Vnesheconombank’s Financial Statements under IFRS for the Nine Months of 2012 Published
Vnesheconombank releases consolidated financial statements under IFRS for the nine months of 2012.
1. Dynamics of main components of assets and liabilities
(analysis based on balance indicators comparison as of 30.09.2012 and 31.12.2011 )
For the nine months of 2012 Vnesheconombank’s Group total assets amounted to 2 723 billion rubles. In comparison to the beginning of 2012 the assets grew by 191 billion rubles (+8%).
The growth in assets was mostly driven by the increase in the portfolio of loans extended to customers by 158.1 billion rubles (+13%) amounting to 1 387.1 billion rubles. The share of loans to customers in the assets of Vnesheconombank Group for the nine months of 2012 rose from 49% to 51%.
As compared with the beginning of the year 2012 the amount of investment financial assets available for sale increased from 454.3 billion rubles to 516.2 billion rubles (+14%). Increase in the assets mentioned was mainly due to the purchase in the first half year of 2012 of the financial assets (fair value of 47.8 billion rubles), representing entitlement to GPB (OJSC) shares with the Bank’s commitment to sell shares, as per the terms and conditions of an eight-year American call option sold.
The Amounts Due from Credit Institutions decreased by 56.7 billion rubles for nine months of 2012 to 401.0 billion rubles. This was largely due to the early partial repayment in the 1st half of the year of subordinated loans by GPB (OJSC) (the par value is 50 billion rubles). The loans were extended by Vnesheconombank under Law 173-FZ.
The following changes occurred in the resource base.
Total liabilities for the nine months of 2012 increased by 173.8 billion rubles (+9%) having reached 2 173 billion rubles. The main drivers for the growth being: increase in the amount of debt securities issued (by 102.3 billion rubles (+39%) to 363.3 billion rubles), increase in the amounts due to the Russian Government and the Bank of Russia (by 123.0 billion rubles (+14%) to 1 007.6billon rubles). Amounts due to the Bank of Russia increased by 106.7 billion rubles. This growth is mainly associated with the increase of short-term funding of subsidiary banks of Vnesheconombank Group (deposits and repo-transactions). Increase in the amounts due to the Russia Government amounted to 16.4 billion rubles and was caused by the growth in short-term deposits placed Ministry of Finance of Russia with Vnesheconombank subsidiary banks.
At the same time, the Amounts Due To Customers decreased by 27.0 billion rubles (-8%) equaling to 325.4 billion rubles. The decrease was due to the reduction of term deposits and current account balances. The Amounts Due to Credit Institutions also decreased: by 23.8 billion rubles to 448.3 billion rubles.
Vnesheconombank Group’s equity increased by 17.2 billion rubles since the beginning of the year, the main drivers being the profit received in the amount of 31.8billion rubles and decrease in unrealized revaluation of investment securities available for sale by 13.4 billion rubles.
2. Dynamics of main profit components
(analysis based on data comparison for the nine months of 2012 and the nine months of 2011, chronological average values for respective periods applied).
The profit for the nine months of 2012 amounted to 31.8 billion rubles. As compared with the same period last year the profit increased by 2.5 times.
Net interest income reached 59.5 billion rubles (+11.6 billion rubles from the same period last year).
Interest income for the nine months of 2012 increased by 33.4 billion rubles compared to the nine months of 2011 having reached 149.9 billion rubles. The key driver was the growth in returns on loans and financial leasing due to increase in volume of such transactions.
Interest expenses grew by 22.8 billion rubles to 90.4 billion rubles, with interest expenses on funds raised from credit institutions and the Bank of Russia increasing by 10.0 billion rubles due to the rise in average amounts of borrowings and borrowing rates as compared to the same period of 2011. Expenses on amounts due to customers and the Russian Government also increased, as well as expenses on the securities issued (by 5.8 and 6.9 billion rubles respectively).
For the nine months 2012 the net income from transactions on investment financial assets available for sale diminished as compared to the same period of 2011 by 13.7 billion rubles to (-)0.6 billion rubles.
As compared to the 9 months of 2011 the gains less losses on transactions in foreign currency increased as by 17.2 billion rubles to 12.7 billion rubles.
Non-interest expenses in the accounting period increased by 5.7 billion rubles to 30.3 billion rubles. Other operating expenses growth by 3.1 billion rubles also had a significant impact.
