||1||Vladivostok|
359 sales offices are located in 223 cities and towns, including 148 (66%) in cities with a population in excess of 500,000. To improve the Bank’s availability and customer service quality, 20 new officers were opened in 2019 as part of the Sales Office Network Transformation program. In 2019, the Bank embarked on a branch network management model transformation project, aimed at improving its performance.
Number of offices opened in 2019
|West Siberian Branch||1|
|Far Eastern Branch||2|
|Central Black Earth Branch||3|
|Total branch network||20|
|Total branch network + Moscow branch offices||26|
Perception of the financial institution’s visual image and values by different target audiences is one of the key success factors in customer interaction.
In 2019, Gazprombank significantly transformed its principles and approaches to publicity, consistently moving towards greater openness and activity as regards Russian and international media relations. The Bank’s public relations specialists, with support from the Bank’s experts, analysts, and top officials, processed and provided information and authoritative opinions in response to over 500 media inquiries, while managers of various Bank business lines gave 17 full-feature interviews for the Russian and international media.
Six press tours were arranged for the benefit of Gazprombank’s industrial assets. The press tours took place in Russia and abroad at industrial facilities where equipment manufactured at Group facilities successfully operates: the Vostochny Cosmodrome space launch facility, the Kirovo-Chepetsk Chemical Plant, the Metafrax facility in the Perm Region, the Sakhalin-2 project, and a phosphorus plant in Kazakhstan. In total, journalists from 32 Russian federal and regional media (including nine TV channels) and two Kazakhstan-based publications participated in the press tours. The tours resulted in dozens of articles in the Russian and foreign media. Bank representatives were also closely involved in various discussions on the development of the banking sector, infrastructure projects, financial markets, state-of-the-art financial technologies, corporate financing, and other topics. The Bank consistently occupies leading positions in the rankings of Russia’s credit institutions enjoying the widest media coverage. In 2019, according to the Interfax News Agency’s SCAN system, 99% of references to the Bank were either positive or neutral.
The extremely harsh competition for customers in the banking sector requires prompt responses to any changes in the media market. Every year, Gazprombank formulates an up-to-date strategy for the promotion of all its retail products and its Private Banking segment. To promote flagship products (deposits, loans, cards), federal advertisement campaigns are held on television, in the streets and via digital channels. The scale of these campaigns is sufficient to capture the attention of up to 87% of the target audience. Furthermore, to improve Gazprombank brand recognition and memorability, a rebranding was undertaken in the summer of 2019 and a contract was signed with media personality Pavel Volya on his participation in advertising campaigns during the fall to promote retail loan and deposit products.
By September, the first advertising campaigns featuring Pavel Volya were launched in relation to the rebranded Easy Loan and Your Success deposit products. It was to a large extent due to these new and memorable advertising campaigns that the Bank ranked first in retail cash loan market share in October, and became the leader in term deposit market share growth in 4Q2019.In addition, the results for 2019 show that Gazprombank brand awareness grew by 10 p.p. to reach a record level of 76% in December 2019; advertising awareness grew to 12% from 7%, also reaching a record level by the end of 2019. In terms of individual products, year-end advertising recognition grew 2–3 times. All of these factors are having a positive impact on the acquisition of new customers for all the Bank’s retail products.
Gazprombank’s brand recognition and memorability are being significantly improved by broadcasting its special projects on television, radio and social media. The implementation of a series of such projects resulted in multifold growth in the number of subscribers to the Bank’s social media pages: its VK group grew from 17,000 to 264,000, while the Instagram follower base grew from 10,000 to 33,000. On Facebook, organic audience growth over the most recent year exceeded 5,500 people, reaching 11,000 subscribers. The number of Yandex searches for “Gazprombank” doubled in 2019, from 600,000 to 1.2 million a month.
The number of visits to the gazprombank.ru website grew 2.5 times in 2019 vs. 2018, from 12 million to 30 million. There were also sponsor projects aimed at fostering Gazprombank’s positive image. In 2019, a number of marketing options designed to achieve image and marketing objectives were included in the contract with Zenit football club, a long-standing partner of the Bank. In particular, Artem Dzyuba, captain of Zenit and the Russian national football team became the brand ambassador for the Chempionskiy (Champion’s) deposit. In addition, promo zones named “Entry Suite”, “Kids’ Bank” and “Lecture Center” were built in the Gazprom-Arena stadium. The stadium also features Russia’s first augmented reality zone, where all fans can take selfies with football players. Another important event in 2019 was the start of cooperation between Gazprombank and the Football Union of Russia, with the Russian national team holding three match-days1 in Kaliningrad, Moscow, and St. Petersburg. On the launch day of the Chempionskiy deposit advertisement campaign, the Russian team played Scotland in the Luzhniki arena.
This systemic approach to sponsorship projects is helping to address not only the marketing tasks of interaction with sports organizations but also the key business objective of acquiring new customers as efficiently as possible. Gazprombank’s marketing system was reinvented during the reporting year. To accomplish the outstanding tasks, a strong team was established to take care of all advertising activities and partner programs, studies and product marketing, and a creative development system was set up. Work in the area of internal communications and event management is also being approached in a new way, both for the Bank’s employees and for external partners and customers.
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Growth in the number of gazprombank.ru website visits
Gazprombank brand awareness in December 2019
Growth in the number of Yandex searches for Gazprombank
of target audience
Federal advertising campaign coverage in terms of television, street advertisement, and digital channels
In 2019, regional marketing efforts were considerably reinforced and systematized, in particular, uniform merchandising standards were developed and implemented. The project’s primary objective is to make offices convenient and understandable for customers, and to define the overall rules of information posting inside offices. Much was also done in the reporting year to develop internal communications within the Bank. New tools were launched: regular mail campaigns, corporate TV at key sites outside the head office for which almost 200 videos were produced, and an Instagram account covering the Bank’s internal corporate life, @gpb_life, which had over 4,000 followers by year end. Based on its 2019 results, Gazprombank was named “Leader Company: Best Corporate Media Communication System” at the Silver Threads annual national corporate media resources contest. The “Gazprombank. Heroes in Person” video project, in which the Bank’s senior executives talk about their careers, hobbies, and working principles, was received with much interest on the part of employees.
Over 1,000 employees participated in the projects of GPB Transform, the Employee Holistic Personal Development Platform. The essence of the platform is best described by its slogan: “Improve yourself, improve your Bank”. The project aims to involve employees in the Bank’s corporate life, enable networking with colleagues from different units and cities, promote healthy lifestyles, and broaden outlooks. The Transformation of Power. Pushing the Boundaries (sports competition among employee teams trained by professional coaches) and Transformation of Spirit (a course for creative employees in three categories — Dancing, Acting Technique, and Photo) projects were for the first time held with the participation of colleagues from branches. The Bank team again won the Banking Championship in the Heroes Race project and participated in the world and European OCR (Obstacle Course Race) championships. One new element of the Platform was the Transformation of Mind, which became a forum for the GPB QUIZ championship and 12 GPBIntellectorium events — informal meetings with interesting personalities from the worlds of science, culture and arts, business and sports.
This was a truly breakthrough year for the internal communication function, with both the relaunch of a number of existing projects and the kick-off of new initiatives, primarily designed to develop the corporate culture and build a positive attitude towards the transformational changes taking place in the Bank.