VEB.RF published its consolidated financial statements prepared in accordance with International Financial Reporting Standards for 2020.
VEB.RF Chief Financial Officer Andrey Moskovskikh said: “We are pleased to post a net profit of RUB8.4bn in accordance with IFRS for 2020. This is the result of our efforts to follow the government’s agenda and reorient VEB.RF’s activities towards achieving national goals and building up a new, high-quality portfolio of projects in infrastructure, industrial production, export and urban economy development. The most serious challenge we faced in 2020 was definitely mitigating the consequences of the pandemic.
“As part of the government’s large-scale rescue package for ailing businesses, VEB.RF issued surety bonds totalling about RUB500bn to commercial banks. The surety bonds were intended to guarantee that businesses would repay their interest-free or low-interest loans. This helped millions of people to keep their jobs at hundreds of companies. We can see the general trend is for borrowers to improve their performance in various business segments.
“VEB.RF’s agenda is expanding to encompass active partnership with commercial banks and international financial institutions, the introduction of responsible and green financing, and the consolidation of development institutions under the umbrella of VEB.RF. The capital adequacy ratio of 17% and a comfortable level of liquidity allow us to invest considerably in our development priorities.”
Key financial results of the VEB.RF Group in 2020:
The VEB.RF Group made a profit of RUB8.4bn in 2020. The positive financial result was achieved by great and efficient efforts to carry out projects of importance to the national economy amid the COVID-19 pandemic and global economic slowdown.
Operating income reached RUB233.0bn in 2020, or RUB97.1bn more than in 2019, driven by the following:
- net fee and commission income increased from RUB8.2bn in 2019 to RUB21.5bn in the reporting period due to higher income from guarantees, surety bonds and letters of credit;
- net interest income decreased from RUB25.8bn in 2019 to RUB12.2bn in 2020, largely because of lower interest rates in debt markets and due to IFRS-based interest rate calculation for impaired loans;
- non-interest income grew due to the positive revaluation of loans and securities at fair value.
The Group’s assets increased by 6.7% (+RUB215.3bn) on the beginning of the year to RUB3,406.1bn as at 31 December 2020. Assets changed due to increases in the loan and lending portfolios as well as financial investment assets.
The total loan and lending portfolios, less provision for impairment, grew year on year by 3.6% (+RUB40.3bn) and 13.1% (+RUB20.3bn) respectively. Taken together, they accounted for 39.5% of the Group’s total assets.
The loans given by VEB.RF in 2020 totalled RUB243.1bn. The main borrowers were shipbuilding, gas to chemicals, engineering, infrastructure development and airport modernisation, city development and IT.
Apart from lending in 2020, VEB.RF was also actively involved with the government’s COVID-19 rescue schemes. VEB.RF issued surety bonds totalling about RUB500bn to commercial banks in 2020 to help businesses to repay their loans. As at 31 December 2020, the value of surety bonds was RUB396.6bn.
Provisioning for expected credit losses was RUB28.6bn in 2020, including RUB12.0bn for VEB.RF’s surety bonds issued as part of the government’s rescue package. The loan loss provision was restored for RUB7bn.
The Group’s liabilities decreased by 1.8% (–RUB48.6bn) in the reporting year to RUB2,717.1bn as at 31 December 2020. Liabilities changed due to a decrease of 19.3% (–RUB148.9bn) in amounts due to the Russian government and the Bank of Russia, including derecognising the obligations under the deposit agreements with the Bank of Russia after receivables under the agreements were used as the Russian Federation’s contribution to VEB.RF’s capital.
The decrease in debt securities issued was largely due to the redemption of Eurobonds with a nominal value of USD1.6bn in July 2020. The decreased value of external borrowings was partly offset by increased domestic bond borrowings and amounts due to banks.
The Group’s equity went up by RUB263.9bn (+62.1%) in 2020 to RUB689.0bn as at 31 December 2020. Equity grew, inter alia, due to the following contributions:
- in accordance with Article 1.4 of Federal Law No. 49-FZ of 18 March 2020 “On the Transfer of Part of Income Gained by the Central Bank of the Russian Federation from the Sale of Ordinary Shares in Public Joint-Stock Company Sberbank of Russia”, the Russian Ministry of Finance used the Bank of Russia’s receivables from VEB.RF in May 2020 as the Russian Federation’s contribution to VEB.RF’s capital under the VEB.RF deposit agreements. After receiving the contribution and derecognising the obligations under the deposit agreements, VEB.RF recognised an increase of RUB350.4bn in its capital as a transaction with owners while increasing uncovered losses by RUB142.6bn;
- in the reporting period, VEB.RF received a government subsidy of RUB19.3bn as the Russian Federation’s asset contribution intended to make a contribution to the share capital of the Far East Development Fund for the implementation of priority investment projects. The subsidy was recognised in additional paid-in capital.
VEB.RF’s capital adequacy ratio in accordance with RAS was 17.0% as at 31 December 2020 (13.6% as at 31 December 2019).
In 2020, VEB.RF had its international credit ratings reaffirmed at the same level as the sovereign rating of the Russian Federation (S&P: BBB-, Fitch: BBB, Moody’s: Baa3). The Analytical Credit Rating Agency (ACRA) also reaffirmed VEB.RF’s credit rating at the highest level of AAA.
As part of the government’s administrative reform aimed at streamlining procedures in governmental agencies, changes were introduced in 2020 to the system of development institutions. Ordinance of the Russian Government No. 3710-r of 31 December 2020 approved the list of development institutions pulled together under the umbrella of VEB.RF, laying out the state corporation’s agenda for the near future. VEB.RF is working to implement the road maps approved by the ordinance and submit proposals to the government for approaches to managing these development institutions.
