INVESTOR PRESENTATION - SEPTEMBER 2021 - International Investment Bank
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INVESTOR PRESENTATION SEPTEMBER 2021
K E Y FA C T S I .
STATUS - MULTILATERAL DEVELOPMENT BANK MEMBER STATE COMPOSITION
(MDB) Bulgaria, Cuba, Czech Republic, Hungary, KEY FINANCIAL INDICATORS
IIB was founded in 1970 as an MDB with special status, Mongolia, Romania, Russian Federation, Slovak
based on intergovernmental agreement (registered Republic and Vietnam. 2017 2018 2019 2020 1H2021
with the UN). Assets
1,096.0 1,194.4 1,359.0 1,621.0 1,711.9
SPECIAL STATUS IN MEMBER STATES (EUR m)
Since 2019, IIB is headquartered in CEE – Budapest,
Equity
Hungary. IIB is not subject to national regulation and does 395.7 376.0* 408.1 454.6 447.5
(EUR m)
IB is one of the oldest development banks in the world. not require a banking license. Net Interest
2.5% 2.2% 1.8% 1.2% 1.4%
On July 10, 2020 the Bank celebrated its 50th Margin**
anniversary. For official purposes of IIB, VAT exemption is
Equity / Assets 36.1% 31.5% 30.0% 28.0% 26.1%
applied.
According to the current IIB Development Strategy Total capital
37.8% 34.4% 34.6% 33.7% 31.75%
2018-2022, IIB’s mission is “Facilitating connectivity IIB is exempt from customs duties on export and adequacy
and integration between the economies of the Bank’s import.
Basel leverage
Member States in order to ensure sustainable and 32.9% 28.2% 27.15% 25.5% 25.9%
IIB’s assets and transactions are immune from any ratio
inclusive growth, competitiveness of national
economies, backed by the existing historical ties”. national regulation (including but not limited to
taxes, fees and charges), with exception for Net Loans
The Bank finalized a large-scale institutional reform 664 754 884 1,028 1,095
immunities waiver in terms of bond issuances and (EUR m)
through the adoption of Protocol amending the
Agreement Establishing the International Investment other debt instruments.
Bank and its Charter, which entered into force on 18 NPL ratio 4.5% 1.9% 1.6% 2.4% 2.4%
August, 2018. The main changes introduced are:
transition from a two-tier to a three-tier corporate
governance system; Source: Audited Consolidated IFRS Financial Statements 2017-2020, Interim condensed consolidated financial
statements 1H2021
implementation of a “proportionate” system of * Decrease in the Bank’s equity is linked to the creation of reserves based on IFRS9
voting and a double majority rule; ** Including cross-currency interest-rate SWAP
increase of the authorised capital from EUR 1.3 bn
to EUR 2 bn.
1
1
K E Y FA C T S I I .
HIGH LEVEL OF SUPPORT FROM MEMBER STATES
During the process of obtaining its first credit rating (2013), IIB’s paid-in capital amounts to EUR 380.5 m (as of August 2021)
Member States have addressed the Bank with “comfort letters”, whereas the combined share of European countries in the paid-in
endorsing their support for IIB’s initiatives. capital is 51.42%, Russia’s share is 44.85 %, Asian countries’ share
(Vietnam and Mongolia) is 1.85% and Cuba’s share is 1.88%.
In 2017 the Bank`s Member States unanimously approved a new IIB
Development Strategy for the period of 2018-2022.
At the 1st Board of Governors meeting on December 4, 2018 in HIGH LEVEL OF FINANCIAL STABILITY
Varadero, Cuba, Member States approved the following strategic
Robust capital adequacy (1H2021 total capital adequacy ratio at
issues that provide necessary conditions for achievement of
31.75%).
ambitious growth indicators, including the possibility of expansion
of shareholders composition: Sustainable financial leverage.
- Relocation of the Bank’s Headquarters to Budapest; Diversification of the loan portfolio by sectors and countries, as well
- Capitalization Program for the purpose of implementation of as, diversification of treasury assets and long term funding (by
Development Strategy that implies the increase of paid-in geographies, investors, maturities, currencies, products), ensuring the
capital from current shareholders in the total amount of EUR Bank’s 12-month surviving horizon, as one of COVID-response package
200 m (distributed over the years 2020-2022). measures.
The Bank has a transparent mechanism of callable capital, which Conservative risk policy and liquidity management.
amounts to EUR 744 m as of August 2021.
