TIDM78JE
RNS Number : 1950I
Uzbek Ind & Construction Bank
10 December 2020
JSCB "UZBEK INDUSTRIAL
AND CONSTRUCTION BANK"
AND ITS SUBSIDIARIES
Interim condensed consolidated
financial information (unaudited)
for the six months ended 30
June 2020
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view the associated PDF document.
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JOINT STOCK COMMERCIAL BANK
"UZBEK INDUSTRIAL AND CONSTRUCTION BANK" AND ITS
SUBSIDIARIES
TABLE OF CONTENTS
STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION
AND APPROVAL OF THE Interim condensed consolidated Financial
Information for THE six MONTHS ended
30 June 2020 (UNAUDITED) 1
REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL
INFORMATION 2
INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION FOR THE SIX
MONTHSED 30 JUNE 2020 (UNAUDITED):
Interim condensed consolidated statement of financial position
(unaudited)
3
I interim condensed consolidated statement of profit or loss and
other comprehensive income (unaudited)
4
Interim condensed consolidated statement of changes in equity
(unaudited)
5
Interim condensed consolidated statement of cash flows
(unaudited)
6
Selected explanatory notes to the interim condensed consolidated
financial information (unaudited)
7-46
JOINT STOCK COMMERCIAL BANK
"UZBEK INDUSTRIAL AND CONSTRUCTION BANK" AND ITS
SUBSIDIARIES
STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE
PREPARATION
AND APPROVAL OF THE INTERIM CONDENSED CONSOLIDATED FINANCIAL
INFORMATION
FOR THE SIX MONTHSED 30 JUNE 2020 (UNAUDITED)
Management is responsible for the preparation of the interim
condensed consolidated financial information that presents fairly
the interim condensed consolidated statement of financial position
of Joint Stock Commercial Bank "Uzbek Industrial and Construction
Bank" ("the Bank") and its subsidiaries (collectively - "the
Group") as at 30 June 2020, and the related interim condensed
consolidated statements of profit or loss and other comprehensive
income, changes in equity and cash flows for the six months then
ended, and selected explanatory notes, in accordance with
International Accounting Standard 34 "Interim Financial Reporting"
("IAS 34").
In preparing the interim condensed consolidated financial
information , management is responsible for:
-- Properly selecting and applying accounting policies;
-- Presenting information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- Providing additional disclosures when compliance with the
specific requirements in IAS 34 are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the Group's consolidated financial position and
financial performance; and
-- Making an assessment of the Group's ability to continue as a going concern.
Management is also responsible for:
-- Designing, implementing and maintaining an effective and
sound system of internal controls, throughout the Group;
-- Maintaining adequate accounting records that are sufficient
to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the consolidated financial position
of the Group, and which enable them to ensure that the interim
condensed consolidated financial information of the Group comply
with IAS 34;
-- Maintaining accounting records in compliance with the
Republic of Uzbekistan legislation;
-- Taking such steps as are reasonably available to them to
safeguard the assets of the Group; and
-- Detecting and preventing fraud and other irregularities.
The interim condensed consolidated financial information of the
Group for the six months ended
30 June 2020 was authorized for issue by the Management Board on 27 November 2020.
On behalf of the Management Board:
Annaklichev Sakhi Vokhidov Oybek
Chairman of the Management Chief Accountant
Board
27 November 2020 27 November 2020
Tashkent, Uzbekistan Tashkent, Uzbekistan
JOINT STOCK COMMERCIAL BANK
"UZBEK INDUSTRIAL AND CONSTRUCTION BANK" AND ITS
SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 30 JUNE 2020 (UNAUDITED)
(in millions of Uzbek Soums)
Notes 30 June 31 December
2020
(unaudited) 2019
--------------------------------------------- ------ -------------- ------------
ASSETS
Cash and cash equivalents 8 5,093,732 2,862,574
Due from other banks 9 1,971,250 2,037,090
Loans and advances to customers 10 35,899,587 30,039,785
Investment securities measured at amortised
cost 11 1,085,853 84,648
Financial assets at fair value through
other comprehensive income 100,258 88,714
Premises, equipment and intangible assets 12 638,648 435,280
Deferred tax asset 20 51,490 -
Insurance assets 2,787 2,391
Other assets 355,547 276,693
Non-current assets held for sale 13 100,336 18,943
TOTAL ASSETS 45,299,488 35,846,118
LIABILITIES
Due to other banks 14 1,710,338 465,109
Customer accounts 15 10,443,821 9,123,970
Debt securities in issue 3,140,382 2,920,894
Other borrowed funds 16 23,335,949 16,803,214
Deferred tax liability 20 - 13,880
Insurance liabilities 24,282 15,631
Other liabilities 111,330 99,520
Subordinated debt 82,708 83,332
Liabilities directly associated with
disposal groups held for sale 13 1,327 -
TOTAL LIABILITIES 38,850,137 29,525,550
EQUITY
Share capital 4,640,011 4,640,011
Retained earnings 1,792,434 1,669,225
Revaluation reserve of financial assets
at fair value through other comprehensive
income 13,939 6,404
Net assets attributable to the Bank's
owners 6,446,384 6,315,640
Non-controlling interest 2,967 4,928
TOTAL EQUITY 6,449,351 6,320,568
TOTAL LIABILITIES AND EQUITY 45,299,488 35,846,118
Approved for issue and signed on behalf of the Management Board
on 27 November 2020.
Annaklichev Sakhi Vokhidov Oybek
Chairman of the Management Chief Accountant
Board
Six months Six months
ended ended
30 June 30 June
Notes 2020 (unaudited) 2019 (unaudited)
-------------------------------------------------- ------ ------------------ ------------------
Continuing operations
Interest income 17 1,495,954 1,014,214
Interest expense 17 (769,346) (505,990)
Net interest income before provision on loans
and advances to customers 726,608 508,224
Provision for credit losses on loans and
advances to customers 10 (434,197) (201,842)
Initial recognition adjustment on interest
bearing assets (8,551) (1,661)
Net interest income 283,860 304,721
Fee and commission income 18 157,965 156,532
Fee and commission expense 18 (42,330) (38,065)
Net gain on foreign exchange translation 38,173 7,307
Net gain from trading in foreign currencies 26,774 8,367
Insurance operations income 15,970 119
Insurance operations expense (16,604) (494)
Dividend income 681 5,243
Other operating income 1,840 6,669
Provision for impairment of other assets (11,212) (3,412)
Impairment of assets held for sale 13 (11,309) -
Administrative and other operating expenses 19 (277,014) (205,944)
Profit before tax 166,794 241,043
Income tax expense 20 (31,904) (43,857)
PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS 134,890 197,186
Discontinued operations
Loss for the period from discontinued operations 13 (174) -
PROFIT FOR THE PERIOD 134,716 197,186
Attributable to:
- Owners of the Bank 136,709 197,296
- Non-controlling interest (1,993) (110)
PROFIT FOR THE PERIOD 134,716 197,186
Total basic and diluted EPS per ordinary
share (expressed in UZS per share) 23 0.55 1.86
PROFIT FOR THE PERIOD 134,716 197,186
Other comprehensive income:
Items that will not be subsequently reclassified
to profit or loss:
Fair value gain on equity securities at fair
value through other comprehensive income 9,419 6,418
Tax effect (1,884) (1,284)
Other comprehensive income 7,535 5,134
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 142,251 202,320
Attributable to:
* Owners of the Bank 144,244 202,430
* Non-controlling interest (1,993) (110)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 142,251 202,320
Approved for issue and signed on behalf of the Management Board
on 27 November 2020.
Annaklichev Sakhi Vokhidov Oybek
Chairman of the Management Chief Accountant
Board
Share Revaluation reserve Retained Non-controlling Total
capital of financial assets earnings interest equity
at fair value through
other comprehensive
income
31 December 2019 4,640,011 6,404 1,669,225 4,928 6,320,568
Profit for the period - - 136,709 (1,993) 134,716
Other comprehensive income for the
period - 7,535 - - 7,535
Total comprehensive income for the
period - 7,535 136,709 (1,993) 142,251
Dividends paid in advance* - - (13,500) - (13,500)
Non-controlling interest arising on
acquisition
of subsidiary - - - 32 32
30 June 2020 (unaudited) 4,640,011 13,939 1,792,434 2,967 6,449,351
* Dividends paid in advance to Ministry of Finance in accordance
with the Presidential Decree PP-4679 "On measures to provide
stability of state budget of the Republic of Uzbekistan and timely
financing of priority actions during the coronavirus pandemic".
These dividends are to be offset by future dividend
declaration.
Share Treasury Revaluation reserve Retained Non-controlling Total equity
capital shares of financial assets earnings interest
at fair value through
other comprehensive
income
------------------------- ---------- --------- ----------------------- ---------- ---------------- -------------
31 December 2018 1,884,882 (1,330) 2,261 1,312,607 5,049 3,203,469
Profit for the period - - - 197,296 (110) 197,186
Other comprehensive
income for the
period - - 5,134 - - 5,134
Total comprehensive
income for the
period - - 5,134 197,296 (110) 202,320
Shares issued 292,466 - - - - 292,466
Disposal of treasury
shares - 645 - - - 645
30 June 2019 (unaudited) 2,177,348 (685) 7,395 1,509,903 4,939 3,698,900
Approved for issue and signed on behalf of the Management Board
on 27 November 2020.
Annaklichev Sakhi Vokhidov Oybek
Chairman of the Management Chief Accountant
Board
Six months Six months
ended ended
30 June 30 June
Notes 2020 (unaudited) 2019 (unaudited)
--------------------------------------------------- ------ ------------------ ------------------
Cash flows from operating activities
Interest received 1,040,584 1,224,736
Interest paid (647,628) (674,481)
Fee and commission received 149,435 156,786
Fee and commission paid (42,330) (38,065)
Insurance operations income received 15,970 3,452
Insurance operations expense paid (8,349) (494)
Net gain from trading in foreign currencies 26,774 8,367
Other operating income received 1,793 4,041
Staff costs paid (173,280) (176,591)
Administrative and other operating expenses
paid (67,641) (64,332)
Income tax paid (130,689) (62,506)
Cash flows from operating activities before
changes in operating assets and liabilities 164,639 380,913
Net decrease/(increase) in due from other
banks 139,414 (603,937)
Net increase in loans and advances to customers (4,110,600) (3,107,172)
Net increase in investment securities measured
at amortised cost (985,777) -
Net increase in other assets (10,968) (59,740)
Net increase in due to other banks 1,274,388 195,220
Net increase in customer accounts 979,834 1,253,178
Net decrease in other liabilities (2,845) (4,178)
Net cash used in operating activities (2,551,915) (1,945,716)
Cash flows from investing activities
Acquisition of financial assets at fair value
through other comprehensive income (2,081) (184,663)
Acquisition of premises, equipment and intangible
assets (253,360) (323,608)
Proceeds from disposal of premises, equipment
and intangible assets 5,819 2,628
Acquisition of subsidiary, net of disposed
cash 13 (32,364) -
Dividend income received 681 5,243
Net cash used in investing activities (281,305) (500,400)
Cash flows from financing activities
Proceeds from borrowings due to other banks - 51,000
Repayment of borrowings due to other banks (47,346) (20,529)
Proceeds from other borrowed funds 7,121,033 3,032,177
Repayment of other borrowed funds (2,121,843) (1,032,608)
Proceeds from debt securities in issue 38,326 31,300
Repayment of debt securities in issue (33,050) (40,100)
Issue of ordinary shares - 292,466
Dividends paid (13,583) (74)
Treasury shares sold - 645
Net cash from financing activities 4,943,537 2,314,277
Effect of exchange rate changes on cash and
cash equivalents 120,841 22,424
Net increase/(decrease) in cash and cash
equivalents 2,231,158 (109,415)
Cash and cash equivalents at the beginning
of the period 8 2,862,574 1,897,133
Cash and cash equivalents at the end of the
period 8 5,093,732 1,787,718
Non-cash transactions
--------------------------------------------------- ------ ------------------ ------------------
Approved for issue and signed on behalf of the Management Board
on 27 November 2020.
Annaklichev Sakhi Vokhidov Oybek
Chairman of the Management Chief Accountant
Board
1. INTRODUCTION
The Bank is a Joint Stock Company set up in accordance with
Uzbekistan legislation.
The Bank was incorporated in 1991 and is domiciled in the
Republic of Uzbekistan. It is registered in Uzbekistan to carry out
banking and foreign exchange activities and has operated under the
banking license #17 issued by the Central bank of Uzbekistan
("CBU") on 21 October 2017 (succeeded the licenses #17 issued on 25
January 2003 and #25 issued on 29 January 2005 by the CBU for
banking operations and general license for foreign currency
operations, respectively).
Principal activity . The Bank's principal activity is commercial
banking, retail banking, operations with securities, foreign
currencies and origination of loans and guarantees. The Bank
accepts deposits from legal entities and individuals, extended
loans, and transfer payments. The Bank conducts its banking
operations from its head office in Tashkent and 45 branches within
Uzbekistan as of 30 June 2020 (31 December 2019: 45 branches).
The Bank participates in the state deposit insurance scheme,
which was introduced by the Uzbek Law #360-II "Insurance of
Individual Bank Deposit" on 5 April 2002. On 28 November 2008, the
President of Uzbekistan issued the Decree #PD -4057 stating that i
n case of the withdrawal of a license of a bank, the State Deposit
Insurance Fund guarantees repayment of 100% of individual deposits
regardless of the deposit amount.
As at 30 June 2020 (unaudited), the number of Bank's employees
was 3 813 (31 December 2019: 3,902).
Registered address and place of business. 3, Shakhrisabzskaya
Street, Tashkent, 100000, Uzbekistan
At 30 June 2020 and 31 December 2019, the Group consolidated the
following companies in these consolidated financial statements
:
The Bank's ownership
Country 30 June 31 December
of 2020 (unaudited) 2019 Type of
Name incorporation % % operation
-------------------------------- --------------- ------------------ ------------ ---------------------
SQB Capital, LLC (previously
named PSB Capital) Uzbekistan 100 100 Asset management
PSB Industrial Investments,
LLC Uzbekistan 100 100 Asset management
SQB Insurance, LLC (previously
named PSB Insurance) Uzbekistan 100 100 Insurance
Xorazm Nasli Parranda,
LLC Uzbekistan 57 57 Poultry farming
SQB Securities, LLC Uzbekistan 100 - Securities brokerage
SQB Construction, LLC Uzbekistan 100 - Construction
Urganch Texnopark #1, Uzbekistan 100 - Manufacturing
LLC
Urganch Texnopark #2, Uzbekistan 100 - Manufacturing
LLC
Urganch Texnopark #3, Uzbekistan 100 - Manufacturing
LLC
Urganch Texnopark #4, Uzbekistan 100 - Manufacturing
LLC
Urganch Texnopark #5, Uzbekistan 100 - Manufacturing
LLC
Urganch Texnopark #6, Uzbekistan 100 - Manufacturing
LLC
Zomin Non SQB, LLC Uzbekistan 99 - Bakery
Zarbdor Non SQB, LLC Uzbekistan 98 - Bakery
During 2020, the Group established new subsidiaries SQB
Securities, SQB Construction and Urganch Texnopark companies, and
acquired Zomin Non SQB, Zarbdor Non SQB. Zomin Non SQB, Zarbdor Non
SQB and Urganch Texnopark companies were acquired and established
exclusively for resale and as at 30 June 2020, the Group classified
the investments as non-current assets held for sale described in
Note 13.
The table below represents the interest of the shareholders in
the Bank's share capital as at 30 June 2020 and 31 December
2019:
30 June 31 December
2020 2019
Shareholders (unaudited)
---------------------------------------------------- -------------- ------------
The Fund of Reconstruction and Development
of the Republic of Uzbekistan 82.09% 82.09%
The Ministry of Finance of the Republic of
Uzbekistan 12.77% 0.00%
The State Assets Management Agency of the Republic
of Uzbekistan 0.00% 12.77%
Other legal entities and individuals (individually
hold less than 5%) 5.14% 5.14%
Total 100% 100%
According to the Presidential Decree #4478 dated 9 October 2019,
shares of the State Assets Management Agency of the Republic of
Uzbekistan in the Bank were transferred to the Ministry of Finance
of the Republic of Uzbekistan in order to ensure an effective
transformation of the Bank's business model for subsequent
privatization.
