Luxembourg-based Bank GPB International, a subsidiary of Gazprombank in Moscow, reported a significant decline in net profit for the year 2023. The bank’s net profit fell to €6.1m, down from €61.4m in 2022.
According to the financial results for the year ending 31 December 2023, GPB International experienced a notable decrease in interest income, which declined from €82.833m in 2022 to €58.991m in 2023. Other interest income saw an even steeper fall, plummeting from €48.328m in 2022 to €2.062m in 2023. Despite this, interest expenses were significantly reduced, dropping from €81.161m in 2022 to €11.153m in 2023. This reduction in expenses helped to stabilise the net interest income, which remained relatively unchanged at €49.9m in 2023, compared to €50m in the previous year.
Fee and commission income
The bank’s fee and commission income also experienced a sharp decline, falling from €30.875m in 2022 to €8.157m in 2023. Fee and commission expenses decreased correspondingly, from €1.999m in 2022 to €795,000 in 2023. This resulted in a decrease in net fee and commission income from €28.876m in 2022 to €7.362m in 2023. Additionally, net foreign exchange income dropped significantly from €55.333m in 2022 to €18.507m in 2023. The bank also reported a loss of €1.189m from the sale of financial instruments at amortised cost, reversing from a profit of €5.959m in 2022.
Other income
Other operating income improved markedly, with a turnaround from a loss of €146,000 in 2022 to a profit of €3.206m in 2023. Nevertheless, total operating income decreased substantially from €137.562m in 2022 to €77.783m in 2023. Depreciation and amortisation expenses increased from €2.460m in 2022 to €3.155m in 2023. The net impairment result on financial assets also rose from €7.412m in 2022 to €9.476m in 2023.
Profit before tax
Personnel expenses slightly decreased from €29.686m in 2022 to €28.748m in 2023, while other general administrative expenses increased from €16.659m in 2022 to €19.688m in 2023. Consequently, total operating expenses rose from €56.257m in 2022 to €67.458m in 2023. Profit before income tax fell significantly from €81.305m in 2022 to €10.326m in 2023. Tax expenses were reduced from €19.871m in 2022 to €4.183m in 2023, leading to a total comprehensive income of €6.143m for 2023, compared to €61.434m in the previous year.
The bank’s balance sheet reflected a considerable contraction. Total assets fell from €4.634bn in 2022 to €1.949bn in 2023. Total liabilities similarly decreased from €4.284bn in 2022 to €1.621bn in 2023. Total equity also saw a decline, from €350.42m in 2022 to €327.845m in 2023.
De-risking
Throughout 2023, Bank GPB International focused on de-risking its corporate clientele to address geopolitical challenges and improve its risk profile, its annual filings stated. As part of this strategy, 40 client relationships were closed, reducing the corporate lending portfolio to €222m from €609m in 2022. The bank continued to focus on clients involved in non-sanctioned goods, including natural gas, agriculture, fertilisers, pharmaceuticals, food and retail.
Dividend distribution
In its annual report, Bank GPB International proposed a dividend distribution of €4.8m, subject to regulatory approval. A representative of the Luxembourg Financial Sector Supervisory Commission (CSSF) told Delano that while ex-ante approval for dividend distributions is not required, the CSSF does have “the legal power to limit profit distributions in case of a weak capital base.” The representative also noted that EU regulations prohibit dividend payments to sanctioned entities. However, the CSSF did not confirm whether it had received or approved Bank GPB International’s dividend distribution request.
Several other parts of the Gazprombank group have faced EU and US sanctions since Russia’s full-scale invasion of Ukraine. The bank’s largest shareholder is the state-controlled energy giant Gazprom, which also faces international sanctions.