European Bank for Reconstruction and Development 14 th Annual Syndications and Co-financiers Meeting London 6 th March 2012 1
14 th Annual Syndications and Co-financiers Meeting 6 th March 2012, London EBRD s 2011 Performance and Priorities for 2012 Manfred Schepers Chief Financial Officer and Vice President for Finance EBRD 2
Agenda EBRD investment operations in 2011 Key strategic and investment successes EBRD financial performance in 2011 The strength to meet the challenges ahead EBRD priorities in 2012 3
EBRD today AAA/Aaa/AAA rated stable 0% Basel risk-weighted Preferred creditor status The largest lender and private equity investor in this region Private sector 77% of EBRD finance in 2011 Debt 85%, Equity 15% of EBRD finance in 2011 9.1 billion invested in 380 projects in 2011 Invested over 71 billion in nearly 3,500 projects since 1991 4 Annual business volume 12 10 8 6 4 2 0 1997 1998 EUR billion 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Debt ABV Equity ABV Net Cumulative Business Volume 75 65 55 45 35 25 15 5-5 Net cumulative business volume
What were our strategic priorities in 2011? Focus on continued crisis response and growth recovery Capital Resources Review 4 business plan 2011-15: Financial sector - focus on local capital market development Diversification - considerable backlog in many countries; particularly commodity-rich countries further east Energy efficiency & security and climate change - successful programmes in place; awareness growing throughout the region Infrastructure - key impediment to development; crisis has brought a refocusing on viable projects on sound financial basis Regional focus - deepen shift from advanced economies (EU8) to less developed countries (SEE, Central Asia, ETC) 5
Strong operational results in 2011 Record annual investments of 9.1 billion 380 projects across all 29 countries of operations Record disbursements of 6.7 billion, up 11% on 2010 Continued growth in portfolio and operating assets Portfolio growth of 13% to 34.8 billion 1,654 projects, up 5% on 2010 Operating assets growth of 16% to 24.8 billion 6
Strong results in priority areas Sustainable Energy Initiative Investments increased by 21% to a record 2.6 billion Early Transition Countries, in Central Asia and Caucasus 10% increase to 1 billion Of which more than 50% to Micro-, Small and Mediumsized enterprises Western Balkans Nearly 1 billion in investments 7
2011 investments by region Central Europe & Baltics 15% Turkey 10% Russia 33% Central Asia 5% Eastern Europe & Caucasus 20% South-eastern Europe & Balkans 17% 8
2011 investments by sector Power & Energy 13% Natural Resources 6% Municipal & Env Inf 7% Property & Tourism 2% Telecoms Informatics & Media 3% Transport 11% Agribusiness 10% Manufacturing & Services 10% MSME Financing 9% Equity Funds 5% Financial Institutions 24% 9
2011 investments by product Trade Finance 7% Equity funds 5% Sovereign debt 10% Direct equity 10% Private sector debt 68% 10
2011 investments by currency LCY 4% Other 2% RUB 14% EUR 45% USD 35% Lending continues to be dominated by & $ Growth in Local currency mainly in RUB 11
Focus on developing RUB market EBRD Contribution to Rouble Capital Markets Created alternative AAA rated bond market benchmark for investors Attracted new domestic and international investors to Rouble markets Extended yield curve in Rouble market Pioneered development of RUB syndicated loan market Led MosPrime creation and supported RUONIA development Has issued RUB 39.5 billion through 8 bonds since 2005 on domestic market 12 12
Developing the RUB Money Market from MosPrime to RUONIA MosPrime Rate Established on 25 April 2005 13 contributing banks Increased pricing transparency and achieved consistency in pricing Used as base for pricing of derivatives Aided liquidity and efficiency on interbank money market April 2005 MosPrime was launched May 2005 EBRD issued RUB 5 bn bond: 1 st EBRD MosPrimelinked issue 2007 EBRD commenced issuing RUB Eurobonds swapped to MosPrime To Date EBRD issued 5 RUB floating rate MosPrimelinked notes (RUB 25.5 bn) RUONIA Rouble Overnight Index Average Launched on 8 September 2010 25-35 participating banks Calculated by the Central Bank of Russia EBRD supported development of Overnight Index Swaps (OIS) linked to new RUONIA, a liquid and credit-efficient asset and liability management tool 13 13
