EBRD: War on Ukraine likely to have significant impact on 2022’s financial performance

The European Bank for Reconstruction and Development (EBRD) has recorded its highest-ever profit, the figure of 2.5 billion euros beats the previous record, set in 2006, Report informs referring to the EBRD website.

The EBRD recently announced a 2 billion-euro economic resilience package to help Ukraine and neighboring countries affected by the Russian invasion. However, the Bank is also highlighting that the war on Ukraine is likely to have a significant impact on 2022’s financial performance. The EBRD has a large portfolio of investments and equity holdings in Ukraine, as well as portfolios in Belarus and Russia.

The Bank’s record results for last year were largely due to the excellent performance of equity investments across its regions of operations.

The EBRD invests primarily in the private sector, with the aim of supporting the transition to market economies. Its equity investments recorded a gain of around 30 percent (1.7 billion euros) - growing at roughly triple the rate compared with the 2021 benchmark of equity growth in EBRD economies. Substantial gains in the Bank’s technology-related investments were a particular feature.

A reduction in expected credit losses also contributed to the scale of the profit. The ratio of non-performing loans (NPLs) dropped relative to the 2020 year-end, as economies bounced back from the Covid-19 pandemic.

At the end of 2021, the EBRD had a capital base of 20.3 billion euros, and the Bank operates well in excess of triple-A requirements set by ratings agencies. The Bank expects to remain strongly capitalized, despite the economic consequences of the war. Increased costs for energy and food as a result of the war, and the potential for higher interest rates, are all likely to have an impact on the economies where the Bank operates.

“These record financial results show that the Bank is really making a difference with its investments, helping businesses to transform economies and improving people’s lives. The results demonstrate an all-round strengthening of the balance sheet and put the EBRD on a very firm financial footing,” said Soha El-Turky, EBRD Chief Financial Officer.

The Bank quickly announced an initial 2 billion-euro economic resilience package for Ukraine and its neighboring countries affected by the war.

"We are determined to do all we can to help them deal with the consequences of the conflict," El-Turky noted.

“More widely, the EBRD has both the capital base and liquidity cushion to withstand the financial shock and continue to support Ukraine and the other economies where we work.”

The EBRD recently announced it had reached in 2021 its second-highest-ever business volume – 10.4 billion euros, only slightly below the record figure achieved in 2020 when EBRD investments were buoyed by emergency lending at the start of the Covid-19 pandemic.

In 2021, private-sector investment rose to 76 percent of annual business volume and green financing reached 51 percent. The Bank committed to aligning all its investments with the Paris Agreement on limiting climate change. It also committed to making a majority of its annual investments green by 2025, a target that the EBRD has met four years ahead of schedule.

The EBRD is the leading institutional investor in Azerbaijan and has to date invested around 3.4 billion euros in more than 180 projects in various sectors of the economy. The Bank’s strategy in Azerbaijan is aimed at helping to diversify the economy and develop the non-oil private sector.