2
2
KEY STRENGTHS
I. IIB is an A rated institution under Basel rules owing to Also, an IIB branch has been established in VII. The Bank has a conservative risk management policy:
solid investment grade credit ratings from Moody‘s Moscow (focusing on Russian, Mongolian, NPL ratio stood at 2.4% as of 1H 2021, and since the
(A3), S&P (A-), Fitch (A-) and ACRA (A on international Cuban and Vietnamese markets) and running Bank's relaunch in 2012 the NPL ratio has always
scale and AAA(RU) on national scale. Since the the support functions such as back office remained below 5%.
beginning of this year, three rating agencies have operations.
already taken action with regard to IIB. On 31 March VIII. IIB had successfully achieved a very low weighted
2021, S&P Global affirmed long-term rating of III. The loan and documentary portfolio reached EUR average EUR cost of funding for the bonds issued so
International Investment Bank at “A-” with a stable 1,139 million with over EUR 400 million in the pipeline far under MTN in 2021 of just 12.7bps by issuing a
outlook. S&P underlined that IIB managed to improve at various stages of assessment. IIB pays special total volume of EUR 213m. The Bank recorded its first
its capital adequacy thanks to the additional attention to projects with an integration effect that are ever negative EUR interest rate for its last two
capitalization program and paid-in capital implemented in the interest of two or more transactions (RON and CZK) and its longest ever
installments from member states executed in 2020 shareholder countries. As of 1H 2021, such initiatives maturity by issuing a 20-yr EUR 30 m PP in January.
within its framework. In April 2021, ACRA affirmed A accounted for more than 29% of the loan portfolio.
rating to International Investment Bank, outlook IX. The Bank has pursued the same prudent approach
Stable, under the international scale and AAA(RU), IV. Clearly defined Strategy 2018-2022, unanimously started last year in the pandemic context through the
outlook Stable, under the national scale for the approved by Member States, backed up by relevant 12m survival liquidity management policy.
Russian Federation. The agency also affirmed Capitalization Program to achieve a substantial growth
AAA(RU) to the IIB bond issues. On August 18th, Fitch of assets and loan portfolio.
affirmed IIB’s A- rating with a stable outlook “driven
by 'excellent' capitalization, robust liquidity and a V. IIB is open to new members and planning to expand its
stable business environment” shareholder structure to strengthen it’s capital base
and identify new, sound financing opportunities.
II. The Bank had successfully relocated its Headquarters
from Moscow to Budapest in order to support the VI. Broad geographical diversification of investments
active development of IIB on the European territory. among IIB’s Member States, led by EU States countries,
This was an important milestone of already ongoing achieving its share in the Loan and Documentary
process of Europeanization of the Bank. Portfolio exceeding 60% while the share of EU markets
in the total funding is 65%, as of 1H 2021.
3
3
M E M B E R S TAT E S
SHARE OF PAID-IN CAPITAL
as of August 2021
MEMBER STATES EUR, million %
EU members 195.62 51.42
Hungary 65.50 17.22
Republic of Bulgaria 42.20 11.10
Czech Republic 37.37 9.82
Romania 26.10 6.86
Slovak Republic 24.43 6.42
Others 184.90 48.58
Russian Federation 170.67 44.85
Republic of Cuba 7.17 1.88
Socialist Republic of 3.67 0.96
Vietnam
Mongolia 3.39 0.89
Total 380.52 100.00
In May 2015 Hungary rejoined the IIB.
Diversity of Member States – from G20 and EU members to rapidly growing Asian markets. In accordance with the new IIB Statutory Documents, the Bank uses
“double majority” voting system, ensuring proper voting powers for members with smaller shares in paid-in capital.
Overall territory of operations – approx. 19.6 million km² with a total population of more than 290 million people, a bridge for investments and trade between its
Member States on three continents
There are current ongoing active negotiations with one new potential shareholder that would fit well to the current shareholding group.
4
4
C O R P O R AT E G O V E R N A N C E S T R U C T U R E
Countries or international financial entities who share the goals and
principles that guide the Bank’s activities can become members of the
Bank, subject to corresponding obligations.
BOARD OF
GOVERNORS
Board of Governors is the supreme collective governing body of the Bank, and consists of authorized representatives of countries, drawn from the highest-ranking officials of Member States. The Board of Governors
identifies the general activities of the Bank and the development strategy, resolves to accept new members to the Bank, open offices and branches, as well as takes other fundamental decisions, in compliance with
the Bank’s Statutory Documents.
BOARD OF
DIRECTORS
HR AND The Board of Directors is a collective governing AUDIT
COMPENSATIONS body that consists of representatives, nominated
by the Bank’s Member States. This body is COMMITTEE
COMMITTEE
responsible for the general management and
oversight of the Bank’s operations and policies.
