OREANDA-NEWS. June 16, 2014 - Gazprombank (Open Joint-stock Company) issued consolidated IFRS financial statements for the first quarter of 2014. Key financial indicators of Gazprombank Group are presented below.

billions of Roubles

31.03.2014

31.12.2013

Change

Assets

3 915,6

3 647,0

+7,4%

Equity

400,7

403,1

-0,6%

Corporate loans 1

2 259,1

2 147,0

+5,2%

Retail loans1

294,8

287,6

+2,5%

Securities 2

390,0

419,8

-7,1%

Cash and cash equivalents

661,7

521,9

+26,8%

Corporate deposits

1 935,4

1 867,5

+3,6%

Retail deposits

373,5

393,3

-5,0%

Capital market borrowings 3

448,8

396,5

+13,2%

Subordinated deposits

117,0

97,1

+20,5%

 

1Q 2014

1Q 2013

Change 2014 / 2013

Net income

-3,7

5,6

─

Total comprehensive income

-2,6

5,1

─

 

31.03.2014 / 1Q 2014

31.12.2013 / 12 months 2013

Change

Total capital adequacy4

12,6%

13,2%

-0,6 п.п.

Tier I capital adequacy4

8,9%

9,9%

-1,0 п.п.

Non-performing loans (NPL) to gross loans to customers5 (NPL)

1,1%

1,0%

+0,1 п.п.

Allowance for impairment to gross loans to customers

3,5%

3,2%

+0,3 п.п.

Loans1-to-deposits ratio

110,6%

107,7%

+2,9 п.п.

Net interest margin6

3,4%

3,2%

+0,2 п.п.

Cost-to-income ratio7

47,2%

47,1%

+0,1 п.п.

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, or in the event of borrower's default

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 includes net interest income, non-interest income and non-banking operating profits.

Restrained dynamics of business volume in line with targets

According to consolidated IFRS financial statements Gazprombank Group's (the "Group") total assets increased by 7.4% in the 1Q 2014 and reached RUB 3 915.6 bn as of 31.03.2014. The growth of assets was mainly driven by the growth of loan portfolio by 4.6% up to RUB 2 464.4 bn as of the end of 1Q 2014, and the increase of cash and cash equivalents from RUB 521.9 bn as of the year end up to RUB 661.7 bn as of 31.03.2014. The growth of the Group's assets was supported by the increase in corporate funding, borrowings from debt capital markets and refinancing operations with the Central Bank of Russia (the "CBR").

Lending represents core business of the Group, as of 31.03.2014 it's share in the total assets of the Group constituted 62.9%. Gross corporate loans grew by 5.2%, as compared to the end of 2013, and amounted to RUB 2 259.1 bn. Retail loans posted a growth of 2.5%, increasing from RUB 287.6 bn as of the end of 2013 to RUB 294.8 bn as of 31.03.2014.

In the 1Q 2014, investments in securities decreased by 7.1% from RUB 419.8 bn to RUB 390.0 bn. The main factors behind this were sale of certain equity instruments and dividend distribution to the Group.

A 26.8% growth of cash and cash equivalents in the 1Q 2014 was stipulated by the Group's conservative policy aimed at increasing of the volume of liquid funds during the period of aggravating instability of economic situation. As of 31.03.2014, the share of cash and cash equivalents constituted 16.9% of the Group's total assets as compared to 14.3% as of the end of 2013.

As of 31.03.2014, funds from corporate and retail clients amounted to RUB 2 308.9 bn, having increased by 2.1% as compared to the end of 2013. Customer funds remain the principal source of the Group's funding base: their share in liabilities was 65.7% as of 31.03.2014.

In the 1Q 2014, borrowings in debt capital markets, including eurobonds, domestic bonds and syndicated loans, increased by 13.2% and reached RUB 448.8 bn as of 31.03.2014. The growth was achieved due to the issuing of US Dollar- and CNY - denominated eurobonds. Borrowings in capital markets are well-balanced by their repayment terms and investors' base and represent a moderate share of the Group's liabilities, making 12.8% as of 31.03.2014.

In the 1Q 2014, the Group increased the volume of funds obtained from the CBR. As of 31.03.2014, funds received from the CBR collateralised by loans and securities pledged by the Group contributed RUB 318.8 bn.

Retaining high quality of assets

The Group continues to demonstrate high asset quality: as of 31.03.2014, the non-performing loans (overdue 90 days or more and defaulted loans) constituted 1.1% of gross loans (31.12.2013 - 1.0%); the loan loss provision was 3.5% of the gross loans (31.12.2013 - 3.2%).

Charge for impairment of interest earning assets was primarily attributable to the decrease in the Rouble exchange rate affecting the valuation of foreign-currency denominated loans, as well as the commencement of insolvency proceedings in respect of one of Gazprombank's corporate borrowers. As of 31.03.2014, allowance for impairment cover non-performing loans 3.1 times.

Sustainable growth of recurring income

In the 1Q 2014, the Group recognised net loss in amount of RUB 3.7 bn as compared to RUB 5.6 bn net profit for the same period a year before. Total comprehensive loss, which additionally includes revaluation of available-for-sale investments and other operations directly recorded in equity, constituted RUB 2.6 bn against total comprehensive income of RUB 5.1 bn in 1Q 2013.

The core banking business revenue including net interest and fee income (before allowance for impairment) increased by 41.7% as compared to the 1Q 2013, having reached RUB 27.5 bn against RUB 19.4 bn in the previous year.

The Group's net interest margin for the 1Q 2014 constituted 3.4% as compared to 3.2% for 12 months of 2013. At the same time interest spread in the 1Q 2014 increased to 3.8% as compared to 3.4% for 12 months of 2013.

As a result of the mentioned above factors for the change in the amount of allowances for impairment in the loan portfolio impairment charge in the 1Q 2014 constituted RUB 11.7 bn as compared to RUB 3.1 bn for the three months 2013. Thus, revenues of the Group originating from its interest and commission business, less allowances for impairment, decreased slightly making RUB 15.8 bn for the 1Q 2014 as compared to RUB 16.3 bn for the three months 2013.

As a result of significant volatility in the financial markets the Group recognised a RUB 0.4 bn loss from operations with securities and foreign currency as compared to the RUB 1.1 bn profit in 1Q 2013.

The policy of operating expenses optimisation allowed the Group to maintain cost-to-income ratio at 47.2% as of 31.03.2014 as compared to 47.1% as at the end of 2013.

Capital adequacy

The Group's equity posted a decrease in the 1Q 2014 by 0.6% and as of 31.03.2014 constituted RUB 400.7 bn. At the same time, total capital calculated in accordance with the requirements of Basel II Framework (Basel II) reached RUB 487.8 bn, having increased, as compared to the end of 2013, by 3.5%. This increase is attributable primarily to the Group's issuance of CHF 350 million Tier II subordinated Eurobonds.

Tier I capital adequacy ratio calculated in accordance with Basel II constituted 8.9% as compared to 9.9% as of 31.12.2013. Total capital adequacy ratio amounted to 12.6% as compared to 13.2% as of the end of 2013.

"We are satisfied with resilience to unfavorable macroeconomic conditions, which was demonstrated by the Bank in the first quarter of 2014. Our efforts over the past several years to increase the share of recurring income in total operating income of the Bank, conservative lending policy and close attention to optimisation of operating expenses of the Bank allow to minimise the negative impact of business environment and to continue confident development of the Bank", noted Mr. Alexander Sobol, Deputy Chairman of the Management Board of Gazprombank.