Black Sea Trade and Development Bank Presentation

Transcription

1 Black Sea Trade and Development Bank Presentation October 2015

2 Agenda 1 Overview of BSTDB 2 Operating Environment 3 Portfolio Development and Performance 4 Risk Management 5 Treasury Portfolio and Funding Strategy 2

3 Key Credit Highlights Mission International financial institution with supranational status and a mandate to foster economic growth and regional cooperation amongst its Member States in the Black Sea Region Special status Preferred creditor status Governed by international law and not subject to taxation Strong support of Member State governments demonstrated by capital commitments Strong credit ratings Robust financial metrics Long Term ratings: A2 (Moody's) Negative Outlook and A- (S&P) Stable Outlook Short-term ratings: P-1 (Moody s) Negative Outlook and A-2 (S&P) Stable Outlook Best-rated institution in the Black Sea region and one of the highest-rated banks in CEE/CIS Strong balance sheet and capitalization Low leverage provides solid potential to further expand operations Prudent risk management attested to by consistent profitability Diversified shareholder structure Key financial highlights Country Ownership (%) % Outstanding million 1h Portfolio Total assets 1, , Russia Total loans Turkey Total liabilities Greece Total members equity Romania Net profit Bulgaria Ukraine Total debt Azerbaijan Liquid assets 1 / borrowings (%) Albania CAR (%) Armenia ROA (%) Georgia Moldova Source: YE 2012, 2013, 2014 and 1h 2015 audited Financial Statements. 1 Cash and bank 3 Source: 1h 2015 audited Financial Statements; Note: Moldova reduced its shareholding from 1% to 0.5% in 2011, leaving 0.5% shares unallocated balances plus placements with financial institutions plus investment securities less provisions for impairment; 2 Members equity as a percentage of gross loans, gross equity investments, deposits and gross investment securities

4 16 years of operational history Net income ( mm) 1 June BSTDB commences Operations March Investment Grade Rating from Moody s: Baa October Moody s Credit Rating Upgrade to Baa October SDR 1 billion Capital Increase Subscribed 2008 September Moody s Credit Rating Upgrade to A (0.24) June Initial Credit Rating of A from S&P September Debut CHF 200 million 4 year bond issue January S&P Credit Rating downgraded to A February 2014 Moody s credit rating raised to A March 2015 Moody s A2 Rating assigned negative outlook May CHF 100 million 4.6 year bond issue June 2015 EUR 1 billion MTN program established 1h Source: BSTDB 1h 2015 audited Financial Statements; Note: Net income figures prior to 2010 are converted from SDR at exchange rate at close of day on December 31 of respective year 4

5 Shareholders demonstrate their continued commitment through capital contributions Capital structure 2008 Current 30% paid in 70% callable EUR 3.45Bn Authorised Capital EUR 2.29Bn Subscribed Capital Support from Member States BSTDB benefits from the financial and operational support of its Member States Initial authorized share capital was EUR 1.15 billion Board of Governors composed of Member State representatives approved increase to EUR 3.45 billion in December 2007 BSTDB is able to call capital from its Member States when required to meet obligations of the Bank relating to its borrowings Well capitalized relative to peers Capital adequacy ratio (Equity / Total assets) EUR 1.15Bn Authorised Capital EUR 805MM Callable Capital EUR 1.15Bn Subscribed Capital EUR 1,602MM Callable Capital EUR 132MM Payable Capital 80% 60% 40% 20% 0% 59.5% 27.9% 29.8% 38.9% EUR 345MM Paid in Capital EUR 554MM Paid up Capital Source: 1h 2015 audited Financial Statements. *Capital re-denominated to EUR (from SDR) in June 2013 at SDR/EUR rate of Source: Company financials; Note: BSTDB 1h 2015 (audited), CAF 1h 2015 (audited), CABEI 2014 (audited) and EDB 1h 2015 (unaudited).

