Commentaries to Consolidated Financial Statements Vnesheconombank and its Subsidiaries for 9 months of 2015
Dynamics of main components of assets and liabilities
(Analysis on the basis of comparing balance indicators as of 30.09.2015 and 31.12.2014)
As of the end of the third quarterof 2015, the amount of Vnesheconombank’s assets increased from early 2015 by 428.7 billion rubles (+11.0%) and was 4 314.5 billion rubles.
The portfolio of loans extended to customers and the portfolio of net investments in leasing increased for 9 months of 2015 by 260.4 billion rubles (+9.9%%) and amounted to 2892.4 billion rubles. The total proportion of credits to customers and net investments in leasing in the assets of Vnesheconombank Group as compared to the start of 2015 decreased slightly from 68% to 67%.
Pursuant to Decree of the Russian President dated June 5 2015 № 287 and Federal Law dated June 29, 2015, № 156-FZ “On Introducing Changes to Individual Statutes of the Russian Federation on the Issues of Developing Small and Medium-Sized Enterprises”, Vnesheconombank is to transfer shares JSC SME Bank it owns to pay for additional shares of JSC the Federal Corporation for the Development of Small and Medium-Sized Enterprises. To that end, assets of JSC SME Bank recognized in the consolidated financial statements were classified as of September 30, 2015 as assets disposal group, the amount of assets specified as “Assets of Disposal Groups Designed for Sale” increased by 126.0 billion rubles to 130.3 billion rubles.
The amount of investment financial assets available for sale and held to maturity increased for nine months by 110.4 billion rubles (+28.3%) to 500.6 billion rubles. At the same time, the amount of financial assets transferred under loan agreements and made available as collateral under repo agreements and this is related for the most part withthe maturity of the second part of direct REPO transactions.
The following changes occurred in the resource base.
The amount of liabilities for 9 months of 2015 increased by 479.9 billion rubles (+13.7%) to 3987.1 billion rubles.
The amount of issued debt securities increased for the accounting period by 134.3 billion rubles (+13.7%) to 1 117.4 billion rubles. The mentioned change is related both to reduction in the ruble exchange rate against foreign currencies which brought about increased ruble equivalent under bonds denominated in foreign currencies and to issuing bonds by the Group on the domestic market.
The debt to the Russian Governmentand the Bank of Russia increased by 100.1 billion rubles (+17.9%) to 659.3 billion rubles. The main changes in the structure of the stated debt were caused by increased debt to the Bank of Russia under interest-bearing credits and deposits and the reduction in the amount of raised funds under REPO agreements with the Bank of Russia.
The amount of customers’ funds increased by 94.4 billion rubles (+18.6%) and amounted to 603.2 billion rubles for the first half-year of 2015. The increase was mainly caused by the growth in the amount of balancesin customers’ time deposits with subsidiary institutions incorporated in Vnesheconombank Group.
Due to the fact JSC SME Bank was classified as of September 30, 2015 as a disposal group, the amount of liabilities specified as “Liabilities of Disposal Groups designed for Sale” increased by 65.3 billion rubles.
The rise of the dollar against the ruble during 9 months of 2015 increased the ruble equivalent of subordinated deposits placed with Vnesheconombank through using financial resources of the National Wealth Fund to additionally capitalize Vnesheconombank by 55.8 billion rubles (+18.4%) to 358.8 billion rubles.
In 9 months of 2015, Vnesheconombank’s capital decreased by 51.2 billion rubles (-13.5%) to 327.4 billion rubles. The capital decreased due to the loss in the amount 133.0 billion rubles for nine months of 2015. At the same time, Vnesheconombank’s authorized capital increased by 27.5 billion rubles (+6.6%) in accordance with Federal Law dated 02.05.2015 № 109-FZ “On the Specifics of Transferring Profits in 2015 generated by the Central Bank of the Russian Federation in 2014. Additional capital increased by 12.3 billion rubles (+8.9%) due to subsidies in the form of monetary contributions in the amount of 10 billion rubles purchase shares of JSC EXIARto further increase JSC Roseximbank’s authorized capital and a contribution worth 2.3 billion rubles to purchase additional units of the closed share investment fund of the Russian Direct Investment Fund. The unrealized revaluation of investment financial assets available for sale was a positive value of 29.9 billion rubles. The change in the unrealized revaluation of financial investment assets by 43.8 billion rubles from (-)13.9 billion rubles in 2014 to 29.8 billion rubles as of 30.09.2015 was caused to a large extent by reclassification of the shares and bonds depreciation amounts of (29.9 billion rubles) as expenses.
Dynamics of main profit and loss components
(Analysis on the basis of comparing data for the first 9 months of 2015 and the first nine months of 2014)
For a period of 9 months of 2015, Vnesheconombank Group recognized a loss of 133.0 billion rubles as compared to a loss of 86.3 billion for a period of nine months of 2014.
Net interest income amounted to 49.5 billion rubles, a decrease of 23.5 billion rubles, (-32.2%) from the same period in the previous year (73.0 billion rubles).
Interest incomes increased by 32.0 billion rubles (+15.8%) fromthe nine months of 2014 to 233.9 billion rubles, for the most part as a result of the growth of 37.3 (+29.5%) billion rubles in interest incomes to 163.7 billion rubles under credits to customers caused but the increased portfolio of such creditsas compared to the same period of 2014.
Interest expenses increased by 55.5 billion rubles (+43.1%) to 184.4 billion rubles. The growth was caused for the most part, by the increase in interest expenses on funds raised from banks and the Bank of Russia 23.1 billion rubles (+50.3%) and on issued debt securities - by 22.5 billion rubles (+70.1%)on funds raised from customers and the Russian Government – by 9.6 billion rubles. These changes ware also caused by the growth in the volumes andof the raised funds and the growth of the ruble equivalent of interest expenses on issued debt securities denominated in foreign currencies.
In nine months of 2015, expenses on transactions with investment financial assets available for sale was 24.5 billion rubles. They increased by 19.8 billion rubles The main reason for it was the fact that unrealized negative revaluation of bonds recognized earlier in the Bank’ capitalwasbooked to expenses.
In nine months of 2015, net incomes from the original recognition of financial instruments, changes in contractual terms and conditions and early repayment amounted to 7 billion rubles. The recognition of income worth 14.5 billion rubles in nine months of 2015 was caused for the most part by the recognition of income from rolling over the deposit of the Federal Treasuryfor a period of 10 years at a below market rate to fund through VEB’s subsidiary – JSC SME Bank banks and legal entities involved in supporting small and medium-sized enterprises.
Non-interest expenses (except for expenses on forming other reserves and reserves against depreciation of other assets) decreased by 1.1 billion rubles to 46.3 billion rubles in the accounting periodfrom nine months of 2014.
Expenses on forming reserves against depreciation of assets and other reserves amounted to 139.0 billion rubles in nine months of 2015 against 186.8 billion rubles in the same period of 2014.
In accordance with the terms of issuing eurobonds, on the Russian Finance Ministry’s instructions State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’ transferred funds in the total amount of 159 million 365 thousand 437.5.50 US dollars to Citibank N.A., London Office.
These funds were transferred to repay the government foreign debt of the Russian Federation to pay interest on eurobonds issued in 1998 for an amount of 2.5 billion US dollars for a tenure of 30 years.
The payment was made in a single currency.
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