The amount of allowances for impairment and provisions created for the nine months of 2012 decreased by 8.3 billion rubles in comparison with the same period of 2011 and amounted 21.0 billion rubles.
Dmitry Medvedev’s opening address:
Dmitry Medvedev: Before we begin, I would like to say a few words. Today, Vnesheconombank’ Supervisory Board is meeting for the last time in 2012, so it is time to review the past year’s work. It is obvious that the Bank’s performance as a development institution has been quite successful. The Bank raised more than $5 billion in long-term credit facilities on financial markets, and I think as a whole In Vnesheconombank Group - around $7 billion. Moreover, VEB issued Eurobonds worth over $1.7bn. These figures are encouraging because they testify to increased trust in the Bank. I would like to thank VEB’s team for their contribution.
Vladimir Dmitriev (Vnesheconombank Chairman): Thank you.
Dmitry Medvedev: Give them my best regards.
Now let’s move to the specific items on today’s agenda. First, we’ll consider the Bank’s participation in funding a business development program of Russia’s largest automaker, AvtoVAZ until 2020. The program aims to upgrade the company’s assembly line s and produce new automobiles models. The program’s total value is 177 billion rubles, with VEB’s participation share being 60. This will be a complex program that includes more than one investment projects. Each project will be subject to comprehensive expert examination before funding is provided. We have to go on doing this further on.
There is another priority I would like to mention. VEB is making strenuous efforts to support the development of the Russian Far East and Siberia. At our last meeting we agreed to increase the charter capital of the Far East and the Baikal Region Development Fund by 15 billion rubles, through using budgetary funds. We also plan to additionally capitalize the Russian Direct Investment Fund, VEB subsidiary, by 62 billion rubles; 25 billion of them will be used to fund projects in the Far East.
We’ll also approve VEB’s income and expenditure plan for the next year – the figures are generally in line with the Bank’s strategy until 2015 – and we’ll also consider key performance indicators for the Bank’s employees and management, which should serve as incentives for achieving the Bank’s strategic objectives.
This is our agenda for today, but this is not all – we have a lot of issues to discuss, as usual. Thank you.
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Vnesheconombank Chairman Vladimir Dmitriev answers journalists’ questions after a meeting of VEB’s Supervisory Board
Question: What issues did you discuss?
Vladimir Dmitriev: We had 15 items on our agenda concerning the Bank’s credit and investment activities, such as accounting documents next year’s budget and many other issues.
I’ll start with the first item –a credit facility to AvtoVAZ to implement its investment program up to 2020. This transaction was discussed as a result of decisions and a request from AvtoVAZ shareholders, including Renault-Nissan. An agreement on the investment program was signed last week. It is in this context that we are considering a possibility of participating in this investment program worth about 120 billion rubles. VEB’s participation share is up to 60 billion rubles. We discussed this 60 billion ruble limit today in terms of individual investment projects.
We agreed, anyway, on the main parameters of this credit transaction today – its amount, the credit tenure of up to 10 years and rates that will be considered for each individual investment project with due regard to AvtoVAZ’s debt burden and VEB’s liabilities in foreign and domestic markets and interest rate subsidies under the Government’s decisions on Russia’s automobile industry.
I’d like to emphasize once again that in line with our regulatory documents, transactions within 60 billion ruble limit will be discussed by the Bank’s the Supervisory Board in the case that they exceed five billion rubles. Transactions under five billion rubles will be discussed by VEB’s Board with due regard to above mentioned parameters.
The next issue we discussed was the Supervisory Board’s approval of subsidies to Vnesheconombank in the amount of 62 billion rubles to additionally capitalize the Russian Direct Investment Fund (RDIF). We also stressed that the Russian Direct Investment Fund was energetically boosting its investment activities. Currently, the Fund has 25 specific transactions in its portfolio. RDIF contributed 11 billion dollars to fund these transactions’. And the transactions with regard to which co-investors have been identified, investment documents have been prepared, the structure of transactions has been determined and RDFI’s participation shares have been determined are worth $2.5 billion. Importantly, foreign co-investors are ready to contribute from $4.5 billion to $5.5 billion. And these funds will be invested in the sectors to which RDIF gives high priority.
