VEB.RF published its interim condensed consolidated IFRS financial statements as at September 30, 2020

VEB.RF published its interim condensed consolidated financial statements under International Financial Reporting Standards as at September 30, 2020.  

«VEB.RF serves as a financial and lending institution, Russia’s only institution having such a complicated profile. We support large-scale projects that are most important for Russia’s economy development. VEB.RF fully meets the IFRS criteria designed to enhance transparency and deemed appropriate in the light of VEB.RF’s transformation.

Backed by the Russian Government, VEB.RF dynamically implements nationally significant projects in infrastructure, high-technology industries, exports and urban development, and is actively involved in programmes supporting business during the COVID-19 pandemic. VEB.RF issued about RUB 500 billion worth of guarantees to commercial banks for entrepreneur loans, thus allowing hundreds of enterprises to maintain millions of jobs and revive business.

Notably, our agenda extends far beyond overcoming the economic consequences of the pandemic. VEB.RF increases investment in development in partnership with commercial banks. In the reporting period, VEB.RF demonstrated an increase in the loan portfolio, operating income and equity. The VEB.RF Group generated profit in Q3 2020. The reported nine-month loss is attributable to loan and guarantee provisioning including as part of support for businesses during the pandemic, and VEB.RF’s continuing work with its ‘old’ loan portfolio.

The capital adequacy ratio above 12% and a comfortable level of liquidity allow us to actively promote our development agenda. VEB.RF is continuing its transformation and making up a new break-even portfolio amounting to at least RUB 3 trillion subject to successful implementation of VEB.RF’s business model.” VEB.RF Chief Financial Officer Andrey Moskovskikh said.    

9M 2020 VEB.RF Group’s key financials according to IFRS are as follows:

• The Group’s assets as compared to the beginning of the year increased by 6.6% (RUB +209.0 bn) and as at September 30, 2020 reached RUB 3,399.8 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 6.3% (RUB +80.5 bn) to reach RUB 1,364.8 bn. The total loan and leasing portfolio accounted for 40.1% of the Group’s total assets.  

• The amount of loans granted by VEB.RF in 9M 2020 reached RUB 160.9 bn. The investment priority sectors included industry, infrastructure and urban economy, as well as export support. Among the projects for which financing started in the third quarter are the following projects: construction of the Sukhodol coal export terminal in the Far East, financing of rail buses delivery to the Sakhalin region, etc.

• In 9M 2020 allowance for expected credit loss amounted to RUB 26.2 bn, including the provision of RUB 11.4 bn for guarantees provided in favour of credit institutions within anti-crisis measures of the Russian government.

• In the reporting period the amount of cash and cash equivalents went down by 30.8% (RUB -187.1 bn) to RUB 420.9 bn due to increased project lending. Liquidity is maintained at a comfortable level: cash and cash equivalents account for over 12% of total assets as at September 30, 2020.

• As at September 30, 2020 the Group’s liabilities year-to-date went up by 1.3% (RUB +36.5 bn) to RUB 2,802.2 bn. Foreign currency revaluation affected the increase in liabilities. At the same time amounts due to the Russian government and the Bank of Russia went down by 12.3% (RUB -94.7 bn) because of the derecognition of obligations under deposit agreements with the Bank of Russia. The decrease in debt securities issued was largely due to the redemption in July 2020 of the Eurobond issue with a nominal value of USD 1.6 bn.

• Operating income for 9M 2020 totaled RUB 146.1 bn, exceeding that for the same period of 2019 by 34.2%. In the operating income structure, net interest income amounted to RUB 6.3 bn, net commission income reached RUB 11.1 bn, and non-interest income was RUB 128.7 bn. Interest income decline 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 the nine-month period the Group reported a loss of RUB 29.7 bn. The negative financial result was mostly driven by the loss on initial recognition of guarantees issued in favour of 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. However the Group recognized the profit of RUB 17.4 bn in the third quarter.

• Weakening of the Russian rouble also affected the indicators and the Group’s result for 9M 2020.

• In 9M 2020 the Group’s equity went up by RUB 172.5 bn (+40.6%) to reach RUB 597.6 bn as at September 30, 2020. Equity increase was, inter alia, due to the following asset contributions:

• 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 received a subsidy of RUB 19.3 bn 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 increased with the subsidy of RUB 2.4 bn 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 12.9% as at 01.10.2020 (13.6% as at 01.01.2020).

• Comfortable equity level and state support measures allow VEB.RF to perform the leading development institution’s functions and be actively engaged in programmes of national significance for the Russian economy.