6 BSTDB Credit Ratings Issuer Inter-American Development Bank Aaa (outlook stable) AAA (outlook stable) AAA (outlook stable) Asian Development Bank Aaa (outlook stable) AAA (outlook stable) AAA (outlook stable) International Bank for Reconstruction & Development Aaa (outlook stable) AAA (outlook stable) AAA (outlook stable) Corp Andina De Fomento (CAF) Aa3 (outlook stable) AA- (outlook negative) AA- (outlook stable) Central American Bank of Economic Integration (CABEI) A1 (outlook stable) A (outlook stable) A (outlook stable) BSTDB A2 (outlook negative) A- (outlook stable) Eurasian Development Bank Baa1 (outlook stable) BBB- (outlook negative) Rating withdrawn BNDES Baa3 (outlook stable) BBB- (outlook stable) BBB (outlook stable) Development Bank of Kazakhstan Baa3 (outlook stable) BBB (outlook negative) BBB (outlook stable) Export Credit Bank of Turkey Baa3 (outlook negative) BB+ (outlook negative) BBB-(outlook stable) Vnesheconombank Ba1 (outlook negative) BB+ (outlook negative) BBB- (outlook negative) Hungarian Export-Import Bank BB+ (outlook stable) BB+ (outlook positive) Rating Agencies Comments The rating affirmation (at A2) is supported by the fact that BSTDB s high amount of usable equity relative to its loan book, low leverage, a significant amount of callable capital, and substantial liquid assets support BSTDB s resilience in the challenging macroeconomic environment in which the bank operates. Moreover, against the background of Moody s downgrade of Russia s sovereign bond rating to Ba1 from Baa3, BSTDB s significant strength of member support has remained supportive of the current rating. Moody s Investors Service. Press Release: Black Sea Trade & Development Bank, March 17, 2015 Source: Moody s Press Release, BSTDB's capitalization is the cornerstone of its very strong financial profile. We note that under our liquidity stress scenario, the bank would be able to continue fulfilling its mandate, even under extremely stressed market conditions, without access to the capital markets. The stable outlook reflects our view that BSTDB's credit strengths, in particular, its extremely strong capital adequacy, will endure, despite elevated macroeconomic risks in the region. S&P Rating Services. Research Update: Black Sea and Development Bank, July 10, 2015 Source: S&P Report, 2015

7 and the Board of Governors and Board of Directors bring valuable regional insight Board of Governors Country Governor Position Albania Mr. Erjon Luci Deputy Minister of Finance Armenia Mr. Arthur Javadyan Chairman, Central Bank Azerbaijan Mr. Samir Sharifov Minister of Finance Bulgaria Ms. Karina Karaivanova Deputy Minister of Finance Georgia Mr. Georgi Kadagidze President, National Bank Greece Mr. Georgios Stathakis Minister of Economy, Development and Tourism Moldova Mr. Anatol Arapu Minister of Finance Romania Mr. Eugen Orlando Teodorovici Minister of Public Finance Russia Mr. Sergey Storchak Deputy Minister of Finance Turkey Mr. Cavit Dagdas Acting Undersecretary of Treasury Ukraine Mr. Aivaras Abromavicius Minister, Ministry of Economic Development and Trade Board of Directors Country Director Position Albania Ms. Gelardina Prodani General Secretary, Ministry of Finance Armenia Mr. Vardan Aramyan First Deputy Chief of Staff of the Office of the President of the Republic of Armenia Azerbaijan Mr. Famil Ismayilov Deputy Head, International Relations Department, Ministry of Finance Bulgaria Ms. Milena Boikova Director, Government Debt & Financial Markets Directorate, Ministry of Finance Georgia Mr. David Lezhava Deputy Minister of Finance Greece Mr. Ilias Xanthakos Secretary General, Ministry of Economy, Development and Tourism Moldova Ms. Elena Matveeva Head, Public Debt Department, Ministry of Finance Romania Ms. Diana Peligrad Blindu Senior Advisor, General Directorate for International Financial Relations, Ministry of Public Finance Russia Mr. Evgeny Stanislavov Director, Department of Economic Cooperation, Ministry of Foreign Affairs Turkey Mr. Hakan Tokac Director General for Foreign Economic Relations of the Undersecretariat of the Treasury Ukraine Mr. Valeriy Pyatnytskiy Advisor to the Prime Minister, Cabinet of Ministers of Ukraine 7