An advisory body under the Board of Directors, The Audit Committee (AC) is a governing body
The BoD reports to the Board of Governors.
whose main function is to control the observance composed of Member States’ representatives and
of staff-related policies, rules and procedures at responsible for auditing of the Bank's activities.
the Bank considering the issues regarding the AC reports both to the Board of Directors and to
Bank employees and their remuneration. MANAGEMENT the Board of Governors.
BOARD
The Management Board is the executive body of the Bank, appointed by the BoG, and is responsible for day-to-day management of the activities of the Bank in compliance with the Statutory
Documents, and resolutions of the Board of Directors and the Board of Governors. In accordance with the Key Principles of Management Board Composition approved at the 1st meeting of the
BoG on December 4, 2018 the members of the Management Board are appointed by the BoG with consideration of the recommendations of the HR and Compensations Committee on a
competitive basis through an independent assessment of their qualifications and conformity with the Bank’s requirements (merit-based principle). The Management Board shall include citizens
of at least four Member States of the Bank.
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5
S T R AT E G I C O V E R V I E W
RELAUNCH STRATEGY 2013-2017 DEVELOPMENT STRATEGY 2018-2022 LONG-TERM VISION PERSPECTIVE
CURRENT STAGE UNTIL END 2032
2013-2017 period for IIB can be characterized by: MISSION: facilitating connectivity and integration By the end of 2032 the Bank should become:
between the economies of the Bank’s Member States in ■ A medium-sized development bank in its target
■ Substantial increase of assets (3-fold) reaching EUR 1096 m at order to ensure sustainable and inclusive growth, geographical areas with a broad product and service
end of 2017, and loan and documentary portfolio reaching EUR
712 m
competitiveness of national economies, backed by the offering
existing historical ties. ■ A full-fledged player in Member States and in the global
■ Obtaining investment grade credit ratings from three leading
community of international development institutions
international rating agencies
By the end of 2022, IIB aims to: ■ A major platform providing financial, foreign trade and
■ Issuing bonds and other debt instruments in Member States,
■ Raise total assets to EUR 1.7 bn and expand the loan portfolio to investment ties between Member States and their
both in euros and national currencies (RON, RUB, CZK, EUR as
EUR 1.2 bn based on new capital and increase of volume of companies
national currency of Slovak Republic)
bond issuances, including denominated in local currencies of
■ An attractive strategic investment target
■ Building an advanced risk, assets/liabilities management and the member-states
compliance control systems ■ To deliver measurable development effect for Member
■ Become an acclaimed niche lending institution capable of
States
■ Expanding the Bank’s product offering through direct funding, executing medium-sized projects to promote the development
intermediated financing, trade financing products and bank of the Member States’ national economies
guarantees; ■ Put forward a recognizable value proposition on the markets of
■ Phasing in a three-tier corporate management system Member States, play a prominent role in supporting financial
transactions both between them and third countries, which
■ Restoring Hungary’s membership with the IIB, and opening a includes funding export/import operations and investment
European Regional Office in the Slovak Republic
■ Run a partnership network in each Member State on the basis
■ Increasing the Bank’s recognition on international markets of long-term mutually advantageous relationships
■ Implementing corporate social responsibility principles ■ Achieve and maintain long-term financial sustainability
■ Building a qualitatively new organizational structure ■ Demonstrate sustainable profitability through its core activity
6
6
I I B R AT I N G S
IIB PROVED GREAT RESILIENCE THROUGHOUT IIB IS AN “A” RATED INSTITUTION BY ALL
COVID WITH 7 HOLDS & 1 UPGRADE AGENCIES
S&P (March 2021) – Rating Affirmation
INTERNATIONAL
“The stable outlook balances the risks of a modest asset quality deterioration in IIB's RATING OUTLOOK RATING DATE
RATINGS
concentrated and private-sector-focused loan book against the bank's extremely strong
capital adequacy. It further reflects our expectation that IIB will benefit from its increasingly
diverse funding options alongside scheduled capital injections from shareholders to support Moody’s A3 Stable 15 May 2020
its expansion agenda over the next 24 months.”
S&P A- Stable 30 March 2021
Moody’s (April 2021) – Annual Credit Analysis
“The credit profile of International Investment Bank (IIB, A3 stable) is supported by the
bank's strong capital adequacy, which reflects sustained increased in paid-in capital under Fitch A- Stable 18 August 2021
the 2020-22 capitalization programme, improvements in the quality of development and
treasury assets, and ample callable capital from investment-grade rated shareholders. As we
had expected, IIB's loan portfolio continued to diversify following the relocation of its ACRA A Stable 12 April 2021
headquarters to Budapest (Baa3 positive) from Moscow (Baa3 stable) in mid-2019. The
move has also helped to lower IIB's funding costs”
Fitch (August 2021) – Rating Affirmation
“The ratings of IIB reflect its Standalone Credit Profile (SCP) of 'a-', which is driven by
'excellent' capitalization, robust liquidity and a stable business environment. The bank
continues to increase and diversify its lending operations and shareholding structure across
the EU following the relocation of its headquarters to Budapest from Moscow in 2019.”
