VEB.RF Reports Net Profit of RUB 30.8 bn for H1 2021

VEB.RF published its interim condensed consolidated financial statements under IFRS as at June 30, 2021.  

“In H1 2021, the VEB.RF Group made a net profit of RUB 30.8 bn under IFRS. This result was driven predominantly by the growth in net interest and fee and commission income, along with a partial reversal of allowance. Supported by the Russian Government, VEB.RF is actively increasing investment in the Russian economy: the loan portfolio grew by RUB 125 bn (or by above 10%) in H1 2021. Nationally significant projects and projects aimed at improving the quality of life for people were financed inter alia by debt capital market borrowing: amounts due to banks increased by RUB154 bn (or 26%), the volume of debt securities issued grew by more than RUB 100 bn (or 12%). Notably, the growth in borrowings was accompanied by a decrease in interest expense.

A comfortable level of liquidity and the capital adequacy ratio of 18.6% allow us to maintain high pace of investments in projects and to ensure the inflow of private investments. The recently approved VEB.RF’s new Memorandum on financial policies opens up additional opportunities to implement together with development institutions, partners and investors our major joint agenda,” VEB.RF Chief Financial Officer Andrey Moskovskikh said.    

VEB.RF Group’s key financials for H1 2021 are as follows:

In the first half of 2021, the VEB.RF Group made a profit of RUB 30.8 bn against a loss of RUB 47.6 bn as compared to the same period last year.

The positive financial result was driven by:

• net operating income of RUB 62.4 bn;

• reversal of allowance for expected credit losses of RUB 23.5 bn. In the same period of 2020, the allowance for ECL was established in the amount of RUB 23.8 bn;

• decrease in non-interest expense to RUB 56.1 bn from RUB 77.0 bn for H1 2020.

Operating income (net of allowance) grew by RUB 7.0 bn for H1 2021 as compared to H1 2020, mainly due to the following factors:

• Net interest income grew to RUB 9.3 bn as compared to RUB 3.6 bn for the same period last year, as a result of the decrease in interest expense by RUB 10.7 bn, inter alia due to reduced cost of funding. At the same time interest income slightly decreased.

• Net fee and commission income also went up from RUB 5.1 bn for H1 2020 to RUB 20.5 bn for H1 2021 due to the amortisation of loss on initial recognition of guarantees issued as part of the state anti-crisis programme.

• Non-interested income for H1 2021 amounted to RUB 11.7 bn compared to RUB 33.7 bn for the same period last year. In the reporting period ended June 30, 2021 the loss was recorded on initial recognition of guarantees issued in H1 2021 on preferential terms as part of the new state COVID-19 rescue scheme.

In the first half of 2021 the Group’s assets went up by 6.5% (+ RUB 221.2 bn) against the beginning of the year and as at June 30, 2021 reached RUB 3 627.3 bn. Alongside with the increase in the loan and leasing portfolios, assets dynamics is due to the rise in cash and cash equivalents, as well as in investments in associates and jointly controlled entities.

Continuing its growth in the second quarter of 2021 the loan portfolio (net of provision for impairment) reached RUB 1 294.3 bn, showing an increase of 10.7% (+ RUB 125.2 bn) against the beginning of the year. The leasing portfolio went up by 7.2% (+ RUB 12.7bn) and as at June 30, 2021 was RUB 188.5 bn. In total, the loan and leasing portfolios account for 40.9% of the Group’s total assets.

The amount of loans granted by VEB.RF in H1 2021 totalled RUB 190.3 bn, doubling the amount of loans extended in the same period last year. Investment priority sectors traditionally include industry, infrastructure and urban economy, as well as export support.

In the six-month period of 2021 allowance for expected credit loss was reversed in the amount of RUB 23.5 bn. Of which the allowance for financial guarantees was reversed in the amount of RUB 12.2 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 6.3 bn.

The Group’s liabilities increased by 6.1% (+ RUB 167.0 bn) and as at June 30, 2021 reached RUB 2 884.1 bn. This increase was driven by the rise in amounts due to banks by 25.9% (+ RUB 154.2 bn) and in debt securities issued by 13.3% (+ RUB 101.9 bn). The decrease in amounts due to customers and amounts due to the Russian Government and the Bank of Russia partially offset the said increase.

The rise in liabilities is driven by the necessity to build up market funding of VEB’s activity for increased financing of primary projects of the national economy.

The Group’s equity in the first half of 2021 went up by RUB 54.2 bn (+7.9%) to RUB 743.2 bn as at June 30, 2021. The equity growth was driven by the profit in H1 2021, increase in gains from investment financial assets at fair value through other comprehensive income and receipt of an asset contribution from the federal budget for the increase of authorized capital of a subsidiary.

VEB.RF’s capital adequacy ratio was 18.6% as at June 30, 2021 (17.0% as at December 31, 2020).

After the reporting date, a new Memorandum on Financial Policies of State Development Corporation VEB.RF was approved. The Memorandum defines VEB.RF’s role in the implementation of the Russian Government’s socio-economic initiatives, as well as formalizes VEB.RF’s role as a driver for socially responsible business in Russia. The Memorandum also envisages extended tools and investment priorities of VEB.RF, including the development of Social Impact Bonds (SIB) and promotion of raising private investments for such projects.