On 31 August, Belgazprombank finalized its IFRS financial statements (unaudited) for a 6-month period ended 30 June 2020.
The period under review was challenging. Operating conditions deteriorated for the banking system due to the fallout from the coronavirus pandemic. Moreover, on 15 June 2020 the National Bank introduced temporary administration at Belgazprombank for a maximum of six months and suspended subsequently the bank’s management board. This regulatory action, not connected with the bank’s financial standing, resulted from the temporary inability of a number of top managers to act and, as the National Bank stated, was aimed at ensuring the bank’s corporate governance and its financial consistency in the absence of the quorum for executive decisions.
The licensing powers of Belgazprombank remain in full force and effect. This authorizes the bank to the fullest extent provided by the Belarusian law to make all types of financial operations, including attracting deposits, providing loans and executing international payments of legal entities and individuals through its correspondent accounts in Belarus and abroad.
Despite the above challenges, during the reporting period the bank’s Basel II Tier 1 CAR and total CAR amounted to 14.2% and 15.6% at end 2Q 2020 falling slightly from 14.9% and 16.8% at end 2019. Still this ensured the bank a comfortable headroom above the regulatory thresholds (4% and 8% respectively) to pursue its strategic objectives, meet requirements of its shareholders, investors, banking supervisory and regulatory authorities. The regulatory capital of Belgazprombank, remaining one of the highest across the banking system, amounted to BYN 750.6 mln (equivalent USD 312.6 mln) at 2Q 2020 decreasing by 8.2% from end 2019.
Following the introduction of the temporary administration Belgazprombank faced increase in the volatility of customer deposits and subsequent pressures on its liquidity. These were effectively managed through deleveraging (loans decreased by 17% in 2Q 2020, net of FX effects, with the trend continuing in July-August) and interbank borrowings in the domestic market, including borrowings from the National Bank amounting to BYN 215 mln in June. The National Bank confirmed its readiness to provide further liquidity support to the bank, if needed.
A set of other measures taken by the bank also helped slow down deposit outflows and stabilized them at BYN 2 193.7 mln (due to customers) at end 2Q 2020 from BYN 3 010.6 mln at end 2019 (decrease by 27.1%). As a result, the growth was recorded in balances on corporate accounts by 5.8% in July and on current accounts by more than 14% in August. Part of deposit outflows was substituted for interbank borrowings (due to banks and other financial institutions) totaling BYN 1 147.4 mln at end 2Q 2020 (up from BYN 884.3 mln at end 2019 or a 29.8% increase).
Traditionally high quality of the bank’s loan portfolio backed its financial position as well. Impaired (IFRS 9 Stage 3) loans were a minor 4.3% of loans while Stage 2 loans amounted to 33,9% of loans at 2Q 2020.
For 6 months 2020 Belgazprombank earned IFRS profit of BYN 15.3 mln (equivalent USD 6,4 mln). In periods to follow as per local GAAP Belgazprombank also was one of the most profitable banks in Belarus making BYN 10.3 mln in July (101% of annual income plan) and BYN 6.6 mln in August (105% of annual income plan).
As per local GAAP as of 1 August 2020 Belgazprombank, meeting all the regulatory requirements, retained its position as one of the largest Belarusian financial institutions by main financial indicators: top 7 by assets, top 6 by income, top 5 by regulatory capital and top 3 by authorized fund. The bank’s profitability was above the Belarusian banking system average: ROAA made 1.9% against the average of 1.3%, ROAE equaled 13.4% against the average of 9.2%. The bank decreased effectively operational costs, which affected positively CIR reducing it to 42.7% against the system average of 46.7%.
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