7
7
2020-2022 IIB 3-Y BUSINESS PLAN
Other assets
ASSETS STRUCTURE Treasury assets
IIB IS MAINTAINING ITS OUTLOOK FOR 2020-2022 IN SPITE OF COVID Net loan portfolio
6% 7% 8% 6% 5%
2021 25%
KEY TARGET INDICATORS 2018 2019 2020 2021 H1
Budget
2022F 31% 28% 29% 26%
68% 70%
63% 65% 63%
Total assets (EUR m) 1 194 1 359 1 621 1712 1 694 1 727
Net Loan portfolio (EUR m) 753 884 1 028 1095 1 144 1 202
Share of EU in Loan portfolio (%) 50% 54% 65% 63% 55 to 60% 55 to 60% 2018 2019 2020 2021 2022
Share of Treasury assets in total assets (%) 31% 28% 29% 30% 26% 25% LOAN PORTFOLIO DIVERSIFICATION
10% 5% 5% 4%
15%
Share of A-AAA rated Treasury assets* (%) 57% 70% 68% 84% 70% 75%
55% to 55% to
Basel II CAR (min. 25%) (%) 34% 35% 33.7% 31.75% 37.4% 38% 50% 54% 65% 60% 60%
NPL to Total Outstanding Loans (%) 1.9% 1.6% 2.4% 2.4% 1% to 3% 1% to 3%
35% 36% 35% to 35% to
30% 40% 40%
Source: Audited Consolidated IFRS Financial Statements 2018-2020, Interim condensed consolidated financial statements 1H2021
2020-2022 IIB 3-Y Business Plan
* Treasury assets incl. securities portfolio, cash and cash equivalents, deposits
2018 2019 2020 2021 2022
Third Countries EU Non-EU Member State
8
8
BALANCE SHEET AND P&L
Y2020 1H2021 1H2020 1H2021
(EUR million) (EUR million)
Actual Actual Actual Actual
Assets 1,621 1,712 Interest income 33.4 35.3
Earning assets 1,553 1,642 NOSTRO, deposits with fin. institutions 0.1 0.0
Cash and equivalents 86 166 Loans portfolio 20.8 22.5
Deposits with financial institutions 29 29 Securities portfolio 3.2 2.8
Financial instruments @FVTPL 19 12 Cross-currency derivatives 9.2 10.0
Securities portfolio 355 305 Interest expenses (23.1) (24.0)
Net Loan portfolio 1,028 1,095 Customer accounts (0.1) (0.2)
Loan portfolio - gross 1,036 1,104 Short-term loans (0.3) (0.3)
Provision for possible loan losses (8) (8) (0.9)
Long-term loans (1.0)
Investments in subsidiaries 0 0
Debt securities issued (16.2) (18.6)
Investments in funds 1 2
Cross-currency derivatives (5.4) (4.0)
Investment property 33 33
Net interest income before provisions 10.3 11.3
Fixed, intangible and other assets 70 71
(Charge)/Dissolution of provisions (2.0) 0.2
Fixed and Intangible assets 66 67
Net interest income after provisions 8.3 11.5
Other assets 2 3
Equity and liabilities 1,621 1,712 Net losses from FX and derivatives (1.2) (3.0)
Liabilities 1,166 1,265 Net gains from operations with securities 5.5 2.8
Customer accounts 13 14 Net gains from loan sale 0.0 2.3
Due to banks and other financial institutions 224 160 Net fee and commission income 0.9 0.5
Short-term interbank loans 147 82 Net gains from operations with property 1.8 1.1
Long-term interbank loans 77 79 Net other income/(expense) (2.0) 0.5
Financial liabilities @FVTPL 40 41 Operating profit 13.3 15.7
Debt securities issued 877 1,036 General and administrative expenses (7.4) (7.6)
Other liabilities 13 13
Expenses on depreciation of fixed assets and intangible assets (0.9) (0.9)
Equity 455 447
Paid-in capital 379 379 Net income 5.0 7.2
Revaluation reserves 16 3
Source: Consolidated financial statements for 2020 and Interim condensed consolidated
Fixed assets revaluation reserve 8 9
financial statements 1H2020 and 1H2021
Securities revaluation reserve 8 5
Cash flow hedge reserves 0 (11)
Retained earnings 59 67
9
9RISK MANAGEMENT
Explanatory notes
Indicator 2021 Target 2019 2020 1H 2021
■ Capital adequacy ratio decreased to 31.75% in 1H 2021 from 33.7% in 2020. The risk-
Maintaining the capital adequacy ratio of at least
Capital adequacy 34.6% 33.7% 31.75% weighted assets rose by 4.2%, while the regulatory capital was down by 1.7%, due to a
25%.
reduction in Tier 2 capital.