2. OPERATING ENVIRONMENT OF THE GROUP
Operating Environment. Uzbekistan economy displays
characteristics of an emerging market, including but not limited
to, a currency that is not freely convertible outside of the
country and a low level of liquidity in debt and equity markets.
Also, the banking sector in Uzbekistan is particularly impacted by
local political, legislative, fiscal and regulatory developments.
The largest Uzbek banks are state-controlled and act as an arm of
Government to develop the country's economy. The Government
distributes funds from the country's budget, which flow through the
banks to various government agencies, and other state and privately
owned entities.
Economic stability in Uzbekistan is largely dependent upon the
effectiveness of economic measures undertaken by the Government,
together with other legal, regulatory and political developments,
all of which are beyond the Bank's control.
The Bank's financial position and operating results will
continue to be affected by future political and economic
developments in Uzbekistan including the application and
interpretation of existing and future legislation and tax
regulations which greatly impact Uzbek financial markets and the
economy overall.
In addition to that, starting from early 2020 a new coronavirus
disease (COVID-19) has begun rapidly spreading all over the world
resulting in announcement of the pandemic status by the World
Health Organization in March 2020. Responses put in place by many
countries to contain the spread of COVID-19 are resulting in
significant operational disruption for many companies and have
significant impact on global financial markets. As the situation is
rapidly evolving it has a significant effect on business of many
companies across a wide range of sectors, including, but not
limited to such impacts as disruption of business operations as a
result of interruption of production or closure of facilities,
supply chain disruptions, quarantines of personnel, reduced demand
and difficulties in raising financing. In addition, the Group has
already started to face the increasingly broad effects of COVID-19
as a result of its negative impact on the global economy and major
financial markets.
In June 2020, S&P Global Ratings revised Uzbekistan's rating
outlook from stable to negative. The decision was made due to rapid
rise in the country's external and fiscal debt, partly due to USD 1
billion (UZS 10,173,380 million at the exchange rate prevailing as
at the reporting date) in additional government spending in
response to the coronavirus pandemic. In addition, in April and
September 2020, the CBU reduced the refinancing rate from 16% to
15% and from 15% to 14%, respectively.
As at 30 June 2020, these changes in the economic environment
have significantly impacted the operations of the Group through
increased charges for ECL and further effects of COVID-19 on the
Group's business largely depends on the duration and the incidence
of the pandemic effects on the world and Uzbekistan economy. The
Group continues to monitor the situation and intends to adapt
strategies as needed to continue to drive the business and meet
obligations.
Management of the Group is monitoring developments in the
current environment and taking the following measures, it considers
necessary in order to support the sustainability and development of
the Group's business in the foreseeable future:
- Towards the end of Q1 2020, the Group has implemented remote
work arrangements and restricted business travel effective
mid-March.
- Based on application of customers, the Group has also provided
holidays till end of Q3 2020 for repayment of interest and/or
principal of loans.
- Expanded offering of banking products through digital and
distance channels, which were previously provided exclusively at
the Bank's branches.
3. BASIS OF PRESENTATION
Accounting basis
The interim condensed consolidated financial information of the
Group has been prepared in accordance with International Accounting
Standard 34 "Interim Financial Reporting". The interim condensed
consolidated financial information is unaudited and does not
include all the information and disclosures required in the annual
financial statements. The Group omitted disclosures, which would
substantially duplicate the information contained in its audited
annual consolidated financial statements for the year ended 31
December 2019 prepared in accordance with International Financial
Reporting Standards ("IFRS"), such as accounting policies and
details of accounts, which have not changed significantly in amount
or composition. Additionally, the Group has provided disclosures
where significant events have occurred subsequent to the issuance
of the Group 's annual consolidated financial statements for the
year ended 31 December 2019 prepared in accordance with IFRS.
Management believes that the disclosures in this interim condensed
consolidated financial information are adequate to make the
information presented not misleading if this interim condensed
consolidated financial information is read in conjunction with the
Group's annual consolidated financial statements for the year ended
31 December 2019 prepared in accordance with IFRS. In management's
opinion, this interim condensed consolidated financial information
reflects all adjustments necessary to present fairly the Group's
financial position, results of operations, statements of changes in
shareholders' equity and cash flows for the interim reporting
periods.
This interim condensed consolidated financial information is
presented in millions of Uzbek Soums ("UZS"), except for earnings
per share amounts and unless otherwise indicated.
4. SIGNIFICANT ACCOUNTING POLICIES
Going concern. These consolidated financial statements have been
prepared on the assumption that the Group is as a going concern and
will continue in operation for the foreseeable future.
The Group's activities continue to be affected by the
uncertainty and instability of the current economic environment.
The financial position and the results of the Bank continue to be
significantly impacted by the reforms of the new government,
including those directed at increasing living standards, incomes,
and job opportunities in rural regions.
For the six months ended 30 June 2020 (unaudited), the Group had
a cash outflow from operating activities mainly as a result of
on-lending the funds received from international financial
institutions and the State to finance the government and investment
projects increasing the loans and advances to customers by 20%.
As at 30 June 2020, the Bank was in a breach of cost-to-income
ratio stipulated in the tripartite subsidiary loan agreements
between the Republic of Uzbekistan, the Rural Restructuring Agency
and the Bank #3471-UZB from April 2017 and #3673-UZB from November
2018 as discussed in detail in Note 16. On 5 November 2019, the
Republic of Uzbekistan confirmed to the Bank in writing that it
would not take any action to demand prepayment of the loans
advanced to the Bank under the Subsidiary Loan Agreements as a
consequence of past and/or on-going non-compliance with this
covenant . In addition, the agreement between the Bank and Ministry
of Finance does not provide a definition of an event of default.
Therefore the Management considers the breach of the covenant not
to be an event of default and is currently in discussions with
Ministry of Finance on receiving a letter confirming that this
breach of the covenant is not considered to be an event of
default.
As at 30 June 2020, the Group had a cumulative liquidity
shortfall of UZS 1,860,134 million up to one month (Note 28), which
reflects the effects of the decision to classify UZS 456,356
million as "demand and less than 1 month" as a result of the
non-compliance with the covenant.
The Management believes that the Group will be able to continue
as a going concern for the foreseeable future based on the
following:
-- Continued ongoing support by the Government of the Republic
of Uzbekistan ("the State"). The Group is a state owned bank with
the Ministry of Finance and UFRD as key shareholders, jointly
holding 94.86% interest in the share capital of the Bank. The Group
is a strategic financial institution of the Republic of Uzbekistan,
responsible for the development of strategic industries.
-- The Bank plays a vital role as a government arm/vehicle to
channel the State funds to the strategic sectors of the economy of
Uzbekistan. The Management believes that in spite of a substantial
portion of customer accounts being on demand, the fact that
significant portion of these customer accounts are of large State
controlled entities which are either the Group's shareholders or
its entities under common control and the past experience of the
Group, indicate that these customer accounts provide a long-term
and stable source of funding for the Group. As at 30 June 2020
(unaudited), total current accounts and borrowings with maturities
up to one year of the State and State controlled entities amounted
to UZS 2,917,012 million. As at 30 June 2020 (unaudited) borrowings
of the Group from the State amounted to UZS 4,598,472 million.
Should the Group's liquidity position require more funding, the
Group's Management believes that the terms of the State borrowings
and deposits of the State controlled entities could be
re-negotiated. The Group's cumulative liquidity position up to one
year adjusted for exclusion of the State borrowings and deposits of
the State controlled entities would result in positive cumulative
liquidity gap in the amount of UZS 757,397 million.
-- On the basis of the Presidential Decree #5978 dated 4 March
2020 "On additional measures to support the population, sectors of
the economy and business entities during the coronavirus pandemic"
commercial banks were provided with additional liquid resources in
the amount of UZS 2,600,000 million by means of easing the
requirements for mandatory reserves and implementation of special
mechanism on the part of the Central Bank of Uzbekistan for
providing liquidity to commercial banks up to UZS 2,000,000 million
with a term of up to 3 years. The Bank has the opportunity to use
the funds that appeared due to the simplification of
requirements.
-- During 2020, the Bank signed a loan agreement with ICBC
Standard Bank PLC to attract a credit line in the equivalent of USD
100 million for the purpose of financing the acquisition of modern
equipment and updating the technological base in production
processes, as well as replenishing the raw material base of
business entities. The Bank has also attracted an unsecured
synthetic loan of USD 50 million from the investment management
company Daryo Finance B.V. for financing the small- and
medium-sized enterprises (SMEs), USD 40 million from European Bank
for Reconstruction and Development, as well as USD 20 million loan
from OPEC Fund for International Development (the OPEC Fund) to
support the trade finance requirements of SMEs in different sectors
such as agriculture, healthcare, construction and textiles.
-- Subsequent to the reporting date the Bank and Credit Suisse
AG agreed to increase credit line extended to the Bank by USD 150
million to finance the development of wholesale and retail trade
sector in the Republic of Uzbekistan.
-- As at 30 June 2020, deposits of state entities callable
within one year amounted to UZS 2,917,011 million and borrowings
from the State and state entities with the same maturity amounted
to UZS 1,085,029 million (total UZS 4,002,040 million).
-- The Management regularly assesses the stability of its
customer accounts funding base, in particular with respect to that
of non-state entities, based on past performance and analysis of
the events subsequent to the reporting date. The Management
believes that the customers intend to hold their term deposits with
the Group, and that this source of funding will remain at a similar
level for the foreseeable future.
The Management is not aware of any circumstances that would
question the continuation of the Group and considers that all
operations will proceed in the normal course of business, with the
State retaining the strategic control at least until 2022 as
planned in the "Strategy for reforming of the banking system of the
Republic of Uzbekistan for 2020 to 2025". This strategy envisages
the State's plan to make its shares in the Bank available for sale
to strategic private investors.
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In preparing this interim condensed consolidated financial
information, the significant judgments made by the management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were consistent with those that applied to
the Group's annual consolidated financial statements for the year
ended 31 December 2019 prepared in accordance with IFRS. There have
been no changes to the basis upon which the significant accounting
estimates have been determined compared with 31 December 2019,
except for those disclosed in this Note below.
Measurement of allowances for expected credit losses
("ECL").
Almost all sectors of the economy of Uzbekistan, both in terms
of individuals and legal entities, have been adversely affected by
the unprecedented economic and social disruption resulting from
Covid-19 which has led to significant government interventions and
support. This has caused an increased level of uncertainty and
volatility in the economic activity of Uzbekistan during Q2
2020.
In addition, currently limited observable data available to
inform a supportable, fully-modelled view on how the economic
impacts of this pandemic might affect customers has further
exacerbated the ability of the banking sector of Uzbekistan to
assess the levels of ECL. The Group incorporates forward-looking
information into a measurement of ECL when there is a statistically
proven correlation between the macro-economic variables and the
NPL. As at the reporting date, statistical tests have failed and
ECL across all loan portfolios has not been adjusted for
forward-looking information and macroeconomic scenarios. The
Management updates its statistical tests for correlation as at each
reporting date.
Therefore, due to the increased risk and uncertainties at this
time to incorporate the specific effects of the pandemic and the
related government support measures, the Management of the Group
considered to apply additional overlay in measuring the ECL by
introducing the following adjustments in its methodology.
As discussed in Note 10, in line with the government resolution,
the Group has provided the borrowers with holidays till the end of
Q3 2020 for repayment of interest and/or principal on loans with
the outstanding balance of nearly 36% of the total loan portfolio
as at 30 June 2020 (unaudited).
The calculation of the PD rates applied across all portfolios
(state and municipal organisations, corporate loans) of the Group
except for loans with government guarantees was based on the
Management's assumption that the payment holidays granted during
the lockdown were the evidence of a significant increase in credit
risk (SICR). However, the Management is of the view that the actual
default rates could materialize to be lower as the customers with
government guarantees will continue to receive government support
to meet their obligations.
As a result of the assumptions used above the PD rates across
all portfolios have been adjusted to reflect the increased credit
risk by classifying all Stage 1 loans restructured due to the
effects of the pandemic (except for loans with government
guarantees) as Stage 2 and all restructured Stage 2 loans that were
classified as Stage 3 as at 31 December 2019, have been adjusted as
Stage 3. But in measuring the ECL, as at 30 June 2020, the
Management has applied an overlay by moving these restructured
loans back to their original stages applied before their
restructuring.
Additional overlay was applied to the restructured loans that
have government guarantees as a collateral by retaining their
pre-pandemic staging and assuming that restructuring is not an
automatic evidence of significant increase in their credit risk.
The basis for this overlay was that the Management believes the
government will continue to support these borrowers to meet their
obligations. As such, the restructuring that took place during the
period of the pandemic in this category of customers did not
automatically move them to Stage 2 for a life-time loss
calculation.
The Management has also adjusted the calculation of loss given
default rates (LGD) by excluding the loan recovery results of the
second quarter of 2020, assuming the recovery pattern during the
lockdown period does not accurately reflect the financial
performance of the borrowers. Cash flows and turnover of customer
accounts observed during pre and post quarantine periods suggest
that significant slow-down in the recovery of loans were mainly
attributable to factors other than the financial standing of the
borrowers. This adjustment to LGD has been applied across all
portfolios of the Group.
The Management will closely monitor the servicing of the loan
portfolio to assess the adequacy of the overlay starting from 1
October 2020, and update the ECL measurement as more information
becomes available to support an update, incorporating alternative
economic scenarios.
Changes in judgements and assumptions could result in a material
adjustment to those estimates in the next reporting periods.
6. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS IFRSs)
The following amended standards and interpretations became
effective for the Group from 1 January 2020, but did not have any
significant impact on the Group's interim condensed consolidated
financial information for the six months ended 30 June 2020:
-- Amendments to IFRS 3 Definition of a business;
-- Amendments to IAS 1 and IAS 8 Definition of material;
-- Amendments to References to the Conceptual Framework in IFRS Standards.
The Group did not early adopt any other standards, amendments or
interpretations that have been issued and are not yet
effective.
7. SEGMENT REPORTING
The Group's operations are a single reportable segment.
The Group provides mainly banking services in the Republic of
Uzbekistan. The Group identifies the segment in accordance with the
criteria set in IFRS 8 "Operating Segments" and based on the way
the operations of the Group are regularly reviewed by the chief
operating decision maker to analyse performance and allocate
resources among business units of the Group.
The chief operating decision-maker ("CODM") has been determined
as the Group's Chairman of the Management Board . The CODM reviews
the Group's internal reporting in order to assess performance and
allocate resources. The Management has determined a single
operating segment being banking services based on these internal
reports.
