OREANDA-NEWS. Gazprombank (Open Joint-stock Company) issued consolidated IFRS financial statements for the six months ended 30 June 2014. Key financial indicators of Gazprombank Group are presented below.

billions of Roubles

30.06.2014

31.12.2013

Change

Assets

3 811.3

3 647.0

+4.5%

Equity

398.9

403.1

-1.0%

Corporate loans1

2 210.0

2 147.0

+2.9%

Retail loans1

305.3

287.6

+6.2%

Securities 2

388.6

419.8

-7.4%

Cash and cash equivalents

594.2

521.9

+13.9%

Corporate deposits

1 903.0

1 867.5

+1.9%

Retail deposits

387.3

393.3

-1.5%

Capital market borrowings 3

453.4

396.5

+14.4%

Subordinated deposits

111.8

97.1

+15.1%

Ѓ@

1H 2014

1H 2013

Change

Net income

2.6

12.4

-79.0%

Comprehensive income

3.3

11.5

-71.3%

Ѓ@

30.06.2014/ 1H 2014

31.12.2013 / 12M 2013

Change

Total capital adequacy 4

12.5%

13.2%

-0.7 p.p.

Tier I capital adequacy4

9.0%

9.9%

-0.9 p.p.

Non-performing loans 5, % of gross loans to customers

1.2%

1.0%

+0.2 p.p.

Allowance for impairment, % of gross loans to customers

3.6%

3.2%

+0.4 p.p.

Loans1 to deposit ratio

109.8%

107.7%

+2.1 p.p.

Net interest margin 6

3.2%

3.2%

+0.0 p.p.

Cost to income ratio 7

43.4%

47.1%

-3.7 p.p.

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 Ѓgnon-performingЃh 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.

Moderate growth of business

Gazprombank Group's (the ЃgGroupЃh) total assets per IFRS financial statements for the six months ended 30 June 2014 increased by 4.5% and amounted to RUB 3 811.3bn. The growth of assets in 1H 2014 was mainly driven by the growth of loan portfolio by 3.3% reaching RUB 2 515.3 bn, and the increase of cash and cash equivalents from RUB 521.9 bn as of the year-end 2013 to RUB 594.2 bn as of 30.06.2014. The growth of the Group's assets was supported by an increase in corporate funding, borrowings from debt capital markets and refinancing operations with the Central Bank of Russia (the ЃgCBRЃh).

As of 30.06.2014 the share of the loan portfolio in the total assets of the Group constituted 63.6%. Gross corporate loans grew by 2.9%, as compared to the end of 2013, and amounted to RUB 2 210.0 bn. Retail loans posted a growth of 6.2% from RUB 287.6 bn as of the year-end 2013 to RUB 305.3 bn as of 30.06.2014. Moderate loan portfolio growth rates are consistent with the Group's targets for 2014.

The share of securities portfolio in the Group's total assets amounted to 10.2%. Most of securities (75.7%) are fixed income instruments. In the 1H2014 investments in securities decreased by 7.4% from RUB 419.8 bn to RUB 388.6 bn. The main factor behind this was the disposal of certain equity and debt instruments.

Due to adverse economic conditions in the 1H2014 the Group has increased the share of cash and cash equivalents. As of 30.06.2014 the share of cash and cash equivalents constituted 15.6% of the Group's total assets as compared to 14.3% as of the end of 2013.

Retaining stable funding base

Customer funds remain the principal source of the Group's funding base: their share in liabilities was 67.1% as of 30.06.2014. As of 30.06.2014 funds from corporate and retail clients amounted to RUB 2 290.3 bn, having increased by 1.3% as compared to the end of 2013. Corporate deposits increased by 1.3% over the 1H 2014 and amounted to RUB 1 903.0 bn. In the 2Q 2014 retail deposits grew by 3.7% partially offsetting a decrease in the 1Q 2014. As a result retail deposits decreased by 1.5% in the 1H2014 and amounted to RUB 387.3 bn as of 30.06.2014.