8 BSTDB offers a range of investment products which align with its regional development mandate Mandate Target borrowers and projects Products & Services Foster economic growth and regional cooperation through financing projects and trade activities and providing financial services to public and private entities in the Black Sea Region Public and private companies with operations in one or more of the Member States Transaction benefits Member State/s and has development impact Economically sustainable / financially viable so Bank participation will be profitable and the undertaking will prove sustainable beyond BSTDB s involvement Potential to promote regional cooperation Lending: Short to long-term loans, typically extended in USD or Euros Trade finance: Firms importing from Member States and regional exporters SMEs: Financing through credit lines to local financial intermediaries Bank/Equity funds: Equity investments, looks to take stake of 5-25% Guarantees Co-financings Pricing BSTDB is not a profit maximizing organization; operations are priced according to risk with reference to market pricing No politically motivated or concessional lending Priority sectors Energy Manufacturing Public utilities Financial institutions Telecommunications Transport 8 Municipal services Environmental protection SMEs & Trade Finance

9 Observers of BSTDB enhance co-financing possibilities and facilitate access to investors Observers to BSTDB BSTDB cooperates with various international organisations, including affording observer status to ten development institutions BSTDB aims to enhance cooperation and increase the exchange of project-related information with these organisations with a view to potential co-financing for projects, as well as other types of funding The observers have the right to attend and speak at BSTDB s annual meetings Recognized as a multilateral development bank by the EU Current observers KfW Banking Group (Germany) Aaa AAA AAA Development Bank of Austria AA+ VEB (Russian Development Bank) Ba1 BB+ BBB- Association of European Development Finance Institutions European Investment Bank Aaa AAA AAA Nordic Investment Bank Aaa AAA International Investment Bank Baa1 BBB- International Finance Corporation Aaa AAA Agence France du Développement (Proparco) AA AA European Bank for Reconstruction and Development Aaa AAA AAA Source: Moody s, S&P, Fitch 9

10 BSTDB S Strategy Core components of BSTDB s overall strategy Increase lending portfolio Medium Term Strategy ( ) targets: Increase lending portfolio to reach 1,250 million (average annual growth of 7.5%) Increase exposure to public sector to 15-20% Increase share of trade finance to about 10-15% Introduce new & more sophisticated projects to growing and maturing markets Further sector and geographic diversification of portfolio Funding Enhance dialogue with current and potential member states Strengthen cooperation and partnership with peer institutions Increase equity capital to 800 million by annual subscriptions to capital increase and by retaining earnings Increase total borrowings to 600 million by bond issuance and bi-lateral credit lines Continue to develop and implement strategies tailored to each Member State Engage in accession discussions with Serbia Keep open the prospect of attracting a AAA-rated international financial institution as shareholder Strengthen existing relationships to foster co-financing opportunities and share institutional knowledge Enhance credit rating Seek further credit rating enhancements Long Term Strategy objective is to attain a rating of AA-/ Aa3 level by

11 Agenda 1 Overview of BSTDB 2 Operating Environment 3 Portfolio Development and Performance 4 Risk Management 5 Treasury Portfolio and Funding Strategy 11

12 Regional growth slowed, but metrics still outpace the EU Historical real GDP growth Black Sea Region European Union Sources: National Statistical Agencies & Central Banks, Eurostat Current economic indicators (2014) Real GDP growth Budget/GDP Public debt / GDP (%) (%) (%) Albania 2.1 (5.2) 72.1 Armenia 3.5 (1.9) 45.2 Azerbaijan Bulgaria 1.7 (3.7) 21.2 Georgia Greece 0.8 (3.5) Moldova 4.6 (1.7) 30.3 Romania 2.8 (1.9) 40.4 Russia 0.6 (1.2) 17.8 Turkey 2.9 (1.3) 33.7 Ukraine -6.8 (4.3) 71.2 BSEC Wtd. Avg. 1.1 (1.6) 36.8 European Union 1.6 (2.9) 86.8 Euro Area 0.8 (2.4) 91.9 Sources: NSAs & Central Banks, IMF, Eurostat; Data Estimates for 2014; EU & Euro Area deficit and debt data for Member States credit ratings evolution October 2015 Country Albania B1 B NR Armenia Ba3 NR B+ Azerbaijan Baa3 BBB- BBB- Bulgaria Baa2 BB+ BBB- Georgia Ba3 BB- BB- Greece Caa3 CCC+ CCC Moldova B3 NR WR Romania Baa3 BBB- BBB- Russia Ba1 BB+ BBB- Turkey Baa3 BB+ BBB- Ukraine Ca B- RD Sources: Moody s, S&P, Fitch