Maintaining the liquidity coverage ratio (LCR) of
187.8% 834.7% 1152.9%
Liquidity at least 100%.
adequacy Maintaining the net stable funding ratio (NSFR) of ■ Liquidity ratios substantially improved and stand at sufficient levels. The main driving
121.7% 112.2% 121.8% force of the Bank’s liquidity profile improvement is robust liquidity management. As a
at least 100%.
Fitch BBB+ A- A- result of the continuously undertaken measures, the Bank can fund firmly committed
The credit rating is not below loans solely by disposable liquidity (primary and secondary buffers) throughout 12
IIB’s credit rating investment grade (BBB- for Fitch, Moody’s A3 A3 A3
months.
S&P; Baa3 for Moody's).
S&P A- A- A-
The capital to cover the credit risk does not
63.0% 61.8% 65.0% ■ Successful management of NPLs, which remain comfortably at 2.4% of the loan portfolio.
exceed 70%.
Credit risk Single borrower (or related party) exposure does
22.0% 21.5% 23.5% ■ Capital to cover market risks was down to 11.2% of the Bank’s Tier 1 capital (12.6% - EY
not exceed 25% of the capital.
2020) driven mainly by the bond portfolio’s risk weighted assets decrease by 10.9% (-
Non-performing loans (NPL) do not exceed 6.0% 19.1 m EUR) to 155.8 m EUR (sale of long-term government bonds). The share of bonds
1.6% 2.4% 2.4%
of the loan portfolio. with an investment rating (BBB- or higher) in the Treasury portfolio raised to 96.7% from
The Capital used for the coverage of market risk 93.0% (EY 2020).
Market risk 9.6% 12.6% 11.2%
does not exceed 20%.
The capital to cover the operational risk does not
0.9% 0.9% 0.9% ■ Capital to cover the Bank’s credit risk grew to 65% from 61.8% of Tier1 capital. As of 1H
Operational and exceed 1%.
2020, the share of loan portfolio in credit risk weighted assets amounted to 87.8%
other risks The total operating losses should not exceed EUR
0 0 0 (89.0% - EY2020).
2,0 m.
Tier 1 capital to bank assets (including balance ■ The Basel leverage ratio declined to 25.0% from 25.5% as the Bank's balance sheet assets
Basel leverage
sheet and off-balance sheet items) ratio must be 27.2% 25.5% 25.0%
ratio went up as a result of the Bank’s anti-Covid-19 strategy aimed at improving liquidity
more than 25%.
profile (primary and secondary buffers).
10
10CREDIT RISK
■ Accelerated shift to higher quality deals proven by a change in Distribution by counterparties internal rating Concentration by sector
internal rating composition with the share of strong category to
25% from 20% and the appearance of counterparties in the Very 0% 5% 10% 15% 20% 25% 30%
strong category 23.1%
Finance 27.7%
■ Share of European deals was down to 62.0% from 63.7% due to 42%
Electricity 21.2%
purchase of the Russian blue chips. 16.9%
36%
Telecom 7.6%
■ Loan & documentary portfolio concentration ratios (TOP-5) shrunk 7.3%
7.0%
to 31.4% from 33.4% (EY 2020). Likewise, TOP-10 concentration Auto industry 6.8%
25% 26%25%
went down to 49.6% from 51.4%. Real estate 6.8%
6.5%
20%
■ The share of the financial sector increased to 27.7% from 23.1% Wholesale and retail trade 6.1%
5.7%
12%12% Oil refining 5.9%
5.6%
Loan and documentary portfolio concentration
Mining & Metal industry 5.0%
2020 1H 2021 4.4%
Amount, Amount, Gas transportation and storage 4.8%
Concentration, % Concentration, % 1% 5.9%
EUR m EUR m 0% 0%
Textile production 2.9%
Total 1 080.9 1 147.4 2. Very 3. Strong 4. Good 5. Fair 6. Special 7. Expected 2.7%
strong attention loss Healthcare 1.9%
TOP-5 361.1 33.4% 360.6 31.4% EY2020 1H2021 3.6%
TOP-10 556.0 51.4% 569.5 49.6% Agriculture 1.7%
1.5%
Concentration by risk group Pharmaceutical 1.2%
1.1%