We have also discussed today Vnesheconombank’s non-financial statements that we have already prepared for three years. In general, Vnesheconombank is a leader among companies with state participation and state corporations in preparing and publishing non financial statements that reflect the bank’s priorities in ecological and social responsibility and thus in sustainable economic development. The statements were approved by the Bank’s Supervisory Board.
Today, we have also discussed our income and expenditure plan for the next year, that is, the Bank’s budget. Its main parameters were approved by our Supervisory Board. They include the Bank’s loan portfolio growth, Vnesheconombank’s increased involvement in the investment activity. The budget reflected the growth in the Bank’s own funds through making a contribution to capitalize RDIF and through capitalization the Far East and the Baikal Region Fund. By the way, out of 62 billion rubles contributed to additionally capitalize RDIF, 25 billion will be used this year to fund projects in the Far East and the Baikal region in accordance with a resolution of the Russian Government.
The next year’s budget was approved by our Supervisory Board and it allows for growth in main parameters. But we, of course, take into consideration that Vnesheconombank is a special financial development institution, and that its activity is to be undertaken on a break-even basis. In this respect, we mean profit making is not a main objective of our activity. Hence, such development banks’ indicators as a return on assets and return on capital are different from those in commercial banks including banks with state participation. Our main indicator is capital adequacy ratio and next year this indicator in our Bank will be also higher than 10%.
Today, we have also discussed a plan of charitable and sponsorship activities the total amount of which is a bit less than 3 billion rubles. We channel these funds to the sectors that had been approved by our Supervisory Board earlier – high achievement sports, providing support for the Russian Orthodox Church and its projects including youth spiritual education as well as healthcare, social support for low-income groups and for children suffering from various illnesses. This is of course culture and these are also socio-political issues related to the Open Government’s activity as well as regional development programs in the North Caucasus and the Far East. All this is included in our programs and the budget of our charity and sponsorship activities and these lines of activity were supported by our Supervisory Board.
At the Supervisory Board meeting today, we discussed the personnel issue, as Pyotr Fradkov simultaneously had held two offices for a while – Head of the Export Credit Insurance Agency of Russia and VEB Board Member – in order to synchronize the Bank’s operations aimed at promoting industrial exports and supporting Agency’s activity on providing insurance and guarantee support for exports.. This work has been concluded, and the General Director of the Export Credit Insurance Agency of Russia does not need to hold two offices at the same time. Therefore today, Mr Fradkov has been relieved of his position as Board Member of his own free will. Alexander Ivanov has become Board Member and Deputy Chairman. He is responsible for those lines of activity in the Bank that had earlier been the responsibility of Mr. Fradkov. He is now responsible for establishing a comprehensive system of Russian industrial exports promotion through engaging all development institutions (VEB, the Russian Export-Import Bank and the Export Credit Insurance Agency of Russia); this activity is aimed at raising financial resources on international financial and capital markets, and it has been stepped up recently. This activity is also aimed at cooperating with national and international development institutions. You know that an interbank consortium has been established within the SCO. We have established similar cooperation with development institutions in BRICS countries. We have made a proposal – favored by our foreign partners – to form a pool of development and export promotion institutions within the G20. This proposal will be filled with real substance next year at the St Petersburg Economic Forum and at business events to be held as part of Russia’s G20 presidency.
These are the key issues that have been discussed today. We are very happy that in his opening address the Prime Minister, our Supervisory Board Chairman, praised highly the activities of VEB’s employees and thanked them for their active work.
Question: May I ask you a question about AvtoVaz? When is the first tranche expected and what will it be used for?
Vladimir Dmitriev: It is not clear. It has to do with the Avtovaz modernization program. It provides for the purchase of foreign equipment, re-equipment of existing production facilities, but we have no specific investment projects yet. The decision was based on the funding limit and main terms and conditions. In the future, the Board or VEB’s Supervisory Board if necessary will discuss each individual project. But the total amount of all projects should not exceed 60 billion rubles.
Question: What about the rates?