8. CASH AND CASH EQUIVALENTS
30 June 31 December
2020
(unaudited) 2019
-------------------------------------------------- -------------- ------------
Cash on hand 907,539 662,864
Cash balances with the CBU (other than mandatory
reserve deposits) 1,311,084 1,014,834
Correspondent accounts and placements with
other banks
with original maturities of less than three
months 2,875,248 1,184,977
-
-------------------------------------------------- -------------- ------------
-
Less: Allowance for expected credit losses (139) (101)
Total cash and cash equivalents 5,093,732 2,862,574
The credit quality of cash and cash equivalents at 30 June 2020
(unaudited) is as follows:
Cash balances Correspondent Total
with the CBU accounts and
(other than placements with
mandatory reserve other banks
deposits) with original
maturities of
less than three
months
---------------------------------- ------------------- ----------------- ----------
Neither past due nor impaired
- Central Bank of Uzbekistan 1,311,084 - 1,311,084
- Rated AA- to A+ - 2,396,014 2,396,014
- Rated below A- - 479,234 479,234
Less: allowance for impairment
losses (44) (95) (139)
Total cash and cash equivalents,
excluding
cash on hand 1,311,040 2,875,153 4,186,193
The credit quality of cash and cash equivalents at 31 December
2019 is as follows:
Cash balances Correspondent Total
with the CBU accounts and
(other than mandatory placements with
reserve deposits) other banks
with original
maturities of
less than three
months
---------------------------------- ----------------------- ----------------- ----------
Neither past due nor impaired
- Central bank of Uzbekistan 1,014,834 - 1,014,834
- Rated AA to A- - 812,749 812,749
- Rated below A- - 372,228 372,228
- -
---------------------------------- ----------------------- ----------------- ----------
- -
Less: Allowance for expected
credit losses (53) (48) (101)
Total cash and cash equivalents,
excluding
cash on hand 1,014,781 1,184,929 2,199,710
9. DUE FROM OTHER BANKS
30 June 31 December
2020
(unaudited) 2019
------------------------------------------------------ -------------- ------------
Mandatory cash balances with CBU 131,210 373,156
Placements with other banks with original maturities
of more than three months 1,430,531 1,350,298
Restricted cash 426,703 329,802
- -
------------------------------------------------------ -------------- ------------
- -
Less: Allowance for expected credit losses (17,194) (16,166)
Total due from other banks 1,971,250 2,037,090
Due to the effect of the pandemic, the commercial banks of
Uzbekistan were provided with additional liquid resources as a
result of easing the requirements for mandatory reserves with CBU.
This measure has allowed the Bank to enjoy additional liquidity
that it could use to fund its operations.
Restricted cash represents balances on correspondent accounts
with foreign banks placed by the Group on behalf of its customers.
The Group does not have the right to use these funds for the
purpose of funding its own activities.
Analysis by credit quality of due from other banks outstanding
at 30 June 2020 (unaudited) is as follows:
Mandatory Placements with Restricted Total
cash balances other banks with cash
with CBU original maturities
of more than
three months
-------------------------------- --------------- --------------------- ----------- ----------
Neither past due nor impaired
- Central Bank of Uzbekistan 131,210 - - 131,210
- Rated A- to A+ - 4,069 85,047 89,116
- Rated below A- - 1,426,462 341,656 1,768,118
Less: allowance for impairment
losses - (17,096) (98) (17,194)
Total due from other banks 131,210 1,413,435 426,605 1,971,250
Analysis by credit quality of due from other banks outstanding
at 31 December 2019 is as follows:
Mandatory Placements with Restricted Total
cash balances other banks with cash
with CBU original maturities
of more than
three months
------------------------------- --------------- --------------------- ----------- ----------
Neither past due nor impaired
- Central bank of Uzbekistan 373,156 - - 373,156
- Rated AA to A- - 3,803 260,232 264,035
- Rated below A- - 1,342,045 69,570 1,411,615
Unrated - 4,450 - 4,450
Less: Allowance for expected
credit losses (13) (15,987) (166) (16,166)
Total due from other banks 373,143 1,334,311 329,636 2,037,090
Mandatory deposits with the CBU include non-interest bearing
reserves against client deposits. The Group does not have the right
to use these deposits for the purposes of funding its own
activities.
10. LOANS AND ADVANCES TO CUSTOMERS
The Bank uses the following classification of loans:
-- Loans to state and municipal organisations - loans issued to
clients wholly owned by the Government of the Republic of
Uzbekistan and budget organisations;
-- Corporate loans - loans issued to clients other than
government entities and private entrepreneurs;
-- Loans to individuals - loans issued to individuals for
consumption purposes, for the purchase of residential houses and
flats and loans issued to private entrepreneurs without forming
legal entity.
Loans and advances to customers comprise:
30 June 31 December
2020 2019
(unaudited)
---------------------------------------------- -------------- ------------
State and municipal organisations 14,259,101 13,030,368
Corporate loans 18,681,863 14,532,135
Loans to individuals 4,096,702 3,123,699
Total loans and advances to customers, gross 37,037,666 30,686,202
Less: Allowance for expected credit losses (1,138,079) (646,417)
Total loans and advances to customers 35,899,587 30,039,785
In line with the Presidential Decree #5978 dated 3 April 2020,
the Group has provided holidays till the end of Q3 2020 for
repayment of interest and/or principal on loans with outstanding
balance of 36 % of the total loan portfolio which comprise 49 % of
the loans to legal entities, 37 % of loans to individuals and
nearly 20 % of the loans state and municipal organisation as at 30
June 2020 (unaudited). As at the same date, the amount of
principal, the repayment of which the Group has extended beyond Q3
2020, was UZS 284,000 million (7%) and UZS 2,308,000 million (12%)
of the loans to legal entities and individuals, respectively.
In relation to restructured loans above, interest continued to
accrue on the outstanding principal of the loans and was
distributed over the remaining period of the loans with final
maturities predominantly extended by six months.
Deterioration in Non-performing loans ("NPL") to gross loans and
in NPL coverage ratios at 30 June 2020 was mainly driven by the
increase in non-performing borrowers during the second quarter of
2020 on the back of COVID-19 pandemic outbreak. NPLs are loans in
which the borrower is in default due to the fact that they have not
made the scheduled payments for 90 days or more. The NPL is a
measure of performance not defined by IFRS.
The following table presents information about NPLs as at 30
June 2020 and as at 31 December 2019:
30 June 31 December
2020 (unaudited) 2019
----------------------------------------------------- ------------------ ------------
Non-performing loans (in millions of Uzbekistan
Soums) 325,974 109,925
Non-performing loans ratio (Non-performing
loans balance divided by the gross loan portfolio) 0.9% 0.4%
NPL coverage ratio 349% 588%
The table below represents loans and advances to customer's
classification by stages as at 30 June 2020 and
31 December 2019:
30 June 31 December
2020 (unaudited) 2019
---------------------------------------------- ------------------ ------------
Originated loans to customers 36,945,715 30,654,925
Overdrafts 91,951 31,277
Total loans and advances to customers, gross 37,037,666 30,686,202
Stage 1 27,836,980 21,174,347
Stage 2 6,790,009 8,644,898
Stage 3 2,410,677 866,957
Total loans and advances to customers, gross 37,037,666 30,686,202
Less: Allowance for expected credit losses (1,138,079) (646,417)
Total loans and advances to customers 35,899,587 30,039,785
The tables below analyze information about significant changes
in the gross carrying amount of loans and advances to customers
during the six months ended 30 June 2020 (unaudited):
Stage Stage Stage TOTAL
1 2 3
12-month Lifetime Lifetime
ECL ECL ECL
Gross carrying amount as at 31
December 2019 21,174,347 8,644,898 866,957 30,686,202
Changes in the gross carrying amount
* Transfer from stage 1 (2,239,628) 2,138,646 100,982 -
* Transfer from stage 2 3,561,839 (4,537,027) 975,188 -
* Transfer from stage 3 43,149 103,527 (146,676) -
* Changes due to modifications that did not result in
derecognition* (1,756,201) 344,880 1,000,052 (411,269)
New assets issued or acquired 8,505,330 - - 8,505,330
Matured or derecognized assets
(except for write off) (2,619,747) (272,713) (499,038) (3,391,498)
Recovery of written off assets - - 35,109 35,109
Foreign exchange differences 1,167,891 367,798 78,103 1,613,792
Gross carrying amount as at 30
June 2020 (unaudited) 27,836,980 6,790,009 2,410,677 37,037,666
Loss allowance for ECL as at 30
June 2020 (unaudited) (103,935) (140,359) (893,785) (1,138,079)
Total loans and advances to customers 27,733,045 6,649,650 1,516,892 35,899,587
The tables below analyze information about significant changes
in the gross carrying amount of loans and advances to customers
during the year 2019:
Stage 1 Stage Stage TOTAL
2 3
12-month Lifetime Lifetime
ECL ECL ECL
Gross carrying amount as at
1 January 2019 24,580,970 3,341,788 559,203 28,481,961
Changes in the gross carrying
amount
- Transfer from stage 1 (2,907,052) 2,510,568 396,484 -
- Transfer from stage 2 315,431 (493,493) 178,062 -
- Transfer from stage 3 18,705 107,734 (126,439) -
* Changes due to modifications that did not result in ( 3,541,080
derecognition* ) 2,139,075 34,754 (1,367,251)
New assets issued or acquired 21,544,064 - - 21,544,064
Matured or derecognized assets
(except for write off) (20,801,314) (371,392) (231,594) (21,404,300)
Recovery of written off assets - - 25,838 25,838
Written off assets - - (4,382) (4,382)
Foreign exchange differences 1,964,623 1,410,618 35,031 3,410,272
Gross carrying amount as at
31 December 2019 21,174,347 8,644,898 866,957 30,686,202
Loss allowance for ECL as at
31 December 2019 (136,991) (193,828) (315,598) (646,417)
Total loans and advances to
customers 21,037,356 8,451,070 551,359 30,039,785
* The line "Changes do to modification that did not result in
derecognition" represents changes in EAD, such as Increase,
decrease in EAD and transfer of new issued loans between
stages.
The tables below analyze information about significant changes
in the expected credit loss of loans and advances to customers
during the six months period ended 30 June 2020 (unaudited):
Stage Stage Stage
1 2 3 TOTAL
12-month Lifetime Lifetime
ECL ECL ECL
Loss allowance for ECL as at 31 December
2019 136,991 193,828 315,598 646,417
Changes in the gross carrying amount
* Transfer from stage 1 (5,736) 5,007 729 -
* Transfer from stage 2 92,376 (117,856) 25,480 -
* Transfer from stage 3 5,628 68,237 (73,865) -
* Changes due to modifications that did not result in
derecognition* (759,179) (10,358) 769,831 294
New assets issued or acquired 641,256 - - 641,256
Matured or derecognized assets (except
for write off) (14,812) (8,489) (184,052) (207,353)
Recovery of assets previously written
off - - 35,109 35,109
Foreign exchange differences 7,411 9,990 4,955 22,356
Loss allowance for ECL as at 30 June
2020 (unaudited) 103,935 140,359 893,785 1,138,079
The tables below analyze information about significant changes
in the gross carrying amount of loans and advances to customers
during the year 2019:
Stage Stage Stage
1 2 3 TOTAL
12-month Lifetime Lifetime
ECL ECL ECL
Loss allowance for ECL as at 1 January
2019 175,253 70,747 215,332 461,332
Changes in the gross carrying amount
- Transfer from stage 1 (26,203) 20,967 5,236 -
- Transfer from stage 2 17,966 (24,399) 6,433 -
- Transfer from stage 3 1,992 86,316 (88,308) -
- Changes due to modifications that
did not result in
derecognition* (207,675) 5,780 189,704 (12,191)
New assets issued or acquired 293,830 - - 293,830
Matured or derecognized assets (except
for write off) (124,657) (13,046) (48,482) (186,185)
Recovery of assets previously written
off - - 25,838 25,838
Written off assets - - (4,382) (4,382)
Foreign exchange differences 6,485 47,463 14,227 68,175
Loss allowance for ECL as at 31 December
2019 136,991 193,828 315,598 646,417
Economic sector risk concentrations within the loans and
advances to customer are as follows:
30 June 2020 (unaudited) 31 December 2019
--------------------------- -------------------
Amount % Amount %
---------------------------------------- ------------------ ------- ------------ -----
Manufacturing 11,590,078 31% 9,201,743 30%
Oil and gas & chemicals 8,848,404 24% 6,762,641 22%
Individuals 4,096,702 11% 3,123,699 10%
Trade and Services 3,573,362 10% 3,650,471 12%
Energy 3,372,498 9% 3,621,465 12%
Agriculture 2,616,892 7% 1,642,841 5%
Transport and communication 2,157,108 6% 1,867,812 6%
Construction 782,622 2% 815,530 3%
Total loans and advances to customers,
gross 37,037,666 100% 30,686,202 100%
Less: Allowance for expected credit
losses (1,138,079) (646,417)
Total loans and advances to customers 35,899,587 30,039,785
As at 30 June 2020, the Group granted loans to 10 (31 December
2019: 10) borrowers in the amount of UZS 10,947,912 million (31
December 2019: UZS 10,434,535 million), which individually exceeded
10% of the Group's equity.
Information about loans and advances to individuals as at 30
June 2020 and 31 December 2019 are as follows:
30 June 31 December
2020 (unaudited) 2019
------------------------------------------------ ------------------ ------------
Mortgage 2,666,822 1,792,916
Car Loan 573,583 525,977
Microloan 424,491 357,977
Consumer Loans 421,379 300,598
Other 10,427 146,231
Total loans and advances to individuals, gross 4,096,702 3,123,699
Less: Allowance for expected credit losses (40,354) (30,355)
Total loans and advances to individuals 4,056,348 3,093,344
Information about collateral as at 30 June 2020 are as
follows:
State and Corporate Loans 30 June
municipal loans to 2020 (unaudited)
organisations individuals
------------------------------ --------------- ----------- ------------- ------------------
Loans collateralised by:
Letter of surety 2,065,490 6,339,369 1,024,049 9,428,908
Real estate 178,940 5,482,121 2,372,614 8,033,675
State guarantee 7,688,329 - - 7,688,329
Equipment 989,427 3,687,594 - 4,677,021
Inventory and receivables 2,924,276 864,693 1,149 3,790,118
Insurance policy 51,139 1,592,240 362,641 2,006,020
Vehicles 156,431 377,839 262,807 797,077
Equity securities 168,259 - - 168,259
Cash deposits 36,810 43,189 908 80,907
Not collateralised - 294,818 72,534 367,352
Total loans and advances to
customers, gross 14,259,101 18,681,863 4,096,702 37,037,666
Less: Allowance for expected
credit losses (110,714) (987,011) (40,354) (1,138,079)
Total loans and advances to
customers 14,148,387 17,694,852 4,056,348 35,899,587
Information about collateral as at 31 December 2019 are as
follows:
State and Corporate Loans 31 December
municipal loans to 2019
organisations individuals
Loans collateralised by:
Letter of surety 1,975,298 4,998,533 1,079,732 8,053,563
State guarantee 7,344,937 - - 7,344,937
Real estate 171,715 4,150,752 1,146,855 5,469,322
Equipment 1,060,371 2,592,782 34 3,653,187
Inventory and receivables 1,037,299 827,384 349,464 2,214,147
Insurance policy 504 1,127,543 230,588 1,358,635
Cash deposits 964,025 56,596 379 1,021,000
Vehicles 161,702 335,232 201,279 698,213
Equity securities 314,517 209,504 - 524,021
Not collateralised - 233,809 115,368 349,177
Total loans and advances to
customers, gross 13,030,368 14,532,135 3,123,699 30,686,202
Less: Allowance for expected
credit losses (147,668) (468,394) (30,355) (646,417)
Total loans and advances to
customers 12,882,700 14,063,741 3,093,344 30,039,785
Analysis by credit quality of loans and advances to customers
that are collectively and individually assessed for impairment as
at 30 June 2020 is as follows :
State and Corporate Loans Total
municipal loans to individuals
30 June 2020 (unaudited) organisations
--------------------------------- --------------- ----------- ---------------- ------------
Loans assessed for impairment
on a collective basis (gross)
Not past due loans 14,258,238 17,124,556 4,053,118 35,435,912
Past due loans
- less than 30 days overdue 560 18,077 8,290 26,927
- 31 to 90 days overdue 131 49,179 29,924 79,234
- 91 to 180 days overdue 172 32,445 4,134 36,751
- 181 to 360 days overdue - 40,890 1,190 42,080
- over 360 days overdue - 10,257 46 10,303
Total loans assessed for
impairment on a collective
basis, gross 14,259,101 17,275,404 4,096,702 35,631,207
Loans individually determined
to be impaired (gross):
Not past due loans - 1,105,521 - 1,105,521
Past due loans
31-90 days - 64,098 - 64,098
91-180 days - 236,840 - 236,840
Total loans individually
determined to be impaired,
gross - 1,406,459 - 1,406,459
- Impairment provisions for
individually impaired loans - (537,485) - (537,485)
- Impairment provisions
assessed on a collective basis (110,714) (449,526) (40,354) (600,594)
Less: Allowance for expected
credit losses (110,714) (987,011) (40,354) (1,138,079)
Total loans and advances to
customers 14,148,387 17,694,852 4,056,348 35,899,587
Analysis by credit quality of loans to State and municipal
organisations, Corporate and Individual customers that are
collectively and individually assessed for impairment as at 31
December 2019 are as follows:
State and municipal Corporate Loans Total
31 December 2019 organisations loans to individuals
Loans assessed for impairment
on a collective basis (gross)
Not past due loans 13,017,467 13,627,010 3,065,257 29,709,734
Past due loans
- less than 30 days overdue 10,622 258,313 31,722 300,657
- 31 to 90 days overdue 1,911 421,577 14,019 437,507
- 91 to 180 days overdue 368 58,840 10,130 69,338
- 181 to 360 days overdue - 37,801 2,402 40,203
- over 360 days overdue - 215 169 384
Total loans assessed for
impairment on a collective
basis, gross 13,030,368 14,403,756 3,123,699 30,557,823
Loans individually determined
to be impaired (gross):
Restructured loans - 128,379 - 128,379
Total loans individually
determined to be impaired,
gross - 128,379 - 128,379
- Impairment provisions for
individually impaired loans - (113,604) - (113,604)
- Impairment provisions
assessed on a collective
basis (147,668) (354,790) (30,355) (532,813)
Less: Allowance for expected
credit losses (147,668) (468,394) (30,355) (646,417)
Total loans and advances to
customers 12,882,700 14,063,741 3,093,344 30,039,785
11. INVESTMENT SECURITIES MEASURED AT AMORTISED COST
Currency Annual EIR Maturity 30 June 31 December
coupon/ % date month/year 2020
interest
rate %
(unaudited) 2019
---------------------- ---------- ---------- -------- ----------------- -------------- ------------
Oct. 20
- Jan.