Some key projects in 2011 RusVinyl, Russia Istanbul Ferries, Turkey MICEX/RTS Exchange, Russia Vienna 2.0 14
RusVinyl, Russia (1) JV of SolVin (Solvay/BASF) and Sibur, a major Russian petrochemicals producer EBRD s financing is part of a 1.3 billion greenfield plant in the Nizhny Novgorod region: 330 ktpa of PVC and 235 ktpa of caustic soda EBRD s contribution: Equity: 52 million (2010) Debt: 150 million (2011), as part of a 750 million package Multi-source financing: EBRD, Sberbank, and (with ECA gtee) BNP Paribas, ING Bank, HSBC 15
RusVinyl, Russia (2) Solvay s first large project in Russia Sibur s first project in PVC: required building competences through a JV with an experienced industrial partner EBRD s participation in the equity helped Solvay to make the decision to invest EBRD s reputation and expertise helped the Sponsors to obtain and agree terms on additional large project loans from Sberbank and cover from western ECAs Project Finance International Award: Petrochemicals Deal of the Year, 2011 16
Istanbul Ferries LBO, Turkey Privatisation of 100% of IDO world s largest municipal ferry operator Inter- & inner-city services: Bosphorus & Marmara Sea 51 mln passengers a year 52 vessels and 35 ferry terminals Award for USD 861 million to TASS (Tepe-Akfen-Sera and Brian Souter) Introduction of new demand-driven ticket tariffs, creation of new routes and intermodal passenger transportation services EBRD-led acquisition financing of USD 750 million EBRD 7 year junior loan USD 50 million EBRD 12 year senior loan USD 100 million + Turkish banks USD 600 million Currency and interest rate hedging facilities Euromoney/Project Finance: European Transportation Deal of the Year, 2011 17
MICEX-RTS Exchange, Russia EBRD and Russian Direct Investment Fund (RDIF) have invested 6.29% and 1.25% respectively in MICEX-RTS stock exchange Supports Russia s goal of transforming Moscow into a globally important and competitive international financial centre and strengthen local RUB capital markets EBRD s involvement and role on the Board will enable the Bank to support and strengthen the combined exchange s product development, listing and reporting standards, governance and regional role 18
Vienna 2.0 European Bank Co-ordination Initiative met in January 2012 against backdrop of: Intensifying de-leveraging of systemic bank groups active in region Un-coordinated national regulatory measures by home/host authorities of these banks Vienna 2.0 will meet in Brussels in March: Major cross-border banking groups; supervisory authorities; central banks; fiscal authorities; EU bodies; IMF; EBRD; World Bank Vienna 1 was about liquidity; Vienna 2.0 is about coordination to support cross-border banking Primary objective is to have official co-ordination consistent with a sustainable model for cross-border banking 19
Agenda EBRD investment operations in 2011 Key strategic and investment successes EBRD financial performance in 2011 The strength to meet the challenges ahead EBRD priorities in 2012 20
Financial results in 2011 Realised income before provisions 839 million (2010: 927 million) Net profit 173 million compared to a net profit of 1.4 billion in 2010 Lower profits due reduction in fair value of equity investments Total reserves 7 billion increase of 3% from 2010 Total capital resources 35.5 billion (2010: 26.2 billion) increase includes 9 billion subscription of callable capital Balance sheet assets 47 billion increase of 20% from 2010 Reflects growth in loan, equity and liquid assets 21
Low loan impairment trends EUR billion 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Total loan operating assets Debt impaired assets Debt impaired assets as % of total loan assets Non performing loans represent 2.6% of total loan assets at YE 2011 22
