EBRD announces profit of €2.1bn in 2023

EBRD announces profit of €2.1bn in 2023
The EBRD has bounced back to earn a profit of €2.1bn in 2023 after a loss of €1.1bn in 2022, caused by the start of the war in Ukraine. / bne IntelliNews
By bne IntelliNews April 11, 2024

The European Bank for Reconstruction and Development (EBRD) has announced a significant rebound in its financial performance, recording a robust profit of €2.1bn for the year 2023, rebounding from losses of €1.1bn in 2022, the development bank said in a press release on April 11.

Soha El-Turky, the chief financial officer of the EBRD, highlighted the bank's resilience and financial health in the face of global challenges and the impact of the war in Ukraine.

Russia used to be the EBRD’s largest investment destination until the bank’s operations there were suspended following the annexation of Crimea in 2014. The EBRD has already resumed operations in Ukraine despite the ongoing hostilities, which has become the bank’s biggest investment destination.

"These financial results demonstrate the all-round stability of the balance sheet and the EBRD’s firm financial footing," El-Turky said in the press release, stressing the bank's readiness to intensify its support for its clients in operational countries.

The EBRD's profits for 2023, closely trailing the record €2.5bn profits of 2021, were largely driven by the success of its equity investments across various regions. The bank's focus on the private sector and market economy transitions yielded a €1bn gain in equity investments, a significant turnaround from the €1.1bn loss in the preceding year.

The bank's performance was further buoyed by rising interest rates, which propelled its return on capital to €0.5bn, a five-fold increase from 2022. Loan investments continued to provide a steady stream of interest income, totalling €1.1bn, while the proportion of non-performing loans remained stable at 7.9%.

With an enhanced capital base of €22.3bn by the end of 2023, up from €19.3bn in 2022, and a consistent triple-A rating from major credit ratings agencies, the EBRD is well-positioned to for another good year. The bank's resilience is underscored by its ability to support the economies of its client countries, particularly in light of Ukraine's economic recovery, which saw a 5% growth in 2023 after a significant contraction the previous year.

The EBRD's commitment to Ukraine and its broader mission was reinforced in December 2023, when shareholders approved a €4bn paid-in capital increase. This funding boost is earmarked for sustained investment in Ukraine, both during the ongoing conflict and in the anticipated post-war reconstruction phase. The EBRD has already played an important role in keeping Ukraine’s economy on its feet by providing badly needed loans to the energy sector to buy fuel ahead of the winter just finished, as well as effecting urgent repairs to damage caused by Russian missile strikes on power facilities.

The bank's recent decision to expand into sub-Saharan Africa and Iraq are ongoing and reflect its strategic aim to foster private-sector development in regions with burgeoning economic connections to its existing operational areas.

With a record business volume of €13.1bn in 2023, where private sector investment constituted 80% and green financing maintained at 50%, the EBRD continues to promote sustainable and inclusive growth. The bank's ongoing efforts to align the majority of its annual investments with green objectives by 2025 further underscore its role in addressing global environmental challenges.

The EBRD remains very active in Ukraine and also announced it has provided leading retail bank Oschadbank with a limit for the portfolio mechanism for risk distribution of €50mn. This will generate an additional €200mn in new financing for Ukraine’s private sector. The EBRD loan will cover up to 50% of Oschadbank's credit risk for new loans to private businesses operating in Ukraine.

The EBRD guarantee will strengthen Oschadbank's lending capacity and allow it to provide much-needed financing to Ukrainian private companies operating in the agriculture, construction, transport and pharmaceutical industries, UBN reports. The guarantee will contribute to economic stability and the post-war reconstruction of Ukraine.

In addition, the US provides first-loss risk coverage through the Crisis Response Special Fund to partially mitigate the risk associated with new financing. "Up to 20% of loans with risk sharing will contribute to long-term investments of private micro, small, and medium-sized businesses (MSMEs) in environmental technologies that comply with EU requirements, improving the competitiveness of Ukrainian MSMEs on the domestic and foreign markets," Oschadbank noted.