Government Bonds UZS 14 - 16 15-16 22 937,959 83,095
CBU Bonds UZS 16 16-17.8 Nov. 20 151,283 -
Corporate bonds UZS 19 19 Jul. 26 2,503 2,503
Less: Allowance
for expected credit
losses (5,892) (950)
Total investment
securities measured
at amortised cost 1,085,853 84,648
As at 30 June 2020, the Group holds government bonds of the
Ministry of Finance of the Republic of Uzbekistan in quantity of
949,009 (31 December 2019: 79,009) with nominal value of UZS
1,000,000 per each and coupon rate of 14-16% p.a.
As at 30 June 2020, government bonds of the Ministry of Finance
of the Republic of Uzbekistan in quantity of 470,000 and 250,000
were placed with CBU under REPO agreement with 3 months maturity
and interest rate of 14,91% and 15,93%, respectively.
As at 30 June 2020, the Group holds bonds of CBU in amount of
UZS 150,991 million at 16% p.a. coupon rate.
As at 30 June 2020, the subsidiary PSB Insurance LLC holds
corporate bonds of JSCB "Asia Alliance Bank" in quantity 2,500 with
nominal value of UZS 1 million per each and coupon rate of CBU
refinancing rate (15%) + 4% p.a.
12. PREMISES, EQUIPMENT AND INTANGIBLE ASSETS
In 2019, the Group has arranged a contract with construction
company Shanghai Construction Group Co.Ltd on design and
construction of the Headquarters for Group in the amount of USD
136.5 million. As at 30 June 2020, in accordance with the contract,
the Group invested USD 33.6 million (equivalent to UZS 328,628
million) of which UZS 151,705 million was recorded in CIP. Other
additions to CIP include UZS 18,505 million invested in renovation
of the Group's Head office and UZS 21,682 million on renovation of
Group's branches.
As at 30 June 2020 and 31 December 2019, premises and equipment
of the Group were not pledged.
13. NON-CURRENT ASSETS HELD FOR SALE
30 June
2020
31 December
(unaudited) 2019
----------------------------------------------- -------------- ------------
Assets related to subsidiary companies 33,384 -
Repossessed assets:
- Buildings held for sale 60,931 17,706
- Equipment held for sale 6,021 -
- Others assets held for sale - 1,237
Total repossessed assets 66,952 18,943
Total non-current assets (or disposal groups)
held for sale 100,336 18,943
As at 30 June 2020, buildings held for sale comprise repossessed
collaterals of "Toshbozorsavdo" LLC and "Beltepa Master Story" LLC.
In December 2019 and June 2020, the Group's Management approved and
initiated an active programs to locate buyers within one year.
Repossessed assets were measured at the lower of their carrying
amount and fair value less costs to sell. As at 30 June 2020
impairment losses on repossessed assets classified as held for sale
were recognized in the amount of UZS 11,309 million.
As at 30 June 2020, assets related to subsidiary companies
comprise 8 subsidiary companies (Urganch Technoparks 1-6, Zomin Non
PSB, Zarbdor Non PSB) of PSB Capital LLC and the assets were
measured at the lower of their carrying amount and fair value less
costs to sell. As at 30 June 2020, impairment of the assets related
to subsidiary companies in the amount of UZS 174 million was
recognized within the loss for the period from discontinued
operations.
Major classes of assets and liabilities of the subsidiary
companies are as follows:
30 June
2020
31 December
(unaudited) 2019
--------------------------------------------------- -------------- ------------
Non-current assets 31,941 680
Current assets 1,443 17
Total assets related to subsidiary companies 33,384 697
Current liabilities 1,327 -
Total liabilities related to subsidiary companies 1,327 -
Net assets related to subsidiary companies 32,057 697
14. DUE TO OTHER BANKS
30 June 31 December
2020
(unaudited) 2019
------------------------------------------------- -------------- ------------
Long term placements of other banks 361,341 358,687
Short term placements of other banks 495,576 68,427
Payable to the CBU under repo agreement 734,982 -
Correspondent accounts and overnight placements
of other banks 118,439 37,995
Total due to other banks 1,710,338 465,109
As at 30 June 2020 and 31 December 2019, "Long term placements
of other banks" comprised borrowings from Halk Bank for the amount
UZS 311,020 million and UZS 358,259 million, respectively, obtained
to finance strategic government infrastructural projects.
15. CUSTOMER ACCOUNTS
30 June 31 December
2020
(unaudited) 2019
-------------------------------- -------------- ------------
State and public organisations
- Current/settlement accounts 2,556,968 1,283,604
- Term deposits 2,773,888 3,149,784
Other legal entities
- Current/settlement accounts 2,994,755 2,666,070
- Term deposits 322,091 391,449
Individuals
- Current/demand accounts 772,663 760,410
- Term deposits 1,023,456 872,653
Total customer accounts 10,443,821 9,123,970
Economic sector concentrations within customer accounts are as
follows:
30 June 2020 31 December
(unaudited) 2019
------------------ -----------------
Amount % Amount %
------------------------- ----------- ----- ---------- -----
Public administration 4,392,675 42% 3,290,644 36%
Individuals 1,796,119 17% 1,633,063 18%
Manufacturing 1,243,682 12% 1,086,499 12%
Mining 329,088 3% 665,537 7%
Oil and gas 698,125 7% 525,546 6%
Services 495,847 5% 394,745 4%
Trade 388,173 4% 380,999 4%
Energy 340,686 3% 366,456 4%
ommunication 305,929 3% 231,197 3%
Construction 64,986 1% 191,363 2%
Engineering 142,953 1% 115,351 2%
Finance 39,214 0% 55,491 1%
Agriculture 60,619 1% 41,478 0%
Transportation 28,093 0% 22,044 0%
Medicine 3,130 0% 1,384 0%
Other 114,502 1% 122,173 1%
Total customer accounts 10,443,821 100% 9,123,970 100%
As at 30 June 2020, the Group had two (31 December 2019: two)
customers JSC "Uzbekneftegaz" and the Ministry of Finance of the
Republic of Uzbekistan with a total balance UZS 3,872,140 million
(31 December 2019: JSC "Almalyk MMC" and the Ministry of Finance of
the Republic of Uzbekistan with a balance UZS 3,188,457 million),
which individually exceeded 10% (31 December 2019: 10%) of the
Group's equity.
16. OTHER BORROWED FUNDS
30 June 31 December
2020
(unaudited) 2019
------------------------------------------------------ -------------- ------------
International financial institutions
The Export-Import Bank of China 5,143,515 4,959,868
Commerzbank AG 1,594,600 1,480,537
CREDIT Suisse 1,142,921 530,136
International Bank of Reconstruction and Development 1,105,488 1,000,829
Gazprombank 1,013,254 268,974
China Development Bank 932,783 859,232
Raiffeisen Bank International AG 931,304 594,624
Landesbank Baden--Wuerttemberg 889,913 761,952
The Export-Import Bank of Russia 720,822 588,330
ICBC (London) plc 691,020 -
Promsvyazbank PJSC 668,129 -
International Development Association of World
Bank 602,603 570,406
Daryo Finance B.V. 503,363 -
Asian Development Bank 490,845 416,656
VTB Bank Europe 444,162 203,333
Amsterdam Trade Bank N.V 304,016 323,041
Citibank Europe PLC 298,600 115,094
Baobab Securities Limited 233,055 232,573
OPEC Fund for International Development 202,375 -
Turk Eximbank 163,660 130,332
The Export-Import Bank of Korea 145,037 100,959
AKA Ausfuhrkredit-Gesellschaft mbH 128,993 118,302
AK BARS Bank 102,820 -
ODDO Bank 71,217 77,111
Aktif Yatirim Bankasi Anonim Sirketi 51,792 -
KfW IPEX-Bank 49,844 36,317
Sberbank Europe AG 43,014 6,661
European Bank for Reconstruction and Development 23,293 -
UniCredit 20,779 19,427
Sberbank Kazakhstan 12,397 12,816
International Fund for Agricultural Development 2,407 2,495
Financial institutions of Uzbekistan
Long term borrowings from the Ministry of Finance 3,263,253 1,998,012
Fund for Reconstruction and Development of
Uzbekistan 1,248,299 1,299,791
Long term borrowings from CBU 74,717 73,889
Preference shares 9,455 8,647
Khokimiyat of Tashkent Region 5,927 5,953
Children's Sports Development Fund of Uzbekistan 1,189 1,478
Ipak Yuli Bank - 687
Other 5,088 4,752
Total other borrowed funds 23,335,949 16,803,214
The borrowings from the OPEC Fund International Development and
Ak Bars Bank are provided for financing of trade finance sector of
Uzbekistan in order to meet the demand of local enterprises in
Uzbekistan.
In accordance with the general agreement of financing dated 20
February 2020 #1799-02-20-11 signed between Promsvyazbank and the
Group, the funds were granted to finance foreign trade operations
of the Group's borrowers.
The Group was granted a loan facility by the European bank of
reconstruction and development based on loan agreement #51909
signed on 23 June 2020 to re-credit the growing private sector in
Uzbekistan.
The Group granted short term loan with maturity one year through
money market from Aktif bank dated 19 February 2020 to finance
projects involving the industrial and manufacturing sectors
In accordance with the Loan agreement dated 11 June 2020 signed
between Daryo Finance B.V. and the Group, the funds were attracted
through private placement of three - year unsecured credit notes in
national currency among international investors and aimed to
finance small medium business sector respectively.
During 2020, the Group was granted a loan facility by the ICBC
Standard Bank PLC to expand opportunities for providing financing
in the national currency by the Group to small and medium-sized
businesses that are engines of economic growth.
The Group is obligated to comply with financial covenants in
relation to majority of other borrowed funds disclosed above,
non-compliance of which may give the lender a right to demand
repayment.
In 2017 and 2018, the ADB advanced two loans to the Republic of
Uzbekistan (the "Republic") in connection with the financing of
horticulture projects in Uzbekistan (the "Project"). The Republic
on-lent a portion of these loans to the Bank under tripartite
subsidiary loan agreements No. 3471-UZB dated April 2017 and No.
3673-UZB dated November 2018 between the Republic, the Rural
Restructuring Agency and the Bank (the "Subsidiary Loan
Agreements").
In November 2019 the ADB advanced another loan to the Republic
of Uzbekistan (the "Republic") in connection with the financing of
livestock value chain development projects in Uzbekistan (the
"Project"). The Republic on-lent a portion of this loan to the Bank
under subsidiary loan agreements No. L3823(COL)-UZB dated February
10, 2020 between the Republic, the Agro Industries and Food
Security Agency and the Bank (the "Subsidiary Loan
Agreements").
The loan agreements between ADB and the Republic require the
Republic to cause the Bank to ensure the maintenance of certain
financial covenants throughout the implementation period of the
Project. The same financial covenants are included in the
Subsidiary Loan Agreements.
As at 30 June 2020, the Bank was not in compliance with
cost-to-income ratio in the Subsidiary Loan Agreements. Under the
terms of the Subsidiary Loan Agreements, any non-compliance with
covenants gives the Republic the right to demand prepayment of the
loans advanced to the Bank. As at 30 June 2020, in accordance with
IFRS, the Bank classified the long-term borrowings from the
Republic under the Subsidiary Loan Agreements as "demand and less
than 1 month".
The Bank proactively communicated with both ADB and the Republic
and established a strategic action plan in relation to financial
years 2019-2024 with a view of ensuring compliance with the
covenants in the future. On 5 November 2019, ADB issued a letter to
the Bank confirming ADB's agreement with the action plan and the
fact that ADB remains committed to the Project and to continuing
relationships with the Republic under the Project. On 5 November
2019, the Republic confirmed to the Bank that it would not take any
action to demand a prepayment of the loans advanced to the Bank
under the Subsidiary Loan Agreements as a consequence of past
and/or on-going non-compliance with this covenant. The agreement
between the Bank and Ministry of Finance does not provide a
definition of an event of default. Therefore the Management
considers the breach of the covenant not to be an event of default
and is currently in discussions with Ministry of Finance on
receiving a letter confirming that this breach of the covenant is
not considered to be an event of default.
As at 30 June 2020, the Group had a cumulative liquidity
shortfall of UZS 1,860,134 million up to one month (Note 28), which
reflects the effects of the decision to classify UZS 456,356
million as "demand and less than 1 month" as a result of the
non-compliance with the covenant.
