OREANDA-NEWS. Gazprombank (Open Joint-Stock Company) issued consolidated IFRS financial statements for the year ended 31 December 2012. Key financial indicators of Gazprombank Group are presented below:

RUB bn

　

31.12.2012

31.12.2011

Change over 12M 2012

Assets

2 841,0

2 477,7

+14,7%

Equity

363,5

242,9

+49,6%

Corporate loans [1]

1 613,0

1 311,6

+23,0%

Retail loans [1]

210,3

142,7

+47,4%

Securities [2]

330,3

296,5

+11,4%

Corporate deposits

1 415,6

1 272,9

+11,2%

Retail deposits

315,5

266,5

+18,4%

Capital market borrowings [3]

325,5

211,1

+54,2%

Subordinated debt

57,4

133,6

-57,0%

　
　

12M 2012

12M2011

Change 2012 / 2011

Net profit

30,9

40,8

-24,4%

Total comprehensive income

27,3

29,4

-7,2%

　
　

31.12.2012 / 12M 2012

31.12.2011 / 12M 2011

Change

Total capital adequacy [4]

13,9%

14,3%

-0,4 п.п.

Tier I capital adequacy [4]

11,0%

9,6%

+1,4 п.п.

Non-performing loans to gross loans to customers [5]

1,2%

1,4%

-0,2 п.п.

Allowance for impairment to gross loans to customers

3,6%

4,0%

-0,4 п.п.

Loans1 to deposits ratio

105,3%

94,5%

+10,8 п.п.

Net interest margin [6]

2,9%

3,6%

-0,7 п.п.

Cost to income ratio [7]

47,2%

39,4%

+7,8 п.п.

Business growth

During 2012 Gazprombank Group’s (the “Group”) total assets increased by 14.7% and amounted to RUB 2 841bn. The asset growth was largely driven by the loan book, which grew slightly faster than assets, increasing by 25.4% over the course of the year, totaling to RUB 1 823.3bn at the end of 2012. Part of this loan growth was funded by cash and cash equivalents, which decreased by 12.5% over the year to reach RUB 432.1 bn. Consequently the Group substantially improved asset structure: the share of the loan portfolio (net of impairment provisions) in the Group’s asset structure increased from 56.4% at the end of 2011 to 61.9% at the end of 2012, while the share of cash and cash equivalents declined from 19.9% to 15.2% over the same period.

The amount of corporate loans was up by 23.0% since the year-end 2011, which is above the average growth rate for the banking sector, and reached RUB 1 613.0 bn (before impairment provisions), principally due to increased commercial lending and project finance. The retail loan book (before impairment provisions) also increased from RUB 142.7bn at the end of 2011 to RUB 210.3bn at the end of 2012, posting growth of 47.4% over the period. The major drivers in retail lending were mortgages and consumer finance loans.

Customer funds, both corporate and retail, remain the principal source of the Group’s funding: their share in total funding was 69.9% at the end of December 2012 vs. 68.9% at the end of December 2011. The amount of corporate accounts and deposits stood at RUB 1 415.6 bn as of 31 December 2012, up by 11.3% from year-end 2011 levels, which is in line with the sector average growth in corporate funding. Retail customer funds increased by 18.4% to reach 315.5bn as of 31 December 2012.

The favorable market conditions in 2012 enable the Group to substantially increase its borrowings in local and international debt capital markets, improving the maturity profile of liabilities and limiting interest rate risk for the Group. Capital market borrowings were RUB 325.5 bn as of 31 December 2012 vs. RUB 211.1 bn the year before, taking their share in total liabilities to 13.1% from 9.4% at the end of 2011.

Capital adequacy

During 2012, the Group actively improved its capital base, both by capitalization of profit and by capital management transactions:

• in June 2012 was completed an additional placement of common shares of GPB (JSC ), which were purchased by the State corporation “Bank for Development and Foreign Economic Affairs (Vnesheconombank)”, Non-state Pension Fund “Gazfond” and JSC “Gazprom”. The purchase of additional shares was funded by conversion of a part of subordinated deposits from shareholders in the total amount of RUB 90bn;

· USD500m 7-year Tier 2 subordinated eurobonds were placed in May 2012;

· in October 2012 the Group issued perpetual subordinated bonds in the total amount of USD1 bn, which further strengthened Tier 2 capital of the Group.