Vladimir Dmitriev: I haven’t mentioned the rates intentionally. I have mentioned criteria alone. They must conform to our borrowing terms. Regarding the ten-year period, there is simply no such benchmark on the Russian market. Consequently, it is impossible to make any estimates. But, on the other hand, we must, of course, take into account the potential of AvtoVAZ, its debt burden and specific of funding the company. At one point, the Government decided that AvtoVAZ must pay interest rates equal to a refinancing rate, plus an extra 3%. At that time, the rate of refinancing was 8%. And, once again, we take into account the fact that specific rates are subsidized in line with investment programs of the automobile industry. In the long run, we should set rates that are acceptable both for Vnesheconombank in order to operate on a breakeven basis and for borrowers but, unfortunately, the details are so far …
Question: May I ask you a question about the budget? You said that the 2013 budget had been specified. Could you tell us about the 2012 and 2013 profit estimate? And you said that you had approved your borrowing program for 2013. So, could you tell us about next year’s borrowing volumes?
Vladimir Dmitriev: You know, unfortunately, I don’t remember the statistics. I can tell you about profits. Most likely, that we’ll generate 7-9 billion rubles in profits this year.
Remark: You have generated 32 billion in profits in nine months …
Vladimir Dmitriev: This is in line with consolidated International Financial Reporting Standards, but I mean VEB’s performance in line with Russian Accounting Standards, you were absolutely right.
Question: And for 2013?
Vladimir Dmitriev: We’ll conduct another inventory in 2013, but, on the whole, we assume that profits 2013 will be equal to our profits for 2012.
Question: The media has reported that board members were to discuss an increase in maximum loan volumes for the Krasnaya Polyana project in order to complete the construction of the Gornaya Karusel (Mountain Carousel) Olympic facility. Why wasn’t this issue discussed? And is it true that VEB can increase or has increased maximum loan volumes for the Krasnaya Polyana project from 12 billion to 52 billion rubles, including interest payments?
Vladimir Dmitriev: This issue is not new. It has already been discussed, and decisions to increase the limit have, in effect, been made. Indeed, we haven’t discussed all issues of VEB’s agenda today because we must follow rules of procedure. We must submit materials to meetings of the working group and VEB’s Supervisory Board within a certain number of days. But we also have an absentee voting procedure. Consequently, several more issues will be submitted for consideration before the New Year, including those concerning Olympic projects, and we expect to make decisions on them before the end of the year.
Question: As far as Sberbank’s criteria regarding Olympic facilities are concerned, have you managed to settle the conflict somehow?
Vladimir Dmitriev: What kind of claims?
Answer: A shareholder of the Krasnaya Polyana project and another shareholder, Mr Bilalov, argue against this loan because the Krasnaya Polyana project will require additional capitalization under this loan and because the share of inventory investors will be eroded, and so on.
Vladimir Dmitriev: Let’s proceed from the fact that we are dealing with a joint stock borrower company and that several other companies besides Sberbank are its shareholders. And, consequently, our decisions must be coordinated with corporate decisions to be approved by shareholders of this company. That’s why I cannot tell you anything else. This means that they must sort things out between themselves. We are not involved in this conflict, if it can be called a conflict, or this situation or incident.
Question: May I ask you a question about borrowings? You wanted to raise $800-850 million worth of syndicated loans this year. Will you manage to raise this amount of funds before the year is out?
Vladimir Dmitriev: I cannot tell you.
Question: And do you plan to operate on foreign markets next year?
Vladimir Dmitriev: Of course we do.
Origin: Internet Portal of the Government of the Russian Federation
Vnesheconombank Raises Another Credit to Implement Project in the Bryansk Region
State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’ and HSBC Bank Plc (HSBC) signed another individual credit agreement as part of funding the project aimed at producing and processing meat cattle in the Bryansk region. The project is being implemented by LLC the Bryansk Meat Company.
Under the Agreement HSBC is to provide Vnesheconombank with credit resources in the amount of 150 million US dollars to fund advance payments under contracts of LLC the Bryansk Meat Company with a number of foreign cattle exporters and local expenses in 2012-2013 on a commercial basis for a period of 7 years.
On behalf of Vnesheconombank the agreement was signed by Deputy Chairman Alexandr Ivanov and on behalf of HSBC – by Global Head of Export Credit and Global Specialized Finance Peter Luketa.
This credit agreement is the third agreement to have been signed with HSBC on a commercial basis as part of implementing the project in the Bryansk region. All in all about 300 million US dollars have been raised from HSBC on a commercial basis.
HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 6 900 offices in 84 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With assets of US$2,652bn at 30 June 2012, HSBC is one of the world’s largest banking and financial services organizations. HSBC Group operates in Russia through OOO HSBC Bank (RR). HSBC Russia provides a wide range of corporate banking, investment banking and financial markets products and services to corporate and institutional customers.
