VEB.RF published its interim condensed consolidated financial statements prepared in accordance with IFRS as at 31 March 2021.
“We are pleased to report a net profit of RUB 22.7 bn for the VEB.RF Group for the first quarter of 2021 in accordance with IFRS. At the end of the first three months we observe the growth in the loan portfolio, net interest income and fee and commission income.
Support for business during the pandemics remains high on our agenda. Guarantees issued by VEB.RF against interest-free and low-interest loans for commercial banks enabled companies to retain jobs and resume operations. We can see the results of our efforts. We note the general trend for improved performance of our borrowers.
With support from the Russian Government, VEB.RF is vigorously building up its new portfolio of high-quality projects in infrastructure, industry, exports and urban development. Liquidity and capital adequacy ratios allow VEB.RF to be actively involved in priority business areas,” VEB.RF Chief Financial Officer Andrey Moskovskikh said.
Key financial results of the VEB.RF Group in Q1 2021:
- In the first quarter of 2021, the VEB.RF Group made a profit of RUB 22.7 bn against a loss of RUB 22.5 bn as compared to the corresponding period of last year.
The positive financial result was driven by:
- net operating income of RUB 33.9 bn;
- reversal of allowance for expected credit losses of RUB 16.7 bn. In the corresponding period in 2020, the allowance for ECL was charged in the amount of RUB 10.5 bn;
- the decrease in non-interest expense from RUB 51.7 bn in Q1 2020 to RUB 26.0 bn;
- Operating income (net of allowances) was RUB 33.9 bn in Q1 2021, or RUB 9.2 bn less than in Q1 2020.
- The decrease in operating income was attributable to the decrease in non-interest income to RUB 13.0 bn against RUB 33.0 bn in Q1 2020. The dynamics is related, among other things, to the loss on initial recognition of guarantees issued in Q1 2021 on preferential terms as part of the new state COVID-19 rescue scheme.
- Net interest income grew to RUB 3.0 bn in the reporting period (Q1 2020: RUB 0.7 bn) largely as a result of the decrease in interest expense on amounts due to banks, the Government of the Russian Federation and the Bank of Russia due to reduced liabilities and interest expense on debt securities issued because of lower interest rates in debt markets.
- Net fee and commission income also went up from RUB 2.3 bn in Q1 2020 to RUB 9.2 bn in Q1 2021 due to the amortisation of loss on initial recognition of guarantees issued as part of the state anti-crisis programme.
- The VEB.RF Group’s assets decreased by 4.4% (–RUB 150.9 bn) against the beginning of the year to RUB 3,255.2 bn as at 31 March 2021. The amounts of reverse repurchase agreements with non-banking credit institutions for up to 90 days went down, brought about by the decrease in idle cash balances largely due to the increase in the loan and leasing portfolios and settlement of VEB.RF’s obligations as at 31 March 2021.
- As compared to the beginning of 2021, the loan portfolio (net of provision for impairment) increased by 5.8% (+RUB 67.4 bn) to RUB 1,236.5 bn. The leasing portfolio grew by 11.3% (+RUB 19.9 bn) to RUB 195.7 bn. In total, the loan and leasing portfolios account for 44.0% of the Group’s total assets.
- The loans granted by VEB.RF in Q1 2021 totalled RUB 89.6 bn. Investment priority sectors were industry, infrastructure and urban economy as well as export support.
- Allowance for expected credit losses was reversed in the amount of RUB 16.7 bn in Q1 2021. The allowance for financial guarantees was reversed in the total amount of RUB 8.8 bn largely due to the decrease in guarantees issued under the state support programme for business during the pandemics. The loan loss provision was reversed for RUB 4.4 bn.
- The Group’s liabilities decreased by 6.7% (–RUB 181.1 bn) in Q1 2021 to RUB 2,536.0 bn as at 31 March 2021. This dynamics was attributable to the decrease in amounts due to banks by 22.9% (–RUB 136.3 bn) and to the Government of the Russian Federation and the Bank of Russia by 5.5% (–RUB 34.0 bn).
- The Group’s equity went up by RUB 30.2 bn (+4.4%) in Q1 2021 to RUB 719.2 bn as at 31 March 2021. The equity growth was primarily driven by the profit in Q1 2021 and the increase in gains from investment financial assets at fair value through other comprehensive income. There were no changes in the authorised and additional paid-in capital.
- VEB.RF’s capital adequacy ratio in accordance with RAS was 17.0% as at 01 April 2021 (17.0% as at 01 January 2021).