(EU countries segment decreased to 62.0% from 63.7%) External ratings 1.1%
Rating category Internal ratings Road construction and maintenance
Risk group equivalent 1.1%
Countries in the group 2020 1H 2021 1.0%
(BICRA)* 1. Excellent AAA - AA- A1-A3 Hotel service 1.0%
A Cuba 39.5 3.7% 40.6 3.5% Beverage and food production 1.0%
2. Very strong A+ - A- A4-A6 0.7%
Vietnam, Russia, Belarus, Transport 0.5%
B 352.3 32.6% 395.9 34.5% 3. Strong BBB+ - BBB- A7-A9 0.4%
Mongolia 0.5%
4. Good BB+ - BB- B1-B3 Utility services 0.4%
Bulgaria, Hungary, Romania,
C 389.2 36.0% 377.6 32.9% 5. Fair B+ - B- B4-B6 0.4%
Cyprus Delivery service 0.4%
Slovak Rep, Czech, Spain, 6. Special attention CCC+ - CCC- C1-C3
D 299.9 27.7% 333.4 27.7% Paper production 0.3%
Luxembourg, Germany
* A –very high, B – High, C – medium, D - Low 7. Expected loss CC - D SD-D EY2020 1H2021
11
11STRUCTURAL MEASURES AND KEY RISK ACTIVITIES
CREDIT PORTFOLIO MANAGEMENT LIQUIDITY MANAGEMENT
Since the beginning of the year and especially as the COVID-19 hit economies Stress-resilient liquidity management was slightly revised to reflect gradual recovery of the economic followed
globally, there has been an increased focus on the following: by slowdown of the COVID-pandemic.
Strengthening monitoring of high-risk clients, potentially more exposed to — Primary emergency liquidity buffer solely free in cash, created to absorb sudden unpredictable outflows at
headwinds originating from COVID-19 and in need of restructuring any time revised from EUR 70 m to EUR 50 m.
measures, including covenant waivers, rescheduling of payments and — Secondary emergency buffer comprised of high-rated unencumbered securities portfolio (mostly ECB eligible
postponement of collateral checks due to travel restrictions. and high quality liquid securities acceptable for the REPO counterparts) shaped to maintain sufficient
liquidity cushion revised from EUR 100 m to EUR 120 m.
The most risky clients in the Bank’s portfolio were grouped into two
categories: high and medium risk The clients within the high risk group, — 12M Granular cash-inflow-outflow model, aimed at magnifying the liquidity management framework, is
which are more exposed to headwinds originating from COVID-19, were delivered on a monthly basis (previously, on a two-week basis).
subject to stricter monitoring. Some of them required additional support As a result of the continuously undertaken measures, the Bank can provide firmly committed loans basing solely
from the Bank in the form of loan renegotiation and other amendments on disposable liquidity (primary and secondary buffers) throughout 12 months.
(e.g. on collateral checks, covenants, etc.). The share of the restructured Market Early Warning System revision (MEWS)
loans was 6.8% of the total loan and documentary portfolio. To calibrate the MEWS’s sensitivity to the current market situation, the Bank has revised the levels that
Freezing of trade finance operations in the IIB’s riskier countries (Belarus, indicate the potential onset of instability and subsequent high volatility in the financial and money markets.
etc.) to reduce the Bank exposure to excessive tail-risks. Recalibration of Macro-Economic Models under IFRS9 for 4 macro-regions
Implementation of S&P’s Global market intelligence solutions for corporates, Taking into account the macroeconomic implications of the COVID-19 pandemic, its recovery shape and
FIs, and project finance allowed the IIB to: possible next wave, the Bank aimed to improve the macro model’s predictive power, achieve a sensible level of
statistical stability (R2=~80%) and calibrate its impact on provisions to the reasonable extent.