Strong growth in Core Tier-1 Capital 14 12 10 billion 8 6 4 2 0 2005 2006 2007 2008 2009 2010 2011 Paid-in capital Reserves Total core Tier 1 capital During financial crisis the EBRD has increased its Core T1 by 25% Total Core Tier 1 capital increased by 65% since 2005 to 12.8 billion Result from high realised profit and low impairment losses 23
Key Credit Strength: High Core Tier-1 EBRD Basel ratio versus regulatory minimum 30 percentage 25 20 15 10 25 26 Basel III Conservation Buffer 2.5 5 0 EBRD Core Tier 1 EBRD Total 2 Basel II Core Tier 1 2.5 8 4.5 8 Basel II Total Basel III Common Equity Tier 1 Basel III Total EBRD Core Tier 1 Basel Ratio significantly higher than minimum Basel II & III requirements and private sector comparisons This is a key underpinning of AAA/Aaa/AAA rating with stable outlook Demonstrates EBRD s ongoing investment and risk capacity Enables expansion into SEMED region 24
Key credit strength: EBRD Shareholders EBRD shareholding is global 61.5% of shareholding is G8 62.9% of shareholding is from EU member states 84.3% of shareholding is from OECD members 30 billion authorised capital - 6.2 billion paid-in capital - 23.8 billion callable capital 60% of shareholding is rated AAA Global Shareholder Structure EU 27 Countries 62.9% Japan 8.7% EBRD region Canada excluding EU USA Others 3.5% 8.9% 10.3% 5.7% 25
Agenda EBRD investment operations in 2011 Key strategic and investment successes EBRD financial performance in 2011 The strength to meet the challenges ahead EBRD priorities in 2012 26
Key investment priorities in 2012 Financial institutions Supporting strategic and systemic institutions with debt and equity Local currency and capital market development initiative Corporates Supporting refinancing needs and equity investment Promoting energy efficiency Supporting economic diversification Infrastructure Promoting continued reform and investment Lead provider on pioneering structures and projects Early Transition Countries and Western Balkans Promoting investment in the less advanced economies 27
EBRD s mandate extended to SEMED G8 and EBRD shareholders have given strong support to an extension of the Bank s geographic mandate in the southern and eastern Mediterranean region In 2011, Tunisia and Jordan joined Egypt and Morocco as EBRD shareholders as part of the process of becoming recipients countries Technical cooperation funds have been established and EBRD will create a special fund in enable investment in 2012 Over 100 SEMED focussed staff being hired and offices to be opened in Amman, Cairo, Tunis and Casablanca Geographic expansion will be phased and achieved while preserving the conservative risk profile of the Bank 28
Working together: EBRD standards EBRD provides opportunity to co-finance quality projects Sound banking Market-based pricing and covenants Additionality Provide tenor, local currency, structures, innovation Ability to provide loan, bond, equity, mezzanine finance Transition impact Corporate Governance and Integrity Environmental standards and projects Reporting transparency and IAS 29
Working together: supporting your clients EBRD here to help you to support your clients EBRD mandate to assist private sector to finance projects Increase debt tenors and broaden the investor base Provides preferred creditor status Provide equity products to strengthen capital structure Capacity to provide long-term local currency products Both major and minor CEE/CIS currencies Engage EBRD early to leverage EBRD resources effectively EBRD is flexible and not bureaucratic 30
Some challenges remain, others got bigger Tough operating environment Lack of attraction of region vs other EM (Asia, Latam) Continued higher risks: commodity, political, -zone Uneven FDI, with high natural resource concentration Tentative corporate investment programmes Constrained public finance to support infrastructure and PPP Limited international bank participation and presence Increasing role of govt-owned banks in Russia 31
14 th Annual Syndications and Co-financiers Meeting 6 th March 2012, London EBRD s 2011 Performance and Priorities for 2012 Manfred Schepers Chief Financial Officer and Vice President for Finance EBRD 32
European Bank for Reconstruction and Development 14 th Annual Syndications and Co-financiers Meeting London 6 th March 2012 33