Sber, VEB.RF, and RDIF have reached an equity investment agreement under which they will each hold a 25% stake in JSC Prosveshcheniye. The closure of the deal on RDIF’s part is pending approval from its Supervisory Board.
The deal is a continuation of many years of joint work to develop contemporary Russian education.
One hundred percent of the company’s shares were valued for the purposes of the deal at approximately RUB 108 bn. The new shareholder structure is expected to be established in June.
Eight directors will be on the Prosveshcheniye Board of Directors, with two representatives each from Sber, RDIF, VEB.RF, and the current Prosveshcheniye shareholders. The current management of the Group will continue to handle operations.
Today Prosveshcheniye, well known to all children and parents, is the largest brand on the educational literature market in Russia. The company operates in all regions of Russia and in 190 countries worldwide, with annual print runs of over 130 million copies. Prosveshcheniye also provides direct support to educators and school students. The company’s digital platforms count 30 million unique users per month.
The parties joined efforts to increase access to Prosveshcheniye’s well-established learning content for teachers, students, and parents nationwide. The partners’ modern digital technologies, services, and competencies will facilitate the development of next-generation educational content and ensure a personalized approach to each student and new education management tools for teachers.
The partnership will also establish the necessary conditions to increase the export potential of educational products and to develop school infrastructure, including through a PPP-based model.
We understand that access to quality educational content and to modern teaching methods for every child and every teacher lays the foundation for a successful future. Combining our ecosystem’s resources together with those of our partner companies and Prosveshcheniye creates new opportunities for the sector-wide development of education and for the achievement of national development goals.
CEO, Chairman of the Executive Board, Sberbank
The goal of our partnership is to develop a modern learning environment in Russia. Prosveshcheniye went from an educational publishing house to a systemically important company in the industry, providing its clients with a wide variety of solutions: from building new schools to the creation of digital content. The new shareholder composition will enable the company to grow dynamically, contribute to the achievement of national goals, and, in time, become a global education leader.
This agreement sees the partners joining efforts to develop the basis for Russia’s future achievements and the country’s most valuable asset – human capital. A strong company that plays a key role in the education infrastructure and builds on the best Russian and international practices can take the lead in this area globally. The collaborative work of RDIF and its partners is centered on achieving these goals for all students and teachers and for Russia as a whole.
CEO, Russian Direct Investment Fund (RDIF)
The public-private partnership tool has demonstrated that the business sector can become – and is becoming – a serious source of support for the state. Prosveshcheniye Group is a key element of the education system, as well as a national educational integrator, whose products and solutions are used in every single family and school in the country. Today we are talking about pooling our resources to handle the full range of challenges currently facing the state: creating modern education infrastructure, improving quality of education in all of Russia’s regions, developing and using digital educational technologies reasonably and efficiently, and formulating new tasks. We firmly believe that the effects of this deal will be seen throughout the country in the very near future.
Chairman of the Board of Directors, Prosveshcheniye Group
Sber Press office
PJSC Sberbank is Russia’s largest bank and a leading global financial institution. Holding almost one-third of aggregate Russian banking sector assets, Sberbank is the key lender to the national economy and one of the biggest deposit takers in Russia. The Government of the Russian Federation represented by the Ministry of Finance of the Russian Federation is the principal shareholder of PJSC Sberbank owning 50% plus one voting share of the bank’s authorized capital, with the remaining 50% minus one voting share held by domestic and international investors. Sberbank has customers in 18 countries. The bank has a major distribution network in Russia with about 14,000 branches, while its international operations – subsidiary banks, branches, and chapters – include the UK, US, CIS, Central and Eastern Europe, India, China, and other countries. It holds general banking license No. 1481 dd. August 11, 2015, from the Bank of Russia. Official websites of the bank: www.sberbank.com (Sberbank Group website), www.sberbank.ru.
In 2020 Sberbank underwent a rebranding, offering financial and non-financial services of the bank and Sberbank Group to individual and corporate customers. Today, the Sber ecosystem is a raft of services for life and daily assistance in handling pressing everyday issues for individual customers and businesses. The Sber ecosystem website: www.sber.ru.
VEB.RF Press service
email@example.com, +7 (495) 721-94-90
VEB.RF is a state development corporation that implements national projects in partnership with commercial banks and private investors. The scope of its activities includes providing support for high-tech industry, non-resource exports, modernization of infrastructure, and urban agglomerations. VEB.RF Group’s capital amounts to RUB 689.0 bn, with assets of RUB 3,406.1 bn and a capital adequacy ratio of 17.1% (as of December 31, 2020).