align its risk analytical accuracy to the best industry standard (Standard
and Poor’s methodologies);
affirm the average quality of its credit portfolio at BB-; Interest Rate Risk of the Banking Book (IRRBB)
optimize provisions, as well as through IIB’s internally developed The Risk Management has introduced the IRRBB management framework, including limits for the key
macroeconomic model, through a more granular and precise calculation of operational currencies, which has been operating in test mode over the current year. The system is used to
internal credit ratings. manage current and prospective risk to the Bank’s capital and earnings arising from adverse movements in
interest rates that affect the Bank’s banking book positions
12
12P R O F I TA B I L I T Y M E T R I C S & C O S T O F B O N D I S S U A N C E S
NET PROFIT AND NET INTEREST INCOME IIB’S CREDIT SPREAD DEVELOPMENT VS BENCHMARKS FOR EURO-DENOMINATED
BONDS INCLUDING BONDS SWAPPED INTO EURO
23.6
21.8 22.2
17.4
EUR m
12.7
11.3
9.8
8.9
7.37.2 7.2
5.6 5.7 5.3
5.05.1
3.4
1.0
2017 2018 2019 1H2020 2020 1H2021
Net profit Net interest income Net interest income including hedging*
Source: Audited Consolidated IFRS Financial Statements 2017-2020, Interim condensed
consolidated financial statements 1H2020 and 1H2021
Weighted average interest rate of the Bank’s loan portfolio was
recorded at 4.1% (incl. CCY IRS, before provisions) as of 30 June 2021.
Weighted average maturity of the IIB’s loan portfolio (residual) was
recorded at 6.0 years as of 30 June 2021.
Progressive decrease in the cost of funds reflects the improvement of Source: Management reporting 2014-2021
the Bank's credit ratings.
Progressive decrease in the cost of funds reflects the improvement of the Bank's credit ratings and its position as
a high-quality recurring issuer on Member States’ markets. 13
13F U N D I N G S T R U C T U R E A N D O V E R A L L C A P I TA L I Z AT I O N L E V E L
FUNDING STRUCTURE CAPITAL ADEQUACY RATIO
Other liabilities Revaluation fund and unallocated profit
50.0%
Capital adequacy ratio
Paid-in capital Long-term liquidity
45.0%
Tier I capital adequacy ratio
Short-term attracted funds
40.0% 37.9%
12.0 59.6 36.5% 34.4% 34.6%
77.6 160.0 95.9 33.7%
35.0%
33.7% 33.2% 32.5% 31.8% 31.6%
30.0%
IIB Board of Directors required
minimum ≥ 25%
666.8
681.0
25.0%
850.3 1,114.7
953.5
20.0%
15.0%
Basel Total CAR
10.0%
minimum ≥ 8%
315.0 326.0 339.6 378.7 378.7 5.0%
80.6 50.0 68.5 75.9 68.8
21.6 59.8 41.1 52.9 53.8 0.0%
2017 2018 2019 2020 1H2021 2017 2018 2019 2020 1H2021
Source: Audited Consolidated IFRS Financial Statements 2017-2020, Interim condensed Source: Audited Consolidated IFRS Financial Statements 2017-2020, Interim condensed
consolidated financial statements 1H2021 consolidated financial statements 1H2021
Equity amounted to EUR 447.5 m as of 30 June 2021, and comprised of paid-in capital IIB maintains capital levels well in excess of the minimum requirements recommended by
(EUR 378.7 m), reserves (EUR 1.9 m) and retained earnings and net income the Basel Committee. As of June 30, 2021, IIB’s CAR calculated in line with Basel Capital
cumulating (EUR 66.9 m). Accord (Basel II) were:
Total CAR: 31.75%
As of August 2021, the authorized capital of the Bank of EUR 2 bn comprises the paid-
Tier I CAR: 31.6%
in capital of EUR 380.5 m and the unpaid capital amounts of EUR 1,619.5 m, divided
between callable capital amounting to EUR 744 m and unallocated portion of the IIB‘s internal risk policies stipulate maintaining of a conservative total capital adequacy ratio
Bank’s authorized charter capital totaling EUR 875.5 m. of not less than 25%
14
14ASSETS BREAKDOWN
TOTAL ASSETS AND NET LOANS ASSETS BREAKDOWN
Total assets Net loans Treasury assets Net loans portfolio Investment property Other assets
1,712
1,621 4%
7% 6% 5% 6%
1,359 2% 2% 3% 2% 2%
1,194
1096 1,028 1,095
EUR, ,m
884 61% 63% 65% 63% 64%
753
664
30% 29% 28% 29% 29%
2017 2018 2019 2020 1H2021 2017 2018 2019 2020 1H2021
LOAN PORTFOLIO REGIONAL DIVERSIFICATION
15% 11% 9% 8%
17%
15% 14% 14%
13% 16% IIB has supported the European Investment Fund (EIF) in
13% 15% the launch of a regional fund-of-funds initiative focused
20%
26% 20% on boosting equity investments in Austria, Czech
Republic, Hungary, Slovak Republic and Slovenia. Current
65%
size of the Fund is EUR 97 m. The Fund of Funds is
63%
44% 49% 54% expected to mobilize at least around EUR 200 m in
evenhandedness investments into start-up’s and small
mid-caps. The share of IIB amounts to EUR 10m. The
2017 2018 2019 2020 1H2021 IIB’s contribution as of the 30 June 2021 amounted to
EUR 2.1 million.