VEB.RF published its interim condensed consolidated IFRS financial statements as at June 30, 2020
VEB.RF published its interim condensed consolidated financial statements under IFRS as at June 30, 2020.
«As instructed and backed by the Russian government, in the reporting period VEB.RF was actively involved in the large scale measures to support the Russian business during the COVID-19 pandemic. By the time of IFRS statements publication the total amount of guarantees issued by VEB.RF in favour of commercial banks for the loans to business at zero or reduced interest rate nearly reached RUB 500 bn. All decisions were taken promptly and on time. The financial result of H1 2020 was affected by the created provisions (including provisions for guarantees for loans to small and medium business) and by the decrease in net interest income (against the global loan interest rate drop). At the end of H1 2020 capital adequacy ratio was 18%, VEB.RF has been supporting projects in infrastructure, industry, urban development and export support, - said Andrey Moskovskikh, CFO of VEB.RF.
VEB.RF Group’s key financials for H1 2020 are as follows:
- As at June 30, 2020 the Group’s assets increased by 2.4% (RUB +76.3 bn) as compared to the beginning of the year, reaching RUB 3,253.7 bn. The increase in the loan and leasing portfolio, as well as in investment financial assets, stipulated the assets dynamics.
- As compared to the end of 2019 total loans less allowance for impairment and net investments in leases went up by 5.2% (RUB +66.6 bn) to reach RUB 1,350.9 bn. The total loan and leasing portfolio accounted for 41.5% of the Group’s total assets.
- The amount of loans granted by VEB in H1 2020 reached RUB 95.7 bn. Investment priority sectors included industry, infrastructure and urban economy, as well as export support.
- Among the projects for which financing started in the reporting period are the following projects: Amur gas processing plant construction in Blagoveshchensk, projects aimed at public transportation development in Perm and Tver, etc.
- In H1 2020 allowance for expected credit loss amounted to RUB 21.1bn, including the amount of provisions of RUB 12.1 bn for guarantees provided in favour of credit institutions within anti-crisis measures of the Russian government.
- Weakening of the Russian rouble affected the indicators and the Group’s result for H1 2020.
- The Group’s total liabilities as at June 30, 2020 decreased by 3.4% (RUB -94.0 bn) to RUB 2,655.8 bn. The liabilities dynamics is accounted for by the decline in amounts due to the Russian Government and the Bank of Russia by 21.8% (RUB -168.5bn) because of derecognition of obligations under deposit agreements with the Bank of Russia. The growth in debt securities issued was due to the currency revaluation of securities denominated in foreign currency.
- Operating income for H1 2020 totaled RUB 46.6 bn, exceeding that for the same period of 2019 by 12.0%. In the operating income structure, net interest income amounted to RUB 3.4 bn, net commission income reached RUB 5.1 bn and non-interest income was RUB 38.1 bn. Interest income decrease was caused, inter alia, by the Bank of Russia key rate cut and by the specifics of interest rate calculation on impaired loans in accordance with IFRS.
- For H1 2020 VEB.RF Group recognized a loss of RUB 43.5 bn. The negative financial result of the Group was mostly driven by the loss on initial recognition of guarantees issued in favour of commercial banks to secure their loans, provided to companies to support the Russian economy during the COVID-19 pandemic, and by the creation of provisions including those for the guarantees mentioned above.
- The Group’s equity for H1 2020 went up by RUB 170.3 bn (+39,8%) and as at June 30, 2020 amounted to RUB 597.9 bn. Equity increase was, inter alia, due to the following asset contributions as part of state support provided to VEB.RF:
- in May 2020 the Russian Ministry of Finance contributed the rights of claim of the Bank of Russia to VEB.RF under agreement to place funds on deposits with VEB.RF as an asset contribution of the Russian Federation to VEB.RF’s authorized capital in accordance with Article 1.4 of Federal Law No. 49-FZ On the Transfer of Part of Income Gained by the Central Bank of the Russian Federation from the Sale of Ordinary Shares of Public Joint-Stock Company Sberbank of Russia of 18 March 2020. Upon receipt of the asset contribution and derecognition of obligations under deposit agreements, VEB.RF recognized an increase in the authorized capital in the amount of RUB 350.4 bn as a transaction with the owner with an increase in uncovered loss in the amount of RUB 142.6 bn;
- in the reporting period VEB.RF also received a subsidy of RUB 19.3 bn from the federal budget as an asset contribution of the Russian Federation in order to make a contribution to the share capital of JSC Far East and Arctic Development Fund for the implementation of priority investment projects. The whole amount of the subsidy was recognized within additional paid-in capital;
- additional paid-in capital was also increased with the subsidy of RUB 2.4 bn granted from the federal budget as an asset contribution of the Russian Federation for the purchase of shares in Russian Export Center JSC in order to increase share capital of EXIAR JSC under the federal project “Systemic Measures to Develop International Cooperation and Export” of the national project “International Cooperation and Export”.
- VEB.RF’s capital adequacy ratio (according to RAS) was 18.0% as at 01.07.2020 (13.6% as at 01.01.2020).
A comfortable liquidity cushion (cash and cash equivalents account for 14.0% of total assets as at June 30, 2020) and equity allow VEB.RF to perform the development institution’s functions and actively facilitate the programs of national importance for the Russian economy and aimed at mitigating the consequences of the COVID-19 pandemic.