13 Agenda 1 Overview of BSTDB 2 Operating Environment 3 Portfolio Development and Performance 4 Risk Management 5 Treasury Portfolio and Funding Strategy 13

14 BSTDB s portfolio has grown steadily over time BSTDB historical portfolio development million 1,775 1, ,073 1,054 1,145 1,259 1,276 1, ,010 1,087 1,168 1,145 1,320 1, h 2015 Board of Directors Active Operations Signed Active Operations Outstanding Source: 1h 2015 audited Financial Statements BoD approved loan and equity portfolio by country Loan portfolio outstanding by end user sector Loan Portfolio security Greece, 4.7% Albania, 3.2% Armenia, 5.4% Romania, 11.0% Bulgaria, 4.8% Georgia, 5.8% Azerbaijan, 13.9% Moldov a, 2.2% Ukraine, 5.9% Turkey, 23.8% Source: 1h 2015 audited Financial Statements Russia, 19.3% Total: 1.77 billion Mortgages, 7.5% Leasing, 7.6% Sub Debt, 8.6% SME, 18.3% Industrials, 11.9% Health care, 1.0% Inf Trade f inance, 6.7% Energy, 0.3% Total: 905 million ormation technology, 0.8% 16 Materials, 11.3% Real estate, 3.0% Utilities, 5.4% Consumer discretionary, 5.3% Consumer staples, 12.3% 61% of BSTDB s outstanding loan portfolio* is secured By sector: 76% 24% Financial Institutions 20% 80% Secured Unsecured 0% 0% 0% 100% 100% 100% Industrials Telecoms Energy Other Sectors *Exposure to Financial Institutions totals 49% of outstanding loan portfolio

15 Top exposures reflect portfolio diversification Overview of six largest projects by utilization Tav Izmir Airport Zenit Bank Acron Corporate Loan Promsvyazbank Kurum III and IV Credit Bank of Moscow Project Finance facility for design and construction of a new domestic terminal building, renovation of international terminal and operation of Izmir airport Two subordinated loans for capital support A five-year $525m Syndicated Structured Pre- Export Facility to fertiliser producer Acron Financing for mortgage lending Two corporate loans for working capital and capex One subordinated loan to serve as Tier 2 Capital to strengthen bank s capital base; second loan to be used by Credit Bank to finance SMEs Initiated: Utilization: Maturity: m 2028 Initiated: Utilization: Maturity: 2009/ /24 Initiated 2015 Utilization 35.7m Maturity: 2020 Rest of top 20 largest borrowers Initiated: Utilization: Maturity: 2010/ m 2017 Initiated: 2013/15 Utilization: 32.9m Maturity: 2018/21 Initiated: Utilization: Maturity: Outstanding portfolio concentration m 2017 Fabrica de Lapte Initiated: Brasov 31.8m Kastamonu 31.5m Alternatifbank 26.8m Galnaftogaz 26.7m Alumil 19.9m Abrau Durso 19.4m Accessbank* 16.0m Natfood 15.2m Is Leasing 30.0m Instanbul Muni 21.4m Absolut Bank 17.9m Credit Europe Bank 27.0m Center Invest Bank 20.0m Europlan 17.9m Source: 1h 2015 audited Financial Statements.*The Bank has an additional equity investment in Access Bank valued at EUR 20.2m 15 Total: 970m

16 Agenda 1 Overview of BSTDB 2 Operating Environment 3 Portfolio Development and Performance 4 Risk Management 5 Treasury Portfolio and Funding Strategy 16