17. INTEREST INCOME AND EXPENSE
Six months Six months
ended 30 June ended 30 June
2020 (unaudited) 2019 (unaudited)
------------------------------------------------ ------------------ ------------------
Interest income
Interest income on assets recorded at
amortised cost comprises:
Interest on loans and advances to customers 1,419,402 993,358
Interest on balances due from other
banks 67,925 20,856
Interest on investment securities measured
at amortised cost 8,627 -
Total interest income 1,495,954 1,014,214
Interest expense
Interest expense on liabilities recorded
at amortised cost comprises:
Interest on other borrowed funds (343,972) (317,873)
Interest on customer accounts (206,576) (125,078)
Interest on balances due to other banks (111,370) (58,930)
Interest on debt securities in issue (100,094) (4,109)
Interest on subordinated debt (7,334) -
Total interest expense (769,346) (505,990)
Net interest income before provision
on loans and advances to customers 726,608 508,224
18. FEE AND COMMISSION INCOME AND EXPENSE
Six months Six months
ended 30 June ended 30 June
2020 (unaudited) 2019 (unaudited)
-------------------------------------- ------------------ ------------------
Fee and commission income
Settlement transactions 103,461 102,972
Foreign currency exchange 25,573 21,225
International money transfers 15,961 13,579
Guarantees issued 5,270 12,888
Services of engineers for conducting
control measurements 3,100 2,695
Letters of credit 4,141 2,532
Other 459 641
Total fee and commission income 157,965 156,532
Fee and commission expense
Settlement transactions (26,391) (21,486)
Cash collection (6,404) (12,298)
Foreign currency exchange (5,761) (2,147)
Other (3,774) (2,134)
Total fee and commission expense (42,330) (38,065)
Net fee and commission income 115,635 118,467
19. ADMINISTRATIVE AND OTHER OPERATING EXPENSES
Six months Six months
ended 30 June ended 30 June
2020 (unaudited) 2019 (unaudited)
------------------------------------------ ------------------ ------------------
Staff costs 171,296 137,457
Depreciation and amortisation 25,500 11,676
Security services 14,368 13,512
Taxes other than income tax 10,737 3,815
Membership fees 10,463 3,401
Stationery and other low value items 7,569 6,556
Consultancy fee 6,942 4,055
Communication expenses 2,870 2,553
Repair and maintenance of buildings 2,847 1,710
Charity expenses 2,783 1,065
Advertising expenses 2,641 3,260
Utilities expenses 2,519 1,757
Legal and audit fees 1,972 2,957
Rent expenses 1,733 2,626
Travel expenses 1,416 2,536
Representation and entertainment 910 1,081
Fuel 804 882
Other operating expenses 9,644 5,045
Total administrative and other operating
expenses 277,014 205,944
20. INCOME TAXES
Six months Six months
ended 30 June ended 30 June
2020 (unaudited) 2019 (unaudited)
---------------------------------------------------------- ------------------ ------------------
IFRS profit before tax 166,794 241,043
Theoretical tax charge at the applicable
statutory rate - 20% (2019: 20%) 33,359 48,209
* Non deductible expenses (employee compensation,
representation and other non-deductible expenses) 2,195 1,598
* Tax rate difference - (6,793)
* Tax incentives - (40)
* Tax exempt income (19) (1,049)
* Other (3,631) 1,932
Income tax expense 31,904 43,857
Net income tax benefit relating to loss
for the period from discontinued operations (165) -
Net income tax expense relating to the
components of other comprehensive income 1,884 1,284
Income tax expense through profit or
loss and other comprehensive income 33,623 45,141
"Tax rate differences" comprises of tax effects from reduction
of standard income tax rate to encourage the banks to increase the
share of long-term loans to customers in the total loan
portfolio.
Reconciliation between the expected and the actual taxation
charge is provided below.
Six months Six months
ended 30 June ended 30 June
2020 (unaudited) 2019 (unaudited)
----------------------------------------------------------- ------------------ ------------------
Current income tax expense 98,993 34,599
Deferred tax (benefit)/expense:
* Deferred tax (benefit)/expense (67,089) 9,258
* Deferred tax benefit relating to discontinued
operation (165) -
* Deferred tax expense relating to the components of
other comprehensive income 1,884 1,284
Total income tax expense through profit
or loss and other comprehensive income 33,623 45,141
On 1 January 2020 preferential income tax rates for branches
with long-term investment financing in the structure of the loan
portfolio which considered taxable ranges from 14% till 20% for
each branch as a separate tax payer, has expired and in accordance
with the new tax legislation, the bank pays income tax on a
consolidated basis as a single tax payer at a single rate of
20%.
Differences between IFRS and Uzbekistan statutory taxation
regulations give rise to certain temporary differences between the
carrying amount of certain assets and liabilities for financial
reporting purposes and for their tax bases. The tax effect of the
movements on these temporary differences is detailed below, and is
recorded at the rate of 20 % (2019: 20 %).
30 June (Debited)/ Credited Charged 31 30 June (Debited)/ Charged 31
2020 credited to profit to other December 2019 credited to other December
(unaudited) to from comprehensive 2019 (unaudited) to comprehensive 2018
profit discontinued income profit income
or loss operations (unaudited) or loss (unaudited)
(unaudited) (unaudited) (unaudited)
---------------------- ------------ ------------ ------------- -------------- --------- ------------ ------------ -------------- ---------
Tax effect of
deductible/(taxable)
temporary differences
Cash and cash
equivalents 28 (91) - - 119 10 (1) - 11
Due from other banks 3,439 18 - - 3,421 1,709 929 - 780
Loans and advances
to customers 36,037 53,345 - - (17,308) (89,410) (8,078) - (81,332)
Financial assets at
fair value through
other comprehensive
income (3,100) - - (1,884) (1,216) (468) - (1,284) 816
Property, equipment
and intangible
assets 1,217 863 - - 354 120 (115) - 235
Investments in
associates
and subsidiaries (5,745) 660 - - (6,405) (9,350) - - (9,350)
Investment securities
measured at
amortised
cost 7,384 7,194 - - 190 - - - -
Other assets 2,897 1,127 - - 1,770 (960) (1,774) - 814
Non-current assets
held for sale 4,821 2,158 165 - 2,498 - - - -
Customer accounts - 458 - - (458) - - - -
Debt securities in
issue (450) 2,826 - - (3,276) - - - -
Other borrowed funds (1,220) (2,281) - - 1,061 - - - -
Other liabilities 6,182 1,478 - - 4,704 942 (219) - 1,161
Subordinated debt - (666) - - 666 - - - -
Net deferred tax
asset/(liability) 51,490 67,089 165 (1,884) (13,880) (97,407) (9,258) (1,284) (86,865)
Recognised deferred
tax asset 62,005 70,127 165 - 14,783 2,641 929 - 3,817
Recognised deferred
tax liability (10,515) (3,038) - (1,884) (28,663) (100,048) (10,187) (1,284) (90,682)
Net deferred tax
asset/(liability) 51,490 67,089 165 (1,884) (13,880) (97,407) (9,258) (1,284) (86,865)
21.
22. ALLOWANCES FOR IMPAIRMENT LOSSES
The tables below analyses information about the changes in the
ECL amount of financial assets and commitments:
Other financial Cash and Due from Investment Letters of Credit Other
assets cash other securities and Guarantees non-financial
equivalents Banks at (Note 24) assets
(Note (Note 9) amortised
8) cost (Note
11)
Stage Stage Stage Stage 1 Stage 1 Stage Stage Stage TOTAL
2 3 1 1 2 3
Lifetime Lifetime 12-month 12-month 12-month 12-month Lifetime Lifetime
ECL ECL ECL ECL ECL ECL ECL ECL
--------- --------- ------------ --------- ----------- --------- --------- ---------
Loss allowance for
ECL
as at 31 December
2019 1,236 1,043 101 16,166 950 12,077 - - 31,573 129
------------------- --------- --------- ------------ --------- ----------- --------- --------- --------- -------- --------------
- Transfer from
stage
2 (176) 176 - - - - - - - -
- Transfer from
stage
3 19 (19) - - - - - - - -
- Changes due
to modifications
that
did not result in
derecognition 7 707 (21) 316 - 1,276 - - 2,285 1,930
New assets issued
or
acquired 325 463 95 1,193 4,942 3,012 - - 10,030 -
Matured or
derecognized
assets (except
for write
off) (516) (363) (48) (750) - (1,356) - - (3,033) -
Foreign exchange
differences 14 28 12 269 - 291 - - 614 -
Loss allowance for
ECL
as at 30 June
2020 (unaudited) 909 2,035 139 17,194 5,892 15,300 - - 41,469 2,059
------------------- --------- --------- ------------ --------- ----------- --------- --------- --------- -------- --------------
2,944 139 17,194 5,892 15,300 41,469
------------------- --------- --------- ------------ --------- ----------- --------- --------- --------- -------- --------------
Other financial Cash and Due from Investment Letters of Credit Other
assets cash other securities and Guarantees non-financial
equivalents Banks at (Note 24) assets
(Note 8) (Note 9) amortised
cost (Note
11)
Stage Stage Stage 1 Stage 1 Stage 1 Stage Stage Stage TOTAL
2 3 1 2 3
Lifetime Lifetime 12-month 12-month 12-month 12-month Lifetime Lifetime
ECL ECL ECL ECL ECL ECL ECL ECL
--------- --------- ------------ --------- ----------- --------- --------- ---------
Loss allowance
for
ECL
as at 1
January
2019 175 310 54 4,811 - 5,922 361 247 11,880 309
--------------- --------- --------- ------------ --------- ----------- --------- --------- --------- -------- --------------
- Transfer
from
stage 2 (3) 3 - - - - - - - -
- Transfer
from
stage 3 13 (13) - - - - - - - -
- Changes due
to
modifications
that
did not
result
in
derecognition 319 117 47 (1,161) - (1,007) - - (1,685) (180)
New assets
issued
or acquired 706 695 9 12,323 950 6,539 - - 21,222 -
Matured or
derecognized
assets
(except
for write
off) (30) (117) (21) (346) - (756) (361) (247) (1,878) -
Foreign
exchange
differences 56 48 12 539 - 1,379 - - 2,034 -
Loss allowance
for
ECL
as at 31
December
2019 1,236 1,043 101 16,166 950 12,077 - - 31,573 129
--------------- --------- --------- ------------ --------- ----------- --------- --------- --------- -------- --------------
23. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net
profit attributable to ordinary shares by the weighted average
number of ordinary shares.
The Group has no dilutive potential ordinary shares; therefore,
the diluted earnings per share equal basic earnings per share.
According to the charter of the Group, dividend payments per
ordinary share cannot exceed the dividends per share on preferred
shares for the same period and the minimum dividends payable to the
owners of preference shares comprise not less than 20%. Therefore,
net profit for the period is allocated to the ordinary shares and
the preferred shares in accordance with their legal and contractual
dividsend rights to participate in undistributed earnings.
Six months Six months
ended 30 June ended 30 June
2020 (unaudited) 2019 (unaudited)
--------------------------------------------------- ------------------ ------------------
Profit for the year attributable to ordinary
shareholders 133,065 195,780
Profit for the year attributable to preference
shareholders 1,651 1,406
- -
Profit/(loss) for the year from discontinued
operations attributable to ordinary shareholders (174) -
Earnings used in calculation of earnings
per ordinary share from continuing operations 133,239 195,780
Earnings used in calculation of earnings
per preference share from continuing operations 1,651 1,406
Weighted average number of ordinary shares
for the purpose of basic and diluted earnings
per share (in millions) 243,552 105,277
From continuing operations
Basic and diluted EPS per ordinary share
in UZS 0.55 1.86
From discontinued operations
Basic and diluted EPS per ordinary share
in UZS (0.00) -
Total basic and diluted EPS per ordinary
share in UZS 0.55 1.86
24. COMMITMENTS AND CONTINGENCIES
Operating lease commitments. As at 30 June 2020 and 31 December
2019, the Group had no material operating lease commitments
outstanding
Legal proceedings . From time to time and in the normal course
of business, claims against the Group are received. On the basis of
its own estimates and both internal and external professional
advice the Management is of the opinion that no material losses
will be incurred in respect of claims and accordingly no provision
has been made in these consolidated financial statements.
Tax legislation . Uzbek tax, currency and customs legislation is
subject to varying interpretations, and changes, which can occur
frequently. The Management's interpretation of such legislation as
applied to the transactions and activity of the Group may be
challenged by the relevant regional and state authorities. Recent
events within Uzbekistan suggest that the tax authorities may be
taking a more assertive position in their interpretation of the
legislation and assessments, and it is possible that transactions
and activities that have not been challenged in the past, may be
challenged. As a result, significant additional taxes, penalties
and interest may be assessed. Fiscal periods remain open to review
by the authorities in respect of taxes for five calendar years
preceding the year of review. Under certain circumstances reviews
may cover longer periods.
The Management believes that its interpretation of the relevant
legislation is appropriate and the Bank's tax, currency legislation
and customs positions will be sustained. Accordingly, as at 30 June
2020, no provision for potential tax liabilities had been recorded
(2019: Nil). The Group estimates that it has no potential
obligations from exposure to other than remote tax risks.
Capital expenditure commitments. As at 30 June 2020 and 31
December 2019, the Group had contractual capital expenditure
commitments for the total amount of UZS 1,050,749 million and UZS
1,114,823 million in respect of premises and equipment,
respectively.
Credit related commitments . The primary purpose of these
instruments is to ensure that funds are available to a customer as
required. Guarantees and standby letters of credit, which represent
irrevocable assurances that the Group will make payments in the
event that a customer cannot meet its obligations to third parties,
carry the same credit risk as loans. Documentary and commercial
letters of credit, which are written undertakings by the Group on
behalf of a customer authorising a third party to draw drafts on
the Group up to a stipulated amount under specific terms and
conditions, are collateralised by the underlying shipments of goods
to which they relate or cash deposits and therefore carry less risk
than a direct borrowing. Commitments to extend credit represent
unused portions of authorisations to extend credit in the form of
loans, guarantees or letters of credit. With respect to credit risk
on commitments to extend credit, the Group is potentially exposed
to loss in an amount equal to the total unused commitments.
However, the likely amount of loss is less than the total unused
commitments since most commitments to extend credit are contingent
upon customers maintaining specific credit standards. The Group
monitors the term to maturity of credit related commitments because
longer-term commitments generally have a greater degree of credit
risk than shorter-term commitments.
30 June
2020 31 December
(unaudited) 2019
------------------------------------------------------ -------------- ------------
Guarantees issued 1,958,302 1,599,403
Letters of credit, non post-financing 246,403 390,788
Letters of credits, post-financing with commencement
after reporting period end 250,962 260,499
Undrawn credit lines 549,764 297,764
Total gross credit related commitments 3,005,431 2,548,454
Less - Cash held as security against letters
of credit and guarantees (263,008) (270,951)
Less - Provision for expected credit losses (15,300) (12,077)
Total credit related commitments 2,727,123 2,265,426
The total outstanding contractual amount of letters of credit,
guarantees issued and undrawn credit lines does not necessarily
represent future cash requirements as these financial instruments
may expire or terminate without being funded.
25. FAIR VALUE
IFRS defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at a measurement date.
Fair value measurements are analysed by level in the fair value
hierarchy as follows: (i) level one are measurements at quoted
prices (unadjusted) in active markets for identical assets or
liabilities, (ii) level two measurements are valuations techniques
with all material inputs observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is,
derived from prices), and (iii) level three measurements are
valuations not based on observable market data (that is,
unobservable inputs). The Management applies judgement in
categorising financial instruments using the fair value hierarchy.
If a fair value measurement uses observable inputs that require
significant adjustment, that measurement is a Level 3 measurement.
The significance of a valuation input is assessed against the fair
value measurement in its entirety.
Some of the Group's financial assets and financial liabilities
are measured at fair value at the end of each reporting year. The
following table gives information about how the fair values of
these financial assets and financial liabilities are determined (in
particular, the valuation technique(s) and inputs used).Financial
assets and financial liabilities are classified in their entirety
based on the lowest level of input that is significant to the fair
value measurements. The Management's assessment of the significance
of a particular input to the fair value measurement requires
judgment, and may affect the valuation of the assets and
liabilities being measured and their placement within the fair
value hierarchy.
The Group considers that the accounting estimate related to the
valuation of financial instruments where quoted markets prices are
not available is a key source of estimation uncertainty because:
(i) it is highly susceptible to changes from year to year, as it
requires the Management to make assumptions about interest rates,
volatility, exchange rates, the credit rating of the counterparty,
valuation adjustments and specific features of transactions and
(ii) the impact that recognising a change in the valuations would
have on the assets reported on the consolidated statement of
financial position, as well as, the related profit or loss reported
on the consolidated statement of profit or loss, could be material
.