In the 1H 2014, borrowings in debt capital markets, including eurobonds, domestic bonds and syndicated loans, increased by 14.4% and reached RUB 453.4 bn as of 30.06.2014. The growth was achieved due to the issuing of USD- and CNY-denominated eurobonds and domestic RUB bonds. Borrowings in capital markets represent a moderate share of the Group's liabilities, making 13.3% as of 31.03.2014.

As of 30.06.2014 the volume of CBR funds collateralised by loans and securities amounted to RUB 247.2 bn or 7.2% of the Group's total liabilities, increasing by 18.3% compared to the end of 2013.

Retaining high quality of assets

The Group continues to demonstrate high asset quality: as of 30.06.2014, the non-performing loans (overdue 90 days or more and defaulted loans) constituted 1.2% of gross loans (31.12.2013 - 1.0%).

At the same time as a result of unfavorable macroeconomic conditions and external political factors the Group decided to apply a more conservative approach to its provisioning policy. The loan loss provision as a share of gross loans increased by 0.4 p.p. vs. the end of 2013 and amounted to 3.6%. As of 30.06.2014, allowance for impairment cover non-performing loans 3.2 times.

Growth of recurring income

In the 1H 2014, the Group recognised profit in amount of RUB 2.6 bn as compared to RUB 12.4 bn for the same period a year before. Total comprehensive income, which additionally includes revaluation of available-for-sale investments and other operations directly recorded in equity, constituted RUB 3.3 bn in 1H 2014 against RUB 11.5 bn in 1H 2013.

The core banking business revenue, net interest and fee income (before allowance for impairment), increased by 28.2% as compared to the 1H 2013, having reached RUB 52.3 bn against RUB 40.8 bn in the previous year. The share of the core banking business revenue in operating income increased to 84.7% in 1H 2014 vs. 80.6% in 1H 2013. The Group's net interest margin for the 1H 2014 constituted 3.2%, at the same level as in 2013.

Charge for impairment of interest earning assets amounted to RUB 21.5 bn in the 1H 2014 vs. RUB 6.7 bn in the 1H 2013. As a result of conservative provisioning policy, cost of risk increased to 1.5% in the 1H 2014 as compared 0.5% in the same period a year before.

Gain from operations with securities and foreign currency in the 1H 2014 amounted to RUB 3.6 bn vs. 0.1 in the 1H 2013.

The policy of operating expenses optimisation allowed the Group to achieve cost-to-income ratio of 43.4% as of 30.06.2014 as compared to 47.1% as at the end of 2013.

Maintaining capital adequacy

The Group's total capital calculated in accordance with the requirements of Basel II Framework (Basel II) reached RUB 479.4 bn, having increased, as compared to the end of 2013, by 1.8%. This increase is attributable primarily to the Group's issuance of CHF 350 million Tier II subordinated Eurobonds. At the same time, tier 1 capital posted a decrease in the 1H 2014 by 2.0% and as of 30.06.2014 constituted RUB 344.6 bn.

As of 30.06.2014 tier I capital adequacy ratio calculated in accordance with Basel II constituted 9.0% as compared to 9.9% as of 31.12.2013. Total capital adequacy ratio amounted to 12.5% as compared to 13.2% as of the end of 2013.

GPB (OJSC) has comfortable level of statutory capital adequacy. Core tier 1 capital adequacy ratio (N1.1), calculated in accordance with Basel III on unconsolidated basis, amounted to 7.34% as of 30.06.2014; total capital adequacy ratio (N1.0) - 11.50%.

ЃgDuring the first six months of 2014 the Bank faced unstable market conditions which required us to put priorities on measures to support the Bank's resilience to external risks. Such measures included adjustment of credit risk appetite, rebalancing of our market securities portfolios, enhancing the Bank's liquidity position and putting additional emphasis on our operating efficiency. The Bank's financial position is also supported by the strategic focus on the priority growth of core banking business generating recurring revenues which was accomplished during the past several yearsЃh, said Deputy Chairman of the Management Board Mr. Alexander Sobol.