Press Office of Vnesheconombank
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Vnesheconombank Holds International Conference “Investments in Sustainable Development. Partnership between Financial Institutions and Real Sector of Economy
The Third International Conference “Investments in Sustainable Development. Partnership between Financial Institutions and Real Sector of Economy”. State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’ acted as the Conference’s organizer.
The Conference was held with the assistance of Russia’s Economic Development Ministry, the Russian Union of Industrialists and Entrepreneurs, the UN Environment Programme Financial Initiative and the UN Global Compact in the Russian Federation.
The Conference’s participants discussed the process of cooperation between financial institutions representatives of the real sector of the economy in applying principles of ecological and social responsibility. Particular attention was given to Russian and international experience in applying principles of corporate social responsibility, advantages and barriers on the way of introducing corporate social responsibility in Russia.
In his welcoming address to the Conference’s participants Member of the Board , Vnesheconombank Deputy Chairman Mikhail Kopeikin said, “Our investments are designed to qualitatively change the situation not only at specific enterprises but in the whole sectors and regions of the country. In the course of implementing projects accepted by Vnesheconombank for financing in the period of 2007-2011 more than 40 thousand jobs were retained and more than 150 thousand jobs were created and are planned to be created.
M. Kopeikin also stressed that “application of innovative socially and environmentally responsible approaches to working with the real sector of the economy might prove attractive from a commercial point of view for all participants in the investment process”. “There is no doubt that voluntary introduction of social and ecological responsibility mechanisms will reduce credit and investment risks and make it possible to accumulate significant non-financial capital which is always inherently linked to long-term economic effects”, he stressed.
In the attendance of the conference were Vnesheconombank’s partners from the International Finance Corporation, the China State Development Bank, the Eurasian Development Bank, Vnesheconombank’s subsidiaries, representatives of line ministries and institutions, regional government authorities, specialists from Russian and foreign financial institutions and real sector companies as well as experts of leading nongovernmental organizations and initiatives in social and ecological responsibility.
The Conference resulted in adopting a road map to responsibly fund Russia’s real sector of the economy for a period of up to 2015, that is, practical recommendations for financial institutions and real sector companies interested in mutually beneficial partnership in long-term sustainable development.
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Vnesheconombank Sign Quadripartite Agreement on Cooperation in Implementing Investment Project on Developing Innovation Agro-Industrial Parks on the Territory of the Far East Federal District
State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’, the Russian Far East Development Ministry, OJSC the Far East and the Baikal Region Development Fund and LLC AgroInvest signed an agreement on cooperation in implementing a project on the construction of five innovation agro-industrial parks on the territory of the Far East Federal District.
The project aims to ensure the Far East region’s comprehensive development of the agro-industrial sector and food security as part of implementing the Government Program of Developing Agriculture and Regulating Markets for Agricultural Produce, Raw Materials and Food Products for 2013-2020 approved by Resolution of the Russian Government dated July 14, 2012 №717.
The fist construction stage provides for building two innovation infrastructure facilities in the Primorsky and Khabarovsk Territories and then similar integrated facilities are to be built in the Amur, Sakhalin and Jewish autonomous areas. All five facilities are scheduled to be put into operation by 2016.
The project is to be funded on the terms of public private partnership. LLC AgroInvest will be responsible for implementing the project and raising funds from private investors under the auspices of the Russian Far East Development Ministry.
Director General of the Far East and the Baikal Region Development Fund Alexandr Bazhenov said, “Funding such an ambitious innovation project on the construction of a network of agro-industrial parks in the Far East Federal District is sure to become one of the Fund’s top-priority projects in the coming years. We are convinced that application of various public private partnership instruments can give a considerable impetus for the region’s economic development”.
“Russia’s entry into the WTO requires creating new mechanisms for t the state to support its agricultural producers. These are above all measures for improving infrastructure of the Russian agro-industrial complex. And today we are getting down o implementing such an advanced innovation project which will form the basis for ensuring the Far East region’s sustainable socio-economic development and food security”, said Russian Far East Development Minister and Presidential Envoy to the Far East Federal District Victor Ishaev.
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Phone: +7 (495) 608-46-93, Fax: +7 (499) 975-21-34