Vnesheconombank published its consolidated financial statements under IFRS and non-financial report of the VEB Group for 2017.
Vnesheconombank carries out the simultaneous disclosure of its IFRS financial statements and non-financial report for the first time. This approach will allow users of the reports to get a more comprehensive picture of VEB's activities as a development institution.
«In 2017 VEB Group tackled several important tasks: among those were support to the largest infrastructural projects and implementation of disruptive technologies, reduction of cost of funding and diversification of funding sources financing of new projects strategically important for the Russian economy and work with the old portfolio. The second year of our transformation process was not an easy one, but overall good. Despite the sanctions, the Group actively engaged with foreign counterparties, primarily from Asia, and was also active in the domestic market, implementing new instruments for liquidity management. VEB’s raised credit ratings also contributed positively. The range of VEB’s partners and investors is increasing, which allows to engage in challenging projects in priority spheres for the development institution», - emphasized Nikolai Tsekhomsky, First deputy chairman of Vnesheconombank – Member of the Board.
Alongside with the new priority spheres, we also progressed working on the old portfolio of the Group. We elaborated individual strategies for each asset depending on its type. As a result in 2017 we saw a more than twofold decline in provision charges compared to 2016.
The Group’s operating profit before allowance for impairment at the end of 2017 amounted to RUB 25.5 bn. The net result of 2017 is better than that of 2016 less the effect of the state support. Compared to 2016, the amount and the format of the required state support changed significantly. «It is however extremely important that the development institution receives state support, allowing it to carry out development projects crucial for the economy. And now it is not only the support to the Group’s liquidity and capital but for innovative instruments as well», - said Nikolai Tsekhomsky.
The VEB Group’s non-financial report for 2017 discusses the key achievements of Vnesheconombank as the leading development institution in Russia and reviews the progress on the Strategy 2021 implementation.
- The cumulative effect from the projects financed by VEB in 2017 reached 0.34% of GDP (0.33% in 2016);
- At the end of 2017, VEB’s loan portfolio constituted 14.6% of total bank loans in Russia with a tenor of 3 years or more, which reflects Vnesheconombank’s important role in long-term lending in Russia;
- At the end of the reporting period, VEB was involved in financing of 222 projects for a total of RUB 4,485.4 bn with VEB’s commitment standing at RUB 2,303.3 bn. Inter alia, the portfolio of VEB financed projects included 109 projects in priority strategic sectors for a total of RUB 2,398.0 bn with VEB’s commitment standing at RUB 878.4 bn.
- In the reporting year, VEB Group actively worked on mechanisms of search and selection of promising projects and attracting business partners to these projects. Thus, in addition to the already funded projects, VEB approved 26 projects for a total of RUB 845.1 bn with VEB’s commitment standing at RUB 189.3 bn, including 25 projects in priority spheres.
- In 2017, for each priority sphere of investment, sectoral plans were developed and approved, the preparation of which was carried out in accordance with the new integrated approach of VEB;
- In 2017, VEB has already started developing the concept of VEB 3.0. This is the answer to the new challenges facing VEB and the Russian economy in a rapidly changing global world.
The VEB Group’s key performance indicators for 2017 under IFRS are as follows:
- The value and structure of assets and liabilities changed insignificantly compared to 2016:
- Total assets decreased by 5.5% (by RUB 197.4 bn) to reach RUB 3.38 trl;
- Total liabilities decreased by 1.2% (by RUB 37.4 bn) to reach RUB 2.98 trl.
- Loan portfolio constituted 53% of the Group’s assets. The loans to customers before provisions slightly increased, but the net loan portfolio was down by 6.3% to RUB 1.8 trl.
- The amount of new loans granted by VEB for 2017 amounted to RUB 189 bn. This is not only the financing under previously signed agreements, but also the launch of new projects in such sectors as aircraft construction, infrastructure, export support and high-tech production.
- For 2017 provisioning for the interest bearing assets reached RUB 250 bn, decreasing more than twice compared to 2016 (RUB 510 bn), in particular the provision charge for the loan portfolio went down from RUB 489 bn for 2016 to RUB 226 bn for 2017.
- Provisioning within the transformation of the “old” portfolio was the main cause of the net loss for 2017 in the amount of RUB 287.7 bn compared to the net loss of RUB 111.9 bn for 2016.
- Amounts due to banks and debt securities issued constituted 55% liabilities (compared to 2016, their share has not changed). At the same time, there have been certain changes within these articles, due to the sanctions restrictions and the inability to raise new funding in Western markets.
- In 2017, the share of amounts due to Western banks and investors in Eurobonds in liabilities significantly decreased by RUB 186 bn from 44% to 33%. These funding sources were offset by the subsidy from the federal budget in the form of an asset contribution of the Russian Federation recognized within authorized capital of RUB 103.4 bn, and were also refinanced by funds raised both on domestic and new for Vnesheconombank's capital markets.
- At the year end of 2017 the VEB’s Group equity came at RUB 395.7 bn. Capital adequacy ratio (under RAS) amounted to 10,8%.
- In the first quarter of 2018, Vnesheconombank received a subsidy of RUB 95.6 bn to compensate for costs related to the fulfillment of obligations arising from foreign borrowings in the capital markets. As of March 31, 2018, Vnesheconombank's capital adequacy ratio reached 13.1%.
- Confidence in Vnesheconombank as a development institution of significant importance for the Russian economy and a high level of state support are confirmed by the rating actions of leading international and national rating agencies that assigned VEB ratings at the level of the sovereign rating of the Russian Federation:
- In 2017, ACRA assigned AAA(RU) to Vnesheconombank;
- In 2017 and at the beginning of 2018, Moody’s, S&P and Fitch improved the outlook on the VEB ratings;
- In February, 2018, Standard & Poor’s raised its credit ratings on Vnesheconombank from the speculative level of ‘BB+/B’ to the investment grade of ‘BBB-/A-3’, reflecting the similar rating actions on the Russian Federation.