The above transactions enabled the Group to substantially improve capital adequacy indicators. The Tier 1 capital per Basel II Framework increased by 41.5% over the course of 2012, taking the Tier 1 capital adequacy ratio to 11.0% as of 31.12.2012 compared to 9.6% as of 31.12.2011. The total capital adequacy ratio at the end of 2012 was 13.9% and substantially exceeded the minimum requirement of 8% set by the Basel Framework.

The capital increase allowed the Group to significantly increase the loan book while keeping capital adequacy indicators at high levels. The risk-weighted assets over the course of 2012 grew by 22.4%.

Profitability

The Group’s net profit for 2012 amounted to RUB 30.9bn vs. RUB 40.8bn for 2011, net profit for 2011 included one-off credit commissions. Adjusted for their contribution, the net profit for 2012 would be higher by 7.4% compared to 2011. Comprehensive income for 2012 which includes investments revaluation recorded directly in equity amounted to RUB 27.3 bn, close to RUB 29.4bn earned in 2011.

During 2012 the Group demonstrated stable net interest margin, which comprised 2.9% by the end of the year. The net interest and fee income that represent the core banking business in 2012 reached RUB 73.3bn, which is by 7.7% higher than RUB 68.0bn reported in 2011 (adjusted for one-off commissions). The share of net interest and fee income in the total operating income structure reached 62.9% in 2012 vs. 60.5% in 2011.

Trading income, including gains from securities and FX operations, constituted RUB 20.6 bn for 2012 vs. RUB 19.2 bn for the previous year.

The net profit from the Group’s non-banking business in 2012 was RUB 4.8 bn. The non-banking assets of the Group include machinery segment (JSC OMZ and other assets), media business (JSC “Gazprom Media Holding” Group), as well as other investments.

The sustained growth of the Group’s business in 2012 led to a supervised growth of costs: the operating expenses of the Group were RUB 55.0 bn in 2012 vs. RUB 44.3 bn in 2011. Therefore cost/income ratio for 2012 of 47.2% is within limits set by the Group’s strategy.

Asset quality

Asset quality indicators of the Group remain traditionally high. As of 31 December 2012, the share of non-performing loans (gross amount of loans with payments overdue by 90 days and more) in the loan portfolio was 1.2%, down by 20bps over the 12 months of 2012.

The allowance for impairment was 3.6% of gross loans as of 31 December 2012 vs. 4.0% as of 31 December 2011, translating into a higher provisioning coverage ratio of 3.1 times at year-end 2012 vs. 2.8 times at year-end 2011.

Deputy Chairman of Management Board of Gazprombank Alexander Sobol comments: “We view the Bank’s financial performance in 2012 as undoubtedly positive. The Bank substantially reinforced its capital base, expanded its business in 2012 and established strong foundation for future business growth. We pay special attention to developing a modern integrated risk management system, which enabled to keep high asset quality and stable profitability of our business. The growing contribution of the traditional banking business to the operating income thanks to an increasing share of the loan portfolio in the Group’s total assets is a noteworthy and positive trend.”

[1] gross amounts (before allowance for impairment)

[2] includes trading securities, investments available-for-sale, investments in associates and investments held-to-maturity

[3] includes bonds issued and syndicated loans

[4] according to Basel II Framework (Basel II simplified standardised approach)

[5] loans are regarded as “non-performing” if the loan has been in default as to payment of principal or interest for 90 days or more

[6] calculated as net interest income for the reporting period over the chronological average of the balances of interest earning assets as at the end of each three-month period included in the reporting period. Interest-earning assets include due from credit institutions, loans to customers and debt securities (all – before allowances for impairment)

[7] Operating expenses include banking salaries, employment benefits and administrative expenses. Operating income include net interest income, non-interest income and non-banking operating profits