“Gazprom” will increase the capital of Gazprombank, after a decline of investments in construction

“Gazprom” will provide for capitalization of Gazprombank 85 billion rubles Is 13% of the Bank’s capital, which, according to the company on October 1, 2016, is 624 billion rubles. “Our planned long-term financial investments in 2016 increased mainly due to investments for capitalization of Gazprombank”, — stated in the prospectus of the new issue of Eurobonds of the gas concern.

In this case, directing the funds into a Bank, “Gazprom” has adjusted private investment program for 2016. In particular, the gas monopoly has reduced the cost of construction “Forces of Siberia” with 92,1 billion to 76.2 billion rubles. the company Also reduced the cost of maintaining the production of its old fields with declining production — Medvezhye, Urengoy, Yamburg — to 15.6 billion to 30.2 billion rubles, expenses on the system of underground gas storage reduced to 30 billion to 83 billion rubles.

The Gazprombank did not disclose the reasons and timing of the planned capital increase. Experts believe that this may be due to the need to maintain Bank standards, Bank capital adequacy. On October 1, 2016 the adequacy ratio of core capital (N1.1) of Gazprombank under RAS amounted to 7.7% (the standard 4.5 percent), down from the beginning of the year by 1.07 p. p. Indicator of capital adequacy (N1.2) since the beginning of the year fell to 7.85 from 8.97% (standard 6%).

According to senior Director financial institutions Fitch Ratings Alexander Danilov, the Bank’s capital may be associated with the increase in the supplementary capital adequacy ratios: capital contributions by 85 billion rubles to Gazprombank will give about 1.65 p. p. capital adequacy. The expert points out, now to fixed assets (N1.2) the company from Gazprombank for the total supply of 0.3 percentage points, creating a risk of violation of the capital buffers. “Even though it is not as serious as a break of the norm, which remains at 6%, will impose restrictions on payment of bonuses and dividends,” recalls Daniel. It is possible that additional capital may be required to cover risks on Ukrainian loans and debts of “Mechel”, said the expert.

In September 2016 the risks of deterioration in asset quality Gazprombank noted in the rating Agency S&P. According to analysts S&P Sergey Voronenko, the capital of Gazprombank remains weak. He believes that given the proportion of bad loans (2,5%) profit level, which indicates the Bank in 2016, is unable to maintain capital adequacy. The Agency estimated share of restructured Bank loans to 8-10% of the volume of the loan portfolio.

As pointed out by analyst RAEX Vladimir Teterin, the Bank traditionally maintains a low margin of safety for impairment loans receivable. For most of the reporting dates 2014-2016 the capital adequacy stood at the time of the full impairment in the order of 2-3% of the loan portfolio, he said.

International rating Agency Moody’s also pointed to the decline in asset quality Gazprombank for loans issued by the metallurgical companies (“Mechel”), and investment in Ukrainian assets. As the analyst of the Agency Olga Ulyanova, increased credit risk for the Bank are restructured loans. According to Moody’s projections, the level of problem loans in Gazprombank will remain high (up to 20% of the portfolio) until the end of 2016 and possibly in the first half of 2017. In Agency do not exclude that, if necessary, the Gazprombank can be given new support from the state. At the same time, believes Ulyanov, in the next year Gazprombank will be able to maintain their current levels of capital without recourse to external sources of capital replenishment.

The need to increase capital can be linked with the plans of Rosneftegaz by placement on the Bank’s deposits up to 1.8 trillion roubles, said Vladimir Teterin. According to him, to be able profitable to place such a significant amount, Gazprombank is required to replenish capital. “Now the low margin capital adequacy standards do not allow the Bank to actively lend,” says the analyst.

In late October, the Agency Bloomberg with reference to sources and documents reported that the government allowing “Rosneftegaz” to place on deposits in Gazprombank of up to 1.8 trillion rubles This information confirmed RBC a source in the Ministry of economic development. He stressed that we are talking about limiting the amount of deposits, the transaction between the “Rosneftegaz” and the Bank was approved at the annual meeting of the shareholders of the company. “Rosneftegaz” places the money on Deposit “for effective cash management”, “carrying out ordinary economic activity,” he said.

Until the end of 2016, the government plans to sell 19.5% stake in oil company, received at least 700 billion rubles ($11 billion). The sale of “Rosneft” will be implemented through the company “Rosneftegaz”, previously reported to RBC.

“The relationship between capitalization and an expected Deposit of “Rosneftegaz” is not obvious,” — says a senior analyst of Moody’s investors service Olga Ulyanova. It does not exclude that in the case of “Rosneftegaz” we can talk about short-term accommodation means, which will not be transformed into risky assets. In this case, the capitalization of the Bank is not required. “Of course, if the company would put up money, say, more than a year, the Bank can increase its loan portfolio. In this case, the additional capital it will be useful,” — says the analyst.

Assessment Danilova, the capital increase of Gazprombank 85 billion will allow the credit institution to increase the loan portfolio by 1.3 trillion rubles, provided that it will not be necessary to create additional reserves. On October 1, 2016, the Bank issued 3.4 trillion rubles of credits.

The last time Gazprombank increased its capital in mid-2015, received from the state assistance in the form of OFZ on 125,75 billion.