17 Prudent risk management policy Risk management bodies Single project and obligor limits Board of Governors Board of Directors Single obligor limit for loans: Loans to a single borrower may not equal greater than 7.5% of paid-in share capital, reserves, and retained earnings Asset & Liability Management Committee Risk Management Department Aggregate Country Financial Analysis Department Other lending limits Credit Committee Office of the General Counsel Exposure to 5 highest obligors cannot exceed 40% of outstanding loan portfolio Loans to any country may not exceed 30% of total lending Single obligor limit for equity investments: May not equal greater than 3% of paid-in share capital Single obligor limits do not apply to sovereign exposure Single project BSTDB may finance only the following maximum percentages of any project, according to its type: Project finance: 35% Equity: 33% Corporate Finance % Trade Finance: 100% Sector Term Loans to any sector are targeted to not exceed 40% of total lending Generally maximum investment term is 10 years, although exceptions can be approved by the Board 17

18 Track record of solid portfolio performance At 30 th June 2015 BSTDB had 2 impaired (non performing) loans Low problem loan history Non performing loans are defined as 90 days overdue for principal or interest payments 9.0% 8.0% 7.0% Only 11 signed lending operations have become problem loans in over 15 years 4 were rescheduled and have fully repaid 2 were sold 2 were provisioned and restructured 1 was written off 2 are currently provisioned 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% h 2015 NPLs/Loans Provisioning is conservative 80% 70% 60% 50% 40% 30% 20% 10% 0% h 2015 NPLs/Reserves* Reserves*/Gross Loans Source: audited Financial Statements for 2009, 2010, 2011, 2012, 2013, 2014 and 1h (*Reserves + Provisions) Provisions recorded in two ways: 1) General provisioning rate applied to entire portfolio 2) Specific provisions applied against certain assets Specific Provisions are determined following an impairment test if evidence of credit deterioration is found during regular monitoring BSTDB has moved to a Basel II approach, to include Loss Given Default (LGD) and Discount Factors for security in

19 Non Performing Loans BSTDB currently has two non performing loans Textile Manufacturer Turkey (NPL-2004) Reasons for non performance: Cost overruns due to increased raw material prices, fire in a manufacturing plant owned by the guarantor, local currency appreciation reducing value of exports Problems with restructuring / recovery: Local bankruptcy protection for many years prevents enforcement action by lenders, unreliable financial information separate rescheduling procedure being followed by local banks Bank Actions: 100% provisioned. Engagement of Turkish law firm to follow up the court case and represent the Bank s interests Energy company Ukraine (NPL-2014) Reasons for non performance: Crimea based company caught up in Ukraine / Russia conflict Problems with restructuring / recovery: Uncertain geopolitical situation Bank Actions: 100% provisioned. Following the situation 19

20 Agenda 1 Overview of BSTDB 2 Operating Environment 3 Portfolio Development and Performance 4 Risk Management 5 Treasury Portfolio and Funding Strategy 20

21 Conservative treasury portfolio management Treasury Assets ( millions) h 2015 Bank balances & placements with financial institutions Investment securities: A1-A2, 59.0% Available-for-sale Held-to-maturity Total deposits and securities Treasury portfolio Total Treasury Portfolio by credit rating Investment principles Credit quality of securities in portfolio and as collateral Available for sale investment securities rated at a minimum: Long Term - BBB+ by S&P or Baa1 by Moody s Short term rated at a minimum A2 by S&P or P2 by Moody s Credit quality of Treasury counterparties Bank balances and placements with Financial Institutions long term rated at a minimum A by S&P or A2 by Moody s Term of deposits Max term of any 1 deposit (inter-bank credit) may not exceed 6 months Hedging Derivatives with approved counterparties may be used only for hedging and must be ISDA documented with collateral support Repo transactions May be undertaken subject to investment securities and counterparty limits Treasury risk management Total: mm Aaa-Aa3, 34.3% Baa1-Baa2, 6.7% 21 No significant interest rate or foreign exchange risk Aims to balance the term and currency structure of BSTDB s assets and liabilities Requirement to maintain liquidity position at a minimum of 50% of the following 12 months net cash requirement, including budgeted loan disbursements Liquidity position monitored on a daily basis