EU CIS Asia Other
Source: Audited Consolidated IFRS Financial Statements 2017-2020, Interim condensed consolidated financial
statements 1H2021
15
15PROJECTS FINANCED
Over the years, IIB took part in financing of more than 200 investment projects, signed and implemented cooperation
agreements and provided credit lines to financial institutions of the Member States. Examples of projects in Member States
include:
TSKAD-3 (Russia) - RUB 1000 m 23Y financing for the purpose of highway construction
MVM (Hungary) - HUF 35500 m 15Y financing for the purpose of gas network development
Agricover Credit IFN (Romania) - EUR 10 m 7Y financing for SME support
Huvepharma (Bulgaria) - up to USD 20 m participation in syndicate facility. Partner: Citibank N.A.
Slovenské elektrárne, a.s. (Slovak Republic) - EUR 90 m 7Y financing
Khan Bank (Mongolia) - USD 20 m 5Y participation in the syndicated facility to finance SMEs. Partner: FMO
Avicola (Romania) - EUR 17 m 7Y financing for the purpose of modernization
SH Bank (Vietnam) - USD 20 m 5Y financing
Heliosagri (Romania) - EUR 20 m 7Y financing for the purpose of acquisition of the edible oil plant and production development
Vietnam Prosperity Joint Stock Commercial Bank (Vietnam) - USD 20 m for SME support and climate projects. Partner: IFC
GOBI (Mongolia) - EUR 30 m 7Y financing for the purpose of business development
VIS Group (Russia) - RUB 1000 m 3Y financing of infrastructure projects
Vajda Papir (Hungary) - HUF 1250 m 10Y for the purpose of production expansion
Medicover (Luxembourg) - EUR 20 m 10Y for development of medical facilities in Romania, Hungary, and Slovakia. Partner: Helaba
Golomt Bank (Mongolia) - USD 10 m 5Y financing for SME and sustainable development initiatives in Mongolia support
16
16LOAN PORTFOLIO STRUCTURE
NET LOAN PORTFOLIO SPLIT BY COUNTRIES LOAN PORTFOLIO SPLIT BY INDUSTRIES
Production and transmission of electricity 23%
Romania Financial services 17%
12% Leasing 11%
Others Automobile industry 7%
27% Real estate 7%
Retail 6%
Manufacturing of refined oil products 6%
Russia
Communications 5%
15%
Public health 4%
Textile manufacture 3%
100% Metallurgic industry 3% 100%
Cuba Mining 2%
4% Television and radio 2%
Agriculture 2%
Vietnam Transportation and storage 1%
6% Hungary Production of pharmaceutical products 1%
11% Accommodation 1%
Food and beverage 1%
Mongolia Bulgaria Software engineering 1%
7% 8% Water collection, treatment and supply 0.4%
Slovak Republic
10% Postal activities 0.4%
Land transport 0.4%
Paper Manufacture 0.3%
Source: Interim condensed consolidated financial statements 1H2021
17
17IIB TRADE FINANCE PORTFOLIO
SINCE APPROVED BY COUNCIL IN 2014 TF HAS BECOME SIGNIFICANT PART OF THE ACTIVITY
PARTICIPATED 239 DEALS FOR EUR 439 M SINCE TF INTRODUCTION
TRADE FINANCE PORTFOLIO, M EUR TRADE FINANCE PORTFOLIO, M EUR
500
350
433 439 428
304 305 450 421
300
400 376
256
250 350
IRU 300 276
200 248
159 TRL 250
150 Guarantee200
158
Other
85 85 150
100 77 83
100
57 100
50 35 28 31 34
19 50 35
9 8 1 9 2 10 12 13 9 20 9
1 1
0 0
Dec 2015 Dec, 2016 Dec, 2017 Dec, 2018 Dec, 2019 Dec, 2020 Aug 2021 Dec 2015 Dec, 2016 Dec, 2017 Dec 2018 Dec, 2019 Dec, 2020 Aug, 2021
IRU - Irrevocable Reimbursement Undertaking
TRL – Trade Related Loans Issued Closed
Other – SBLC & LCs/guarantees advising
18
18M A R K E T- B A S E D F U N D I N G D U R I N G T H E C O V I D - 1 9
OUTBREAK
Listing Maturity Volume
Moscow Exchange (April) 5y RUB 7 bn (EUR 87.5 m)
Moscow Exchange (April) 5y RUB 5 bn (EUR 62.5 m)
Euronext Dublin (April) 1y RON 110 m (EUR 23 m)
Moscow Exchange (May) 3y RUB 7