RDIF Press service
firstname.lastname@example.org +7 (495) 644-34-14
Russian Direct Investment Fund (RDIF) is Russia's sovereign wealth fund established in 2011 to make equity co-investments, primarily in Russia, alongside reputable international financial and strategic investors. RDIF acts as a catalyst for direct investment in the Russian economy. RDIF has experience in the successful joint implementation of more than 80 projects with foreign partners totaling over RUB 2 tn and covering 95% of the regions of the Russian Federation. RDIF portfolio companies employ over 800,000 people and generate revenues equating to more than 6% of Russia’s GDP. RDIF has established joint strategic partnerships with leading international co-investors from over 18 countries that total over USD 40 bn. Further information can be found at rdif.ru
Prosveshcheniye Group Press service
email@example.com,+7 (495) 789-30-40
Prosveshcheniye is a national educational integrator with 90 years of history. The Group comprises leading educational literature brands. Its key areas of activity are digitizing and exporting education, building and outfitting schools and summer camps for children, training educators, educational and legal consulting, and textbook publishing. Products and solutions by Prosveshcheniye can be found being used by teachers in every school and every family in the country.
VEB.RF’s Green Finance Committee has recognised the 74th issue of City of Moscow bonds as a green financial instrument in accordance with the VEB.RF guidelines. This is the second bond issue certified as compliant with the VEB.RF guidelines (after the Russian Railways bonds issued last autumn) and the first to be issued by a constituent entity of the Russian Federation. As a reminder, the green finance guidelines received approval from the inter-agency working group chaired by Russian Minister of Economic Development Maxim Reshetnikov and composed of representatives of executive authorities, legislative bodies, the business community and non-governmental institutions.
“The projects that will use the proceeds from the issued bonds are fully compliant with the taxonomy,” said Aleksey Miroshnichenko, First Deputy Chairman, VEB.RF. “These include developing the Moscow Metro, which is a fully electrified system, and replacing petrol-powered buses by electric buses. The introduction of low-emission electric vehicles is consistent with the UN Sustainable Development Goals such as Goal 11 (Sustainable Cities and Communities) and Goal 13 (Climate Action). Monitoring how the proceeds are used will also be in accordance with our methodology.”
Together the projects will result in a potential reduction of 10,000 in the number of necessary motor vehicles by 2023, thus decreasing pollutant emissions by 885.5 tonnes per year and carbon dioxide emissions by 20,900 tonnes per year.
“The Moscow bonds were issued to increase funding for development projects. The city meets all its social obligations at its own expense and borrows to boost Moscow’s investment spending. We’ve studied how European urban agglomerations deal with this issue and we consider a trend towards targeted borrowing to be perfectly correct: loans are taken out to achieve sustainable development goals and undertake environmental projects. Moscow has a large number of green projects, most notably the construction of the Moscow Metro’s Large Circle Line, and the purchase of electric buses, environmentally friendly vehicles recognised all over the world. That is why one of our bond issues totalling 70 billion roubles will be green. Though all environmental projects in Moscow are together worth much more, our green borrowings start with this amount. Due to the current situation in the Russian green bond market, we are not expecting a greenium from investors in exchange for ESG performance, but we believe it’s right to float these bonds in Russia to promote the development of the local market. Foreign investors have already shown a lot of interest in our first bonds, which we offered for sale this week. We think green bonds will be even more in demand on an international scale, which will bring added impetus to the Russian sustainable finance market,” said Vladimir Yefimov, Deputy Mayor of Moscow, Economic Policy, Property and Land.
According to Yelena Zyabbarova, Moscow Minister and Finance Department Head, the city has been pursuing a systematic and consistent policy over the past 10 years to improve the environmental situation in Moscow and reduce the negative impact of motor vehicles on the environment. She said: “Green bonds provide a new tool to accelerate the implementation of projects helping to develop environmentally friendly public transport.
“In fact, Moscow is creating a new stock market segment in Russia by issuing the first sub-federal green bonds and participating actively in establishing an adequate regulatory framework. We are confident that Moscow’s experience and expertise in this area will be useful for other Russian regions in the future.
“We think the issuance of green bonds allows the city not only to raise funds for infrastructural projects, but also to publicly reaffirm the Moscow government’s commitment to environmentally responsible policy. As for stock market participants, they will be able to use green bonds to implement the principles of responsible investing, as well as giving support to projects to remedy the environmental situation and improve the urban environment.”
If any financial instrument is granted green status, this requires a higher level of reporting and additional measures to monitor how the proceeds from the issuance are used. The issuer should publish a special report once a year, which will be assessed for compliance with the green principles. The proceeds from the sold bonds will be used to fund the declared projects in 2021–2023.