22 Diversification of Funding Strategy is Targeted Apart from Member States capital contributions, to date BSTDB has funded itself by means of a combination of bond issuance, syndicated loans, bi-lateral loans and ECP issuance funding plans include bond issuance and geographical diversification In May 2015 the Bank established a Medium term Note Program Current outstanding borrowings Available undrawn credit facilities CHF 200 mm 4 year bond issue CHF 100 mm 4 year bond issue 30.4 mm fully utilized facilities from Nordic Investment Bank $90.6 mm fully utilised facility from KFW 13.7mm fully utilized facility from Proparco 26.7mm fully utilized facility from OeEB 12.0mm Schuldschein issued 20mm facility from Nordic Investment Bank $100mm facility from KFW Current borrowing EUR million Historical borrowing By Currency By Maturity million Source: 1h 2015 audited Financial Statements h 2015 CHF 64% USD 18% EUR 18% Year EUR 000,000s , , , , , ,056 TOTAL 452,145 22

23 Annex Summary of Audited Financial Statements 23

24 Five Year Comparison Income Statement Income Statement (in EUR 000 s) Year h 2015 Interest and similar income From loans 31,633 39,663 34,893 38,141 21,936 From placements with financial institutions From investments securities 5,229 3,385 2,019 1, From front-end and commitment fees 2,819 2,643 3,389 1,713 1,623 Total interest and similar income 39,706 45,699 40,303 41,818 23,828 Interest and similar expense Interest expenses 11,430 13,999 11,279 10,906 6,703 Issuance and arrangement costs , Other charges Total interest and similar expense 12,110 14,964 12,495 11,705 7,020 Net interest income 27,596 30,735 27,808 30,113 16,808 Other income Net fees and commissions 433 1, Dividend income 1, ,203 1,690 2,589 Net profits on sale of equity investments Net gains (losses) from investments 4,693 3,105 (47) 349 Net gains (losses) on hedging activities 0 (12) (3) (10) (17) Net income (loss) on foreign exchange 1,033 (1) (745) (85) (95) Other income (expense) 881 (6) Total other income 8,315 4, ,605 2,982 Operating income 35,911 34,881 28,774 32,718 19,790 Administrative expenses Personnel Expenses 10,867 12,159 12,674 13,074 6,936 Other administrative expenses 4,399 3,309 3,585 3,453 2,136 Depreciation and amortisation Total administrative expenses 15,664 15,997 16,919 17,292 9,404 Income before provisions 20,247 18,884 11,855 15,426 10,386 Provisions (releases) for impairment on loans (4,591) 3, ,406 2,400 Provisions for impairment on equity investments Provisions for impairment on guarantees (3) 9 Provisions for impairment on investment securities 14, (2,104) 0 Net Income 10,059 14,930 13,284 14,023 7,977 24

25 Five Year Comparison Balance Sheet Balance Sheet (in EUR 000 s) Year End h 2015 Assets Cash and Bank Balances 11,888 18,227 14,849 63,955 69,219 Placements with Financial Institutions Investment Securities 140, , ,812 75, ,352 Total Deposits & Securities 152, , , , ,571 Derivative financial instruments 0 11,517 16, Loans 688, , , , ,502 Equity Investment 31,565 43,290 52,934 84,860 64,613 Less: deferred income (6,913) (6,694) (6,146) (8,125) (7,751) Less Provisions for Losses (39,843) (42,026) (41,163) (47,734) (20,763) Net Loans & Equity Investment 673, , , , ,601 Net property, technology equipment 1,479 1,515 1,465 1,170 1,008 Other Assets 9,588 14,677 9,832 10,799 16,311 Total Assets 836, , ,198 1,057,063 1,160,491 Liabilities Borrowings & Other Liabilities 268, , , , ,145 Derivative financial instruments 8, ,769 5,290 Payables & Accrued Interest 3,051 9,105 4,761 8,968 12,052 Total Liabilities 279, , , , ,487 Members Equity Subscribed Share Capital 2,349,300 2,316,688 2,288,500 2,288,500 2,288,500 Less:callable share capital (1,653,115) (1,623,876) (1,601,950) (1,601,950) (1,601,950) Less:payable share capital (228,767) (198,094) (168,584) (143,702) (132,175) Cumulative translation adjustment (216) (337) 0 0 Advance against future call Paid in share capital 467, , , , ,375 General reserve 40,103 44,206 50,519 71,389 47,777 Retained earnings 49,630 62,525 72,603 80,874 88,852 Total members' equity 556, , , , ,004 Total Liabilities and Members' Equity 836, , ,198 1,057,063 1,160,491 25