Except as detailed in the following table, the Management
considers that the carrying amounts of financial assets and
financial liabilities recognised in the interim condensed
consolidated financial information approximate their fair values
:
Financial Carrying Fair value Fair value Valuation model(s) Significant Relationship
Assets/ value hierarchy and key input(s) unobservable of unobservable
Liabilities input(s) inputs to fair
as at value
30 June 2020
(unaudited)
-------------------- ----------- ----------- ----------- ------------------- -------------- --------------------
Discounted cash
flows. Key input
- average interest
rates obtained
from Statistical
bulletin of the
CBU at the end of The greater
the reporting discount-
Loans and advances Level date used as a the smaller fair
to customers 35,899,587 34,401,244 2 discount rate. N/A value
Discounted cash
flows. Discount
rate estimated
based on
unobservable The greater
internally discount-
Due from other Level generated interest Discount the smaller fair
banks 1,971,250 1,876,435 3 rates. rate value
Discounted cash
flows. Discount
rate estimated
Investment based on
securities unobservable The greater
measured at internally discount-
amortised Level generated interest Discount the smaller fair
cost 1,085,853 1,082,650 3 rates. rate value
Discounted cash
flows. Discount
rate estimated
based on
unobservable The greater
internally discount-
Level generated interest Discount the smaller fair
Due to other banks 1,710,338 1,710,502 3 rates. rate value
Discounted cash
flows. Key input
- average interest
rates obtained
from Statistical
bulletin of the
CBU at the end of The greater
the reporting discount-
Level date used as a the smaller fair
Customer accounts 10,443,821 10,464,689 2 discount rate. N/A value
Debt securities
in issue
Quoted bid prices
Level in an active
- Eurobonds 3,005,702 3,126,788 1 market. N/A N/A
Discounted cash
flows. Discount
rate estimated
based on
unobservable The greater
internally discount-
- Certificates Level generated interest Discount the smaller fair
of deposit 54,304 54,304 3 rates. rate value
Discounted cash
flows. Discount
rate estimated
based on
unobservable The greater
internally discount-
Level generated interest Discount the smaller fair
- Bonds 80,376 80,376 3 rates. rate value
Discounted cash
flows. Discount
rate estimated
based on
unobservable The greater
internally discount-
Other borrowed Level generated interest Discount the smaller fair
funds 23,335,949 23,843,500 3 rates. rate value
Discounted cash
flows. Discount
rate estimated
based on
unobservable The greater
internally discount-
Level generated interest Discount the smaller fair
Subordinated debt 82,708 82,453 3 rates. rate value
Financial Carrying Fair value Fair Valuation model(s) Significant Relationship of
Assets/ value value and key input(s) unobservable unobservable inputs
Liabilities hierarchy input(s) to fair value
as at
31 December
2019
----------------- ----------- ----------- ----------- --------------------- -------------- ---------------------
Discounted cash
flows. Key input
- average interest
rates obtained
from Statistical
bulletin of the
CBU at the end of The greater
Loans and the reporting discount-
advances Level date used as a the smaller fair
to customers 30,039,785 26,681,120 2 discount rate. N/A value
Discounted cash
flows. Discount
rate estimated based
on unobservable The greater
internally generated discount-
Due from Level interest Discount the smaller fair
other banks 2,037,090 1,883,309 3 rates. rate value
Discounted cash
flows. Discount
Investment rate estimated based
securities on unobservable The greater
measured internally generated discount-
at amortised Level interest Discount the smaller fair
cost 84,648 83,618 3 rates. rate value
Discounted cash
flows. Discount
rate estimated based
on unobservable The greater
internally generated discount-
Due to Level interest Discount the smaller fair
other banks 465,109 455,427 3 rates. rate value
Discounted cash
flows. Key input
- average interest
rates obtained
from Statistical
bulletin of the
CBU at the end of The greater
the reporting discount-
Customer Level date used as a the smaller fair
accounts 9,123,970 9,106,613 2 discount rate. N/A value
Debt securities
in issue
Quoted bid prices in
Level an active
- Eurobonds 2,808,987 2,987,751 1 market. N/A N/A
Discounted cash
flows. Discount
rate estimated based
on unobservable The greater
internally generated discount-
- Certificates Level interest Discount the smaller fair
of deposit 79,627 79,627 3 rates. rate value
Discounted cash
flows. Discount
rate estimated based
on unobservable The greater
internally generated discount-
Level interest Discount the smaller fair
- Bonds 32,280 32,280 3 rates. rate value
Discounted cash
flows. Discount
rate estimated based
on unobservable The greater
Other internally generated discount-
borrowed Level interest Discount the smaller fair
funds 16,803,214 16,963,385 3 rates. rate value
Discounted cash
flows. Discount
rate estimated based
on unobservable The greater
internally generated discount-
Subordinated Level interest Discount the smaller fair
debt 83,332 84,917 3 rates. rate value
As at 30 June 2020 and 31 December 2019, the Group determined
fair value for some of its financial assets and liabilities using
the discounted cash flow model by applying CBU statistical
bulletin, which became open to public starting 2019. Such financial
instruments were categorised as Level 2.
For those financial instruments where interest rates were not
directly available in the CBU's Statistical bulletin, the
Management uses discounted cash flow model by applying market
interest rates based on the rates of the deals concluded towards
the end of the reporting period, thereby, categorizing such
instruments as Level 3.
The fair value of the equity instruments at fair value through
other comprehensive income disclosed in note 12 were determined as
the present value of future dividends by assuming dividend growth
rate of zero per annum. The Management built its expectation based
on previous experience of dividends received on financial assets at
fair value through other comprehensive income over multiple years,
and accordingly calculated the value of using the average rate of
return on investments. The Management believes that this approach
accurately reflects the fair value of these securities, given they
are not traded. Such financial instruments were categorised as
Level 3.
26. CAPITAL RISK MANAGEMENT
The Group manages regulatory capital as Group's capital. The
Group's objectives when managing capital are to comply with the
capital requirements set by the CBU, and to safeguard the Group's
ability to continue as a going concern. Compliance with capital
adequacy ratios set by the CBU is monitored monthly with reports
outlining their calculation reviewed and signed by the Chairman and
Chief Accountant.
Under the current capital requirements set by the CBU, banks
have to maintain ratios of (actual ratios given below are
unaudited):
-- Ratio of regulatory capital to risk weighted assets
("Regulatory capital ratio") above a prescribed minimum level of
13% (31 December 2019: 13%). Actual ratio as at 30 June 2020: 18.9%
(31 December 2019: 23%);
-- Ratio of Group's tier 1 capital to risk weighted assets
("Capital adequacy ratio") above a prescribed minimum level of 10%
(31 December 2019: 10%). Actual ratio as at 30 June 2020: 15.8% (31
December 2019: 18%); and
-- Ratio of Group's tier 1 capital to total assets less
intangibles ("Leverage ratio") above a prescribed minimum level of
6% (31 December 2019: 6%). Actual ratio as at 30 June 2020: 11.9%
(31 December 2019: 13.4%).
Total capital is based on the Group's reports prepared under
Uzbekistan Accounting Legislation and related instructions and
comprises:
30 June 31 December
2020 (unaudited) 2019 (unaudited)
------------------------------- ------------------ ------------------
Tier 1 capital 6,044,271 5,235,684
Tier 2 capital 1,155,573 1,463,606
Less: Deductions from capital (102,835) (100,000)
Total regulatory Capital 7,097,009 6,599,290
Regulatory capital consists of Tier 1 capital, which comprises
share capital, share premium, preference shares, retained earnings
excluding current year profit and less intangible assets. The other
component of regulatory capital is Tier 2 capital, which includes
current year profit.
27. RISK MANAGEMENT POLICIES
The risk management function within the Group is carried out in
respect of financial risks, operational risks and legal risks.
Financial risk comprises market risk (including currency risk,
interest rate risk and other price risk), credit risk and liquidity
risk. The primary objectives of the financial risk management
function are to establish risk limits, and then ensure that
exposure to risks stays within these limits. The operational and
legal risk management functions are intended to ensure proper
functioning of internal policies and procedures, in order to
minimise operational and legal risks.
Credit risk . The Group takes on exposure to credit risk which
is the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an
obligation. Exposure to credit risk arises as a result of the
Group's lending and other transactions with counterparties giving
rise to financial assets.
Clients of the Group are segmented into five rating classes. The
Group's rating scale, which is shown below, reflects the range of
default probabilities defined for each rating class. This means
that, in principle, exposures migrate between classes as the
assessment of their probability of default changes.
Group's internal ratings scale :
Timely repayment of these loans is not in doubt. The borrower is
a financially stable company, which has an adequate capital level,
high level profitability and sufficient cash flow to meet its all
existing obligations, including present debt. When estimating the
reputation of the borrower such factors as the history of previous
repayments, marketability of collateral (movable and immovable
property guarantee) are taken into consideration.
"Sub-standard" loans are loans, secured with a reliable source
of secondary repayment (guarantee or collateral). On the whole, the
financial situation of borrower is stable, but some unfavourable
circumstances or tendencies are in the present, which raise doubts
on the ability of the borrower to repay on time. "Standard" loans
with insufficient information in the credit file or missed
information on collateral could be also classified as
"sub-standard" loans.
Unsatisfactory loans have obvious deficiencies, which make for
doubtful repayment of the loan on the conditions, envisaged by the
initial agreement. As for "unsatisfactory" loans, the primary
source of repayment is not sufficient and the Group has to seek
additional loan repayment sources, which in case of non-repayment
is a sale of collateral.
Doubtful loans are those loans, which have all the weaknesses
inherent in those classified as "unsatisfactory" with the added
characteristic that the weakness makes collection or liquidation in
full, on the basis of currently existing facts, conditions and
values, highly questionable.
Loans classified as "loss" are considered uncollectible and have
such little value that their continuance as bankable assets of the
Group is not warranted. This classification does not mean that the
loans have absolutely no likelihood of recovery, but rather means
that it is not practical or desirable to defer writing off these
essentially worthless assets even though partial recovery may be
effected in the future and the Group should make efforts on
liquidation such debts through selling collateral or should apply
all forces for its repayment.
Risk limits control and mitigation policies . The Group manages,
limits and controls concentrations of credit risk wherever they are
identified - in particular, to individual counterparties and
groups, and to industries.
The Group structures the levels of credit risk it undertakes by
placing limits on the amount of risk accepted in relation to one
borrower, or groups of borrowers, and to geographical and industry
segments. Such risks are monitored on a revolving basis and subject
to an annual or more frequent review, when considered necessary.
Limits on the level of credit risk by product, industry sector and
by country are approved quarterly by the Bank Council.
Exposure to credit risk is managed through regular analysis of
the ability of borrowers and potential borrowers to meet interest
and capital repayment obligations and by changing these lending
limits where appropriate.
Some other specific control and mitigation measures are outlined
below.
(a) Limits . The Group manages and controls credit risk by
setting limits on the amount of risk it is willing to accept for
individual counterparties and for geographical and industry
concentrations, and by monitoring exposures in relation to such
limits.
(b) Collateral . The Group employs a range of policies and
practices to mitigate credit risk. The most traditional of these is
the taking of security for funds advances, which is common
practice. The Group implements guidelines on the acceptability of
specific classes of collateral or credit risk mitigation.
Collateral before being accepted by the Group is thoroughly
analysed and physically verified, where applicable. Debt
securities, treasury and other eligible bills are generally
unsecured.
The principal collateral types for loans and advances as well as
finance lease receivables are:
- State guarantees
- Cash deposits;
- Motor vehicle;
- Inventory;
- Letter of surety;
- Residential house;
- Equipment;
- Building; and
- Other assets
(c) Concentration of risks of financial assets with credit risk
exposure . The Group's Management focuses on concentration
risk:
- The maximum risk to single borrower or group of affiliated
borrowers shall not exceed 25 percent of the Group's tier 1
capital;
- Total amount of unsecured credits to single borrower or group
of affiliated borrowers shall not exceed 5 percent of Group's tier
1 capital;
- Total amount of all large credits shall not exceed Group's
tier 1 capital by more than 8 times; and
- Total loan amount to related party shall not exceed Group's tier 1 capital.
In order to monitor credit risk exposures, weekly reports are
produced by the credit department's officers based on a structured
analysis focusing on the customer's business and financial
performance, which includes overdue balances, disbursements and
repayments, outstanding balances and maturity of loan and as well
as grade of loan and collateral. Any significant exposures against
customers with deteriorating creditworthiness are reported to and
reviewed by the Management daily. The Management monitors and
follows up past due balances.
Impairment and provisioning policies . The internal rating tool
assists the Management to determine whether objective evidence of
impairment exists, based on the following criteria set out by the
Group:
- Delinquency in contractual payments of principal or interest;
- Cash flow difficulties experienced by the borrower (e.g.
equity ratio, net income percentage of sales);
- Breach of loan covenants or conditions;
- Initiation of bankruptcy proceedings and etc.
The Group's policy requires the review of individual financial
assets that are above certain materiality thresholds at least
annually or more regularly when individual circumstances require.
Impairment allowances on individually assessed accounts are
determined by an evaluation of the incurred loss at balance-sheet
date on a case-by-case basis, and are applied to all individually
significant accounts. The assessment normally encompasses
collateral held (including re-confirmation of its enforceability)
and the anticipated receipts for that individual account.
Collectively assessed impairment allowances are provided for:
(i) portfolios of homogenous assets that are individually below
materiality thresholds; and (ii) losses that have been incurred but
have not yet been identified, by using the available empirical
data, experienced judgment and statistical techniques.
Maximum exposure of credit risk. The Group 's maximum exposure
to credit risk varies significantly and is dependent on both
individual risks and general market economy risks.
The following table presents the maximum exposure to credit risk
of balance sheet and off balance sheet financial assets. For
financial assets in the balance sheet, the maximum exposure is
equal to the carrying amount of those assets prior to any offset or
collateral. The Group 's maximum exposure to credit risk under
contingent liabilities and commitments to extend credit, in the
event of non-performance by the other party where all
counterclaims, collateral or security prove valueless, is
represented by the contractual amounts of those instruments.
Maximum Offset Net exposure Collateral Net exposure
exposure after offset pledged after offset
30 June 2020 (unaudited) and collateral
Cash and cash equivalents 5,093,732 (907,539) 4,186,193 - 4,186,193
Due from other banks 1,971,250 - 1,971,250 - 1,971,250
Loans and advances to
customers 35,899,587 (80,907) 35,818,680 (35,451,328) 367,352
Financial assets at
fair value through other
comprehensive income 100,258 - 100,258 - 100,258
Investment securities
measured at amortised
cost 1,085,853 - 1,085,853 - 1,085,853
Other financial assets 32,247 - 32,247 - 32,247
Off-balance sheet items:
Letters of credit and
guarantees issued 2,440,367 (263,008) 2,177,359 (401,026) 1,776,333
Maximum Offset Net exposure Collateral Net exposure
exposure after offset pledged after offset
31 December 2019 and collateral
Cash and cash equivalents 2,862,574 (662,864) 2,199,710 - 2,199,710
Due from other banks 2,037,090 - 2,037,090 - 2,037,090
Loans and advances to
customers 30,039,785 (1,021,000) 29,018,785 (28,669,608) 349,177
Financial assets at
fair value through other
comprehensive income 88,714 - 88,714 - 88,714
Investment securities
measured at amortised
cost 84,648 - 84,648 - 84,648
Other financial assets 5,162 - 5,162 - 5,162
Off-balance sheet items:
Letters of credit and
guarantees issued 2,238,613 (270,951) 1,967,662 (66,150) 1,901,512
Off-balance sheet risk. The Group applies fundamentally the same
risk management policies for off-balance sheet risks as it does for
its on-balance sheet risks. In the case of commitments to lend,
customers and counterparties will be subject to the same credit
management policies as for loans and advances. Collateral may be
sought depending on the strength of the counterparty and the nature
of the transaction.
Market risk . The Group takes on exposure to market risks.
Market risks arise from open positions in interest rate, currency
and equity products, all of which are exposed to general and
specific market movements. The Group manages its market risk
through risk-based limits established by the Bank Supervisory Board
on the value of risk that may be accepted. The risk-based limits
are subject to review by the Bank Council on a quarterly basis.
Overall Group's position is split between Corporate and Retail
banking positions. The exposure of Corporate and Retail banking
operations to market risk is managed through the system of limits
monitored by the Treasury Department on a daily basis. However, the
use of this approach does not prevent losses outside of these
limits in the event of more significant market movements.
Currency risk . The Group takes on exposure to the effect of
fluctuations in the prevailing foreign currency exchange rates on
its financial position and cash flows. In respect of currency risk,
the Council sets limits on the level of exposure by currency and in
total for both overnight and intra-day positions, which are
monitored daily. The Group's Treasury Department measures its
currency risk by matching financial assets and liabilities
denominated in same currency and analyses effect of actual annual
appreciation/depreciation of that currency against Uzbekistan Soum
to the profit and loss of the Group.