VEB.RF’s green finance system consisting of a taxonomy for green projects, a taxonomy for intermediate (adaptational) projects, green finance guidelines and related documents is currently under consideration by the Russian Government. The system is expected to receive final approval and be ready for publication this summer.
Syndicate of VEB.RF and Commercial Banks to Provide Financing for Arctic LNG 2
- The syndicate of banks will lend 3.11 billion euros for 15 years
- Arctic LNG 2 is a major development project for Russia’s Arctic
A syndicate of VEB.RF and commercial banks—Sberbank, Gazprombank, Bank GPB International S.A. and Otkritie Bank—has signed a syndicated loan agreement with Arctic LNG 2 Ltd to carry out the Arctic LNG 2 project.
The syndicate of banks will lend 3.11 billion euros for 15 years to finance the construction of a facility designed for liquefied natural gas and stable gas condensate.
“This is an extremely important initiative in the region. The project has strategic significance for the Northern Sea Route and operations in the Arctic. VEB.RF is involved in the project in partnership with Russian commercial banks. VEB.RF has already begun financing the construction of 15 ice-class gas carriers, which will be used to transport LNG under the Arctic LNG 2 project,” said Daniil Algulyan, Deputy Chairman, VEB.RF.
“We are pleased to take part in such a large and strategically significant project as Arctic LNG 2. Sber will lend 2 billion euros for 15 years. Arctic LNG 2 will help Russia to strengthen its position in the global gas market. We find it especially important that the construction uses advanced technology that will help to minimise the environmental impact on Russia’s Arctic,” said Anatoly Popov, Deputy Chairman of the Executive Board, Sberbank.
“Gazprombank continues to be active in cooperating with Russia’s largest oil and gas market participants. We are a lender under the Yamal LNG project and we are pleased to be actively involved in another LNG megaproject implemented by NOVATEK, which is important for the socio-economic development of the entire country. I am sure the consolidated efforts of experienced, internationally recognised financial partners will ensure as much financing as necessary, and this will enable the construction to proceed at a fast pace,” said Alexey Belous, Deputy Chairman of the Management Board, Gazprombank.
“We are optimistic about the outcome of the project and we are grateful to our partners for their confidence and the opportunity to take part in the project. Low production costs, an efficient financial model and strong international investors make the project unique and truly competitive. Arctic LNG 2 is important for the Russian economy, and as a nationwide bank we are interested in its successful implementation,” said Viktor Nikolaev, Deputy President & Chairman of the Management Board, Otkritie Bank.
Arctic LNG 2 Ltd carries out a project to build three LNG trains, each with an annual capacity of 6.6 million tonnes and with a total annual capacity of 19.8 million tonnes of LNG and 1.6 million tonnes of stable gas condensate.
The project’s shareholders are NOVATEK (60%), Total (10%), CNPC (10%), CNOOC (10%), and Japan Arctic LNG and consortium of Mitsui & Co and JOGMEC (10%).
Photo courtesy of NOVATEK
The final round of the RAISE All-Russian Accelerator of Social Initiatives took place in Moscow from 20 to 22 April. VEB.RF participated in selecting the winners from among student teams of 22 Russian universities. The awards ceremony was hosted by the Russian Ministry of Science and Higher Education.
Why is it important?
RAISE is a large-scale educational programme organised by the Russian Presidential Academy of National Economy and Public Administration. The programme aims to find and teach socially oriented young leaders. Students can gain experience of preparing and implementing real social impact projects using an entrepreneurial approach. VEB.RF contributed to establishing a special category of the accelerator programme, Best Social Impact Project. Russia’s key development institution is active in promoting such projects.
VEB.RF’s Managing Director Mikhail Alashkevich said: “Social impact bonds are a new financial instrument. The government and the private investor agree to implement a project, and repayment is contingent on the achievement of specified social outcomes.
“It’s a pleasure to note that student teams of the country’s leading universities participate in our special category, coming up with ideas for social impact projects. VEB.RF is already involved in four SIB projects, and it’s very important for us to help student project teams to prepare and propose their ideas.”
Who won in the category?
The best RAISE social impact project was an initiative to improve digital financial literacy among schoolchildren aged between 14 and 17 in remote communities of the Primorie Territory. The project was prepared by the Far Eastern Federal University team. The runners-up were the students representing the Stolypin Volga Region Institute of Administration. Their team proposed a project to warn children aged 6–10 about Internet threats and teach them how to communicate on the Web.
The winners received awards from VEB.RF Director Denis Bokov