The Group measures its currency risk by:
- Net position on each currency should not exceed 10 % of Group's total equity;
- Total net position on all currencies should not exceed 15 % of Group's total equity.
The table below summarises the Group's exposure to foreign
currency exchange rate risk at the end of reporting period:
Non-derivative monetary assets and liabilities:
USD EUR Other UZS Total
30 June 2020 (unaudited) currencies
--------------------------------- ----------- ---------- ------------ ----------- -----------
Cash and cash equivalents 3,204,514 307,346 182,611 1,399,261 5,093,732
Due from other banks 1,100,538 167,936 26,415 676,361 1,971,250
Loans and advances to customers 19,280,274 5,835,656 - 10,783,657 35,899,587
Investment securities measured
at
amortised cost - - - 1,085,853 1,085,853
Other financial assets 14,053 2,508 - 15,686 32,247
Total monetary assets 23,599,379 6,313,446 209,026 13,960,818 44,082,669
Due to other banks 430,346 171,179 - 1,108,813 1,710,338
Customer accounts 6,103,779 337,069 53,729 3,949,244 10,443,821
Debt securities in issue 3,005,702 - - 134,680 3,140,382
Other borrowed funds 13,291,744 5,789,817 - 4,254,388 23,335,949
Other financial liabilities 33,087 341 26,672 60,100
Subordinated debt - - - 82,708 82,708
Total monetary liabilities 22,864,658 6,298,065 54,070 9,556,505 38,773,298
Net Balance sheet position 734,721 15,381 154,956 4,404,313 5,309,371
USD EUR Other UZS Total
31 December 2019 currencies
--------------------------------- ----------- ---------- ------------ ----------- -----------
Cash and cash equivalents 1,640,812 94,358 106,364 1,021,040 2,862,574
Due from other banks 1,081,143 11,827 34,638 909,482 2,037,090
Loans and advances to customers 16,846,573 3,595,623 - 9,597,589 30,039,785
Investment securities measured
at
amortised cost - - - 84,648 84,648
Other financial assets 823 2,812 - 1,527 5,162
Total monetary assets 19,569,351 3,704,620 141,002 11,614,286 35,029,259
Due to other banks 42,738 32 - 422,339 465,109
Customer accounts 4,777,978 274,280 111,267 3,960,445 9,123,970
Debt securities in issue 2,808,987 - - 111,907 2,920,894
Other borrowed funds 10,644,036 3,506,863 - 2,652,315 16,803,214
Other financial liabilities 812 - - 23,213 24,025
Subordinated debt - - - 83,332 83,332
Total monetary liabilities 18,274,551 3,781,175 111,267 7,253,551 29,420,544
Net Balance sheet position 1,294,800 (76,555) 29,735 4,360,735 5,608,715
The CBU sets a number of requirements for foreign currency
position. As at 30 June 2020, the Bank is in compliance with the
statutory requirements on open position in respect of foreign
currencies under the accounting policies set by CBU.
Changes of the possible movement of the currency rates from 2019
to 2020 were associated with the increase in the volatility of the
exchange rate. The following table presents sensitivities of profit
and loss to reasonably possible changes in exchange rates applied
at the end of reporting period, with all other variables held
constant:
As at 30 June As at 31 December
2020 (unaudited) 2019
Impact on Impact on
profit or profit or
loss loss
---------------------------------------------- ------------------ ------------------
US Dollars strengthening by 20% (31 December
2019: 20%) 146,944 275,890
US Dollars weakening by 20% (31 December
2019: 20%) (146,944) (275,890)
EUR strengthening by 20% (31 December
2019: 20%) 3,076 (15,311)
EUR weakening by 20% (31 December 2019:
20%) (3,076) 15,311
The above sensitivity analysis include limitations in terms of
the use of hypothetical market movements to demonstrate potential
risk that only represent the Group's view of possible near-term
market changes, based on historical change in foreign currency
rates, and which cannot be predicted with any certainty.
The exposure was calculated only for monetary balances
denominated in currencies other than the functional currency of the
Group. Impact on equity would be the same as impact on statement of
profit or loss and other comprehensive income.
Interest rate risk . The Group takes on exposure to the effects
of fluctuations in the prevailing levels of market interest rates
on its financial position and cash flows. Interest margins may
increase as a result of such changes but may reduce or create
losses in the event that unexpected movements arise.
The Management monitors on a daily basis and sets limits on the
level of mismatch of interest rate repricing that may be
undertaken.
The table below summarises the Group's exposure to interest rate
risks. The table presents the aggregated amounts of the Group's
financial assets and liabilities at carrying amounts, categorised
by the earlier of contractual interest repricing or maturity
dates.
Demand From From 6 From 1 From 3 Over 5 Total
and less 1 to to 12 to 3 years to 5 years years
30 June 2020 than 6 months months
(unaudited) 1 month
---------------------- ---------- ---------- ---------- ------------ ------------ ---------- -----------
Assets
Cash and cash
equivalents 961,248 - - - - - 961,248
Due from
other banks 62,518 168,760 19,924 755,515 - 402,966 1,409,683
Loans and
advances
to customers 352,206 4,736,952 4,688,373 10,747,336 6,897,501 7,637,710 35,060,078
Investment
securities
measured
at amortised
cost - 314,561 699,745 47,558 - 2,440 1,064,304
Total % bearing
financial
assets 1,375,972 5,220,273 5,408,042 11,550,409 6,897,501 8,043,116 38,495,313
Liabilities
Due to other
banks 255,000 778,570 - 23,550 67,721 218,685 1,343,526
Customer accounts 126,807 543,091 649,331 324,371 1,749,883 559,738 3,953,221
Debt securities
in issue 35,203 18,300 38,560 23,275 3,005,702 - 3,121,040
Other borrowed
funds 1,057,138 2,849,805 3,325,311 7,796,407 2,385,626 5,174,840 22,589,127
Subordinated
debt - - - - - 80,000 80,000
Total financial
%
bearing liabilities 1,474,148 4,189,766 4,013,202 8,167,603 7,208,932 5,953,263 31,086,914
Net interest
sensitivity
gap (98,176) 1,030,507 1,394,840 3,382,806 (311,431) 2,089,853 7,408,399
Demand From From 6 From From Over Total
and less 1 to to 12 1 to 3 to 5 years
31 December than 1 6 months months 3 years 5 years
2019 month
---------------------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Assets
Cash and cash
equivalents 256,933 - - - - - 256,933
Due from
other banks 3,496 71,218 114,857 698,730 3,572 445,999 1,337,872
Loans and
advances
to customers 1,056,345 4,000,702 3,156,815 8,496,128 6,125,037 6,704,737 29,539,764
Investment
securities
measured
at amortised
cost - - 74,923 - - 2,504 77,427
Total % bearing
financial
assets 1,316,774 4,071,920 3,346,595 9,194,858 6,128,609 7,153,240 31,211,996
Liabilities
Due to other
banks - 57,372 9,146 27,298 80,107 242,965 416,888
Customer accounts 228,361 789,256 563,816 516,982 1,635,942 504,538 4,238,895
Debt securities
in issue 9,903 29,850 38,750 31,560 2,808,987 - 2,919,050
Other borrowed
funds 1,020,611 1,203,960 1,791,775 3,066,109 2,574,204 6,505,692 16,162,351
Subordinated
debt - - - - - 80,000 80,000
Total financial
%
bearing liabilities 1,258,875 2,080,438 2,403,487 3,641,949 7,099,240 7,253,195 23,817,184
Net interest
sensitivity
gap 57,899 1,991,482 943,108 5,552,909 (970,631) (99,955) 7,394,812
As at 30 June 2020 (unaudited), if interest rates at that date
had been 154 basis points lower (2019: 140 basis points lower) with
all other variables held constant, profit for the period would have
been UZS 144,443 million higher (for the year ended 31 December
2019: UZS 40,723 million higher).
If interest rates had been 140 basis points higher (2019: 140
basis points higher), with all other variables held constant,
profit for the period would have been UZS 144,443 million lower
(for the year ended 31 December 2019: UZS 40,723 million
lower).
The Group monitors interest rates for its financial instruments.
The table below summarises interest rates based on reports reviewed
by key management personnel:
30 June 2020 (unaudited)
-------------------------------------------
In % p.a. UZS USD EUR Other
--------------------------------------- ------------ ---------- --------- ------
Assets
Cash and cash equivalents 0-18 0-0.06 - -
Due from other banks 3 - 20 0.7 - 7.3 - -
Loans and advances to customers 0 - 47.9 0 - 15 2.5 - 15 -
Investment securities measured
at amortised cost 14 - 19 - - -
Liabilities
Due to other banks 3-18 0-4.75 - -
Customer accounts:
-term deposits 0-23 0-6 4-6 5
Debt securities in issue 14-17 5.75 - -
Other borrowed funds:
0.23 -
-International Financial Institutions 4.5 - 19.25 0.82 - 7 5.05 -
-Local Financial Institutions 0 - 15 0 - 7 - -
Subordinated debt 16 - - -
31 December 2019
-----------------------------------
In % p.a. UZS USD EUR Other
--------------------------------------- --------- ------ -------- ------
Assets
Cash and cash equivalents - 0-7.3 - -
Due from other banks 0-19 0-7.3 - -
Loans and advances to customers 2-47.9 2-15 2.95-12 -
Investment securities measured
at amortised cost 15-20 - - -
Liabilities
Due to other banks 0-18 - - -
Customer accounts:
-term deposits 1-35 4-17 5-6 5
Debt securities in issue 5-18 6 - -
Other borrowed funds:
-International Financial Institutions 13-19.26 1-7 0.23-8 -
-Local Financial Institutions 0-16 0-7 - -
Subordinated debt 16 - - -
Other price risk . The Group is exposed to prepayment risk
through providing loans, including mortgages, which give the
borrower the right to early repay the loans. The Group's current
year profit or loss and equity at the current reporting date would
not have been significantly impacted by changes in prepayment rates
because such loans are carried at amortised cost and the prepayment
right is at or close to the amortised cost of the loans and
advances to customers. The Group has no significant exposure to
equity price risk.
Geographical risk concentration . The geographical concentration
of the Group's financial assets and liabilities at 30 June 2020
(unaudited) is set out below:
Uzbekistan OECD Non-OECD Total
---------------------------------------- ----------- ------------ ------------ -----------
Assets
Cash and cash equivalents 2,523,490 2,553,202 17,040 5,093,732
Due from other banks 1,489,630 401,156 80,464 1,971,250
Loans and advances to customers 35,899,587 - - 35,899,587
Investment securities measured at
amortised cost 1,085,853 - - 1,085,853
Financial assets at fair value through
other comprehensive income 88,981 11,277 - 100,258
Other financial assets 18,590 10,915 2,742 32,247
Total financial assets 41,106,131 2,976,550 100,246 44,182,927
Liabilities
Due to other banks 1,443,770 254,335 12,233 1,710,338
Customer accounts 10,443,821 - - 10,443,821
Debt securities in issue 134,680 3,005,702 - 3,140,382
Other borrowed funds 4,607,928 9,643,456 9,084,565 23,335,949
Other financial liabilities 27,013 - 33,087 60,100
Subordinated debt 82,708 - - 82,708
Total financial liabilities 16,739,920 12,903,493 9,129,885 38,773,298
Net balance sheet position 24,366,211 (9,926,943) (9,029,639) 5,409,629
Credit related commitments (Note
24) 2,727,123 - - 2,727,123
The geographical concentration of the Group's financial assets
and liabilities at 31 December 2019 is set out below:
Uzbekistan OECD Non-OECD Total
------------------------------------- ----------- ------------ ------------ -----------
Assets
Cash and cash equivalents 1,954,937 900,972 6,665 2,862,574
Due from other banks 1,661,265 301,531 74,294 2,037,090
Loans and advances to customers 30,039,785 - - 30,039,785
Financial assets at fair value
through other comprehensive income 78,376 10,338 - 88,714
Investment securities measured
at amortised cost 84,648 - - 84,648
Other financial assets 4,429 240 493 5,162
Total financial assets 33,823,440 1,213,081 81,452 35,117,973
Liabilities
Due to other banks 456,822 1,100 7,187 465,109
Customer accounts 9,123,970 - - 9,123,970
Debt securities in issue 111,907 2,808,987 - 2,920,894
Other borrowed funds 3,393,210 6,297,467 7,112,537 16,803,214
Other financial liabilities 24,025 - - 24,025
Subordinated debt 83,332 - - 83,332
Total financial liabilities 13,193,266 9,107,554 7,119,724 29,420,544
Net balance sheet position 20,630,174 (7,894,473) (7,038,272) 5,697,429
Credit related commitments (Note
24) 2,265,426 - - 2,265,426
Liquidity risk . Liquidity risk is defined as the risk that an
entity will encounter difficulty in meeting obligations associated
with financial liabilities. The Group is exposed to daily calls on
its available cash resources from overnight deposits, current
accounts, maturing deposits, loan draw downs, guarantees and from
margin and other calls on cash settled derivative instruments. The
Group does not maintain cash resources to meet all of these needs
as experience shows that a minimum level of reinvestment of
maturing funds can be predicted with a high level of certainty.
Liquidity risk is managed by the Resources Management Committee of
the Group.
The Group seeks to maintain a stable funding base comprising
primarily amounts due to other banks, corporate and retail customer
deposits and invest the funds in inter-bank placements of liquid
assets, in order to be able to respond quickly and smoothly to
unforeseen liquidity requirements.
The liquidity management of the Group requires considering the
level of liquid assets necessary to settle obligations as they fall
due; maintaining access to a range of funding sources; maintaining
funding contingency plans and monitoring balance sheet liquidity
ratios against regulatory requirements. The Group calculates
liquidity ratios on a monthly basis in accordance with the
requirement of the Central Bank of Uzbekistan. These ratios are
calculated using figures based on National Accounting
Standards.
The Treasury Department receives information about the liquidity
profile of the financial assets and liabilities. The Treasury
Department then provides for an adequate portfolio of short-term
liquid assets, largely made up of short-term liquid trading
securities, deposits with banks and other inter-bank facilities, to
ensure that sufficient liquidity is maintained within the Group as
a whole.
The daily liquidity position is monitored and regular liquidity
stress testing under a variety of scenarios covering both normal
and more severe market conditions is performed by the Treasury
Department.
When the amount payable is not fixed, the amount disclosed is
determined by reference to the conditions existing at the reporting
date. Foreign currency payments are translated using the spot
exchange rate at the statement of financial position date.
The undiscounted maturity analysis of financial instruments at
30 June 2020 (unaudited) is as follows:
Demand From From 6 From 1 From 3 Over Total
and less 1 to to 12 to 3 years to 5 years 5 years
than 6 months months
1 month
------------------- ---------- ---------- ---------- ------------ ------------ ---------- -----------
Liabilities
Due to other
banks 634,688 808,566 24,092 116,349 146,567 223,474 1,953,736
Customer accounts 6,489,652 692,304 858,269 504,086 2,039,288 718,791 11,302,390
Debt securities
in
issue 52,974 119,483 136,398 215,310 3,464,998 - 3,989,163
Other borrowed
funds 1,167,912 3,412,070 3,698,702 9,526,346 2,771,824 5,917,399 26,494,253
Other financial
liabilities 60,100 - - - - - 60,100
Subordinated
debt 2,708 6,453 6,347 25,600 25,635 89,626 156,369
Undrawn credit
lines 45,832 79,645 121,565 105,740 129,414 67,568 549,764
Guarantees
issued 128,767 217,304 88,104 - 72,078 1,372,441 1,878,694
Letters of
credit 40,618 67,502 190,545 - - - 298,665
Total potential
future payments
for financial
obligations 8,623,251 5,403,327 5,124,022 10,493,431 8,649,804 8,389,299 46,683,134
The undiscounted maturity analysis of financial instruments at
31 December 2019 is as follows:
Demand From 1 From 6 From 1 From 3 Over 5 Total
and less to 6 months to 12 to 3 years to 5 years years
than 1 months
month
------------------- ---------- ------------- ---------- ------------ ------------ ----------- -----------
Liabilities
Due to other
banks 53,788 81,476 36,490 133,361 173,742 267,468 746,325
Customer accounts 4,740,001 537,498 745,800 1,355,343 1,011,853 1,579,526 9,970,021
Debt securities
in
issue 25,410 103,327 123,698 194,725 3,282,366 - 3,729,526
Other borrowed
funds 1,075,611 1,559,551 2,028,916 4,143,930 3,099,972 7,473,794 19,381,774
Other financial
liabilities 24,025 - - - - - 24,025
Subordinated
debt 3,332 5,331 6,418 25,600 25,635 97,061 163,377
Undrawn credit
lines 5,364 110,495 69,517 59,854 36,597 15,937 297,764
Guarantees
issued 136,010 21,109 50,481 - 67,361 1,283,724 1,558,685
Letters of
credit 32,734 279,741 94,552 1,950 - - 408,977
Total potential
future payments
for financial
obligations 6,096,275 2,698,528 3,155,872 5,914,763 7,697,526 10,717,510 36,280,474
Liquidity requirements to support calls under guarantees and
standby letters of credit are considerably less than the amount of
the commitment disclosed in the above maturity analysis, because
the Group does not generally expect the third party to draw funds
under the agreement.
The total outstanding contractual amount of commitments to
extend credit as included in the above maturity table does not
necessarily represent future cash requirements, since many of these
commitments will expire or terminate without being funded.
The table below shows the maturity analysis of non-derivative
financial assets at their carrying amounts and based on their
contractual maturities, except for assets that are readily saleable
if it should be necessary to meet cash outflows on financial
liabilities. Such financial assets are included in the maturity
analysis based on their expected date of disposal. Impaired loans
are included at their carrying amounts net of impairment
provisions, and based on the expected timing of cash inflows.
The Group does not use the above undiscounted maturity analysis
to manage liquidity. Instead, the Group monitors expected
maturities which may be summarised as follows at 30 June 2020
(unaudited):
Demand From 1 From 6 From 1 From 3 Over 5 Total
and less to 6 months to 12 to 3 years to 5 years years
30 June 2020 than 1 months
(unaudited) month
----------------- ------------ ------------- ---------- ------------ ------------ ---------- -----------
Assets
Cash and
cash
equivalents 5,093,732 - - - - - 5,093,732
Due from
other
banks 289,148 359,221 161,512 755,515 - 405,854 1,971,250
Loans and
advances
to
customers 1,191,715 4,736,952 4,688,373 10,747,336 6,897,501 7,637,710 35,899,587
Investment
securities
measured
at
amortised
cost 21,549 314,561 699,745 47,558 - 2,440 1,085,853
Financial
assets
at fair
value
through
other
comprehensive
income - - - 100,258 - - 100,258
Other financial
assets 32,247 - - - - - 32,247
Total financial
assets 6,628,391 5,410,734 5,549,630 11,650,667 6,897,501 8,046,004 44,182,927
Liabilities
Due to other
banks 621,813 778,570 - 23,550 67,721 218,684 1,710,338
Customer
accounts 6,461,148 581,156 742,891 348,650 1,749,934 560,042 10,443,821
Debt securities
in issue 35,736 37,108 38,560 23,276 3,005,702 - 3,140,382
Other borrowed
funds 1,091,803 3,051,072 3,331,275 8,200,185 2,409,481 5,252,133 23,335,949
Other financial
liabilities 60,100 - - - - - 60,100
Subordinated
debt 2,708 - - - - 80,000 82,708
Undrawn credit
lines 45,832 79,645 121,565 105,740 129,414 67,568 549,764
Guarantees
issued 128,767 217,304 88,104 - 72,078 1,372,441 1,878,694
Letters of
credit 40,618 67,502 190,545 - - - 298,665
Total financial
liabilities 8,488,525 4,812,357 4,512,940 8,701,401 7,434,330 7,550,868 41,500,421
Net liquidity
gap (1,860,134) 598,377 1,036,690 2,949,266 (536,829) 495,136 2,682,506
Cumulative
liquidity
gap (1,860,134) (1,261,757) (225,067) 2,724,199 2,187,370 2,682,506
The Group does not use the above undiscounted maturity analysis
to manage liquidity. Instead, the Group monitors expected
maturities which may be summarised as follows at 31 December
2019:
Demand From From 6 From From Over 5 Total
and less 1 to to 12 1 to 3 to years
31 December than 1 6 months months 3 years 5 years
2019 month
------------------- ------------ ---------- ---------- ---------- ---------- ------------ -----------
Assets
Cash and cash
equivalents 2,862,574 - - - - - 2,862,574
Due from other
banks 412,400 305,773 170,616 698,730 3,572 445,999 2,037,090
Loans and
advances to
customers 1,556,366 4,000,702 3,156,815 8,496,128 6,125,037 6,704,737 30,039,785
Financial assets
at fair value
through other
comprehensive
income - - - 88,714 - - 88,714
Investment
securities
measured at
amortised
cost - - 82,144 - - 2,504 84,648
Other financial
assets 5,162 - - - - - 5,162
Total financial
assets 4,836,502 4,306,475 3,409,575 9,283,572 6,128,609 7,153,240 35,117,973
Liabilities
Due to other
banks 48,221 57,372 9,146 27,298 80,107 242,965 465,109
Customer accounts 4,710,833 430,187 629,544 1,202,836 694,959 1,455,611 9,123,970
Debt securities
in issue 10,311 31,286 38,750 31,560 2,808,987 - 2,920,894
Other borrowed
funds 1,029,026 1,339,792 1,801,274 3,414,962 2,599,136 6,619,024 16,803,214
Other financial
liabilities 24,025 - - - - - 24,025
Subordinated
debt 3,332 - - - - 80,000 83,332
Undrawn credit
lines 5,364 110,495 69,517 59,854 36,597 15,937 297,764
Guarantees
issued 136,010 21,109 50,481 - 67,361 1,283,724 1,558,685
Letters of
credit 32,734 279,741 94,552 1,950 - - 408,977
Total financial
liabilities 5,999,856 2,269,982 2,693,264 4,738,460 6,287,147 9,697,261 31,685,970
Net liquidity
gap (1,163,354) 2,036,493 716,311 4,545,112 (158,538) (2,544,021) 3,432,003
Cumulative
liquidity
gap (1,163,354) 873,139 1,589,450 6,134,562 5,976,024 3,432,003
The above analysis is based on remaining contractual
maturities.
As at 30 June 2020, the Bank was not in compliance with
cost-to-income ratio stipulated in the tripartite subsidiary loan
agreements between the Republic of Uzbekistan, the Rural
Restructuring Agency and the Bank #3471-UZB from April 2017 and
#3673-UZB from November 2018 as discussed in detail in Note 16. On
5 November 2019, the Republic of Uzbekistan confirmed to the Bank
in writing that it would not take any action to demand a prepayment
of the loans advanced to the Bank under the Subsidiary Loan
Agreements as a consequence of past and/or on-going non-compliance
with this covenant . In addition, the agreement between the Bank
and Ministry of Finance does not provide a definition of an event
of default. Therefore the Management considers the breach of the
covenant not to be an event of default and is currently in
discussions with Ministry of Finance on receiving a letter
confirming that this breach of the covenant is not considered to be
an event of default.
As at 30 June 2020, the Group had a cumulative liquidity
shortfall of UZS 1,860,134 million up to one month, which reflects
the effects of the decision to classify UZS 456,356 million as
"demand and less than 1 month" as a result of the non-compliance
with the covenant.
Although the Group does not have the right to use the mandatory
deposits held in Central bank of Uzbekistan for the purposes of
funding its operating activities, the Management classifies them as
demand deposits in the liquidity gap analysis on the basis that
their nature is inherently to fund sudden withdrawal of customer
accounts.
The matching and/or controlled mismatching of the maturities and
interest rates of assets and liabilities is fundamental to the
Management of the Group. It is unusual for banks ever to be
completely matched since business transacted is often of an
uncertain term and of different types. An unmatched position
potentially enhances profitability, but can also increase the risk
of losses. The maturities of assets and liabilities and the ability
to replace, at an acceptable cost, interest-bearing liabilities as
they mature, are important factors in assessing the liquidity of
the Group and its exposure to changes in interest and exchange
rates.
The Management believes that in spite of a substantial portion
of customer accounts being on demand, the fact that significant
portion of these customer accounts are of large state controlled
entities which are either the Group's shareholders or its entities
under common control and the past experience of the Group, indicate
that these customer accounts provide a long-term and stable source
of funding for the Group.
As part of liquidity risk management, the Group maintains a
contingency plan, periodically reviewed and adjusted, to be able to
withstand any unexpected outflow of customers and to respond to
financial stress. The contingency plan is developed primarily on
the basis of the Group's ability to access the State resources due
to its state ownership and strategic importance to the national
banking system of the Republic of Uzbekistan.
As at 30 June 2020, the contingency plan of the Group consisted
of the following:
- Attraction of long-term deposits of State funds under the
Ministry of Finance - Pension Fund, State Deposit Insurance Fund
and others;
- Attraction of budgetary funds up to one year through weekly
electronic bidding platform run by the State Treasury under the
Ministry of Finance;
- Utilization of the CBU's short-term liquidity loans;
- Attraction of deposits from inter-bank money markets within
the limits set by the local commercial banks.
Subsequent to the reporting date the Bank and Credit Suisse AG
agreed to increase credit line extended to the Bank by USD 150
million to finance the development of wholesale and retail trade
sector in the Republic of Uzbekistan.
Due the effects of the pandemic on the Uzbek economy and banking
sector, the State has announced and adopted various measures to
combat its negative impact. Among the measures taken by the CBU,
the following had direct and indirect impact on the Bank's
liquidity:
- The commercial banks were provided with additional liquid
resources as a result of easing the requirements for mandatory
reserves with the CBU. This measure has allowed the Bank to enjoy
additional liquidity;
- The CBU made available for the commercial banks a credit line
collateralized with mortgage loans and/or loans classified as
"standard";
- For regulatory and statutory purposes, the commercial banks
were allowed not to reduce the quality classification of the loans
restructured as a result of pandemic, which in turn allowed the
banks not to increase their impairment allowances;
- The CBU postponed the introduction of more stringent liquidity
requirements (in particular, liquidity coverage ratio - LCR) from
mid 2020 to 2021;
- Quarterly contributions to the State Deposit Insurance Fund
have been reduced from 0.25% to 0.05% starting from 1 July
2020.
The Management of the Group is of the view that through their
contingency plans the Group will be able to attract resources
sufficient to cover any potential negative liquidity gap as at 30
June 2020.
28. RELATED PARTY TRANSACTIONS
Parties are generally considered to be related if the parties
are under common control or one party has the ability to control
the other party or can exercise significant influence over the
other party in making financial or operational decisions. In
considering each possible related party relationship, attention is
directed to the substance of the relationship, not merely the legal
form. The Group applies a disclosure exemption regarding
Government-related entities, where the same Government has control
or joint control of, or significant influence over, both the Group
and the other entities, disclosed as "entities under common
control".
-- "Significant shareholders" - legal entities-shareholders
which have a significant influence to the Group through Government
;
-- "Key management personnel" - members of the Management Board and the Council of the Bank;
-- "Entities under common control" - entities that are
controlled, jointly controlled or significantly influenced by the
Government.
Details of transactions between the Group and related parties
are disclosed below:
30 June 2020 (unaudited) 31 December 2019
------------------------------------ ------------------------------
Related Total category Related Total category
party balances as per financial party as per financial
statements balances statements
caption caption
--------------------------------- ---------------- ------------------ ---------- ------------------
Cash and cash equivalents
- entities under common control 1,626,621 32% 1,291,956 45%
Due from other banks
- entities under common control 1,279,874 65% 1,444,897 71%
Loans and advances to customers
- key management personnel 204 0% 166 0%
- significant shareholders 4,274,483 12% 3,767,645 13%
- entities under common control 9,873,904 28% 9,262,723 31%
Investment securities measured
at
amortised cost
- significant shareholders 932,534 86% - -
- entities under common control 150,875 14% 84,648 100%
Financial assets at fair value
through other comprehensive
income
- entities under common control 91,018 90.78% 6,903 8%
Other Assets
- significant shareholders 12,979 3.52% - 0%
Due to other banks
- entities under common control 1,402,655 82% 515,690 111%
Customer accounts
- key management personnel 285,636 3% 1,265 0%
- significant shareholders 4,657,306 45% 363,226 4%
- entities under common control 673,550 6% 4,310,188 47%
Debt securities in issue
- entities under common control 32,200 1% 32,320 1%
- significant shareholders 500 0% - 0%
Other borrowed funds
- significant shareholders 4,511,552 19% 1,299,160 8%
- entities under common control 86,920 0% 2,088,610 12%
Other liabilities
- significant shareholders 85 0% 76 0%
- entities under common control 34,286 31% 42,683 92%
Subordinated debt
- entities under common control 82,708 100% 83,332 100%
Six months ended Six months ended
30 June 2020 (unaudited) 30 June 2019 (unaudited)
------------------------------------ ------------------------------
Related Total category Related Total category
party balances as per financial party as per financial
statements balances statements
caption caption
-------------------------------------- ---------------- ------------------ ---------- ------------------
Interest income
* key management personnel 9 0% 26 0%
* significant shareholders 125,212 8% 286,659 28%
* entities under common control 208,791 14% 46,887 5%
Interest expense
* key management personnel (24) 0% (80) 0%
* significant shareholders (128,251) 17% (250,771) 50%
* entities under common control (135,667) 18% (29,537) 6%
Provision for/(recovery of)
credit losses on loans and
advances to customers
* significant shareholders (14,116) 3% 4,011 -2%
Fee and commission income
* significant shareholders 17,083 11% 28,742 18%
* entities under common control 24,430 15% 11,738 7%
Net gain from trading in
foreign currencies
* significant shareholders 17 0% 118 1%
* entities under common control 2,035 8% 546 7%
Other operating income
* significant shareholders - 0% 271 4%
* entities under common control 75 4% 25 0%
Administrative and other
operating expenses
* key management personnel (1,540) 1% (1,193) 1%
* entities under common control (38,142) 14% (22,485) 11%
The Group enters into transaction with other government related
entities in the normal course of business.
Key management compensation is presented below:
Six months Six months
ended 30 ended 30
June 2020 June 2019
(unaudited) (unaudited)
------------------------------- ------------- -------------
Salaries and other benefits 1,222 697
Bonuses - 452
Social security contributions 317 44
Total 1,539 1,193
29. EVENTS AFTER THE END OF THE REPORTING PERIOD
During July, August and October 2020, Bank's subsidiary PSB
Capital has sold four of its subsidiaries (Urganch Technoparks)
that were classified as non-current assets held for sale as of
reporting date for total amount of UZS 23,256 million with payment
due within 30 days of contract date.
On 8 July 2020, the Government reinstated significant
restrictions on the movement of vehicles and closed non food
shopping malls, markets, parks, cafes, restaurants and
entertainment venues in response to a surge of new COVID-19 cases
in the country. These restrictions were lifted on 15 August
2020.
In July 2020 the Bank and Credit Suisse AG agreed to increase
credit line extended to the Bank by USD 150 million to finance the
development of wholesale and retail trade sector in the Republic of
Uzbekistan.
In September 2020, the CBU reduced the refinancing rate from 15%
to 14% which may lead to attraction of funding and their
reinvestment into loans and advances to customers at lower
rates.
In September 2020 Group's subsidiary Xorazm Nassli Parranda LLC
has bought back its share of 57.2% from the the Group based on the
share selling agreement for the amount of UZS 3,975 million.
In September 2020 Steel Property Construction, LLC has bought
back its share 7.1% from the Group for total consideration of UZS
58,280 million. As of 30 June 2020 this investment was classified
as f inancial asset at fair value through other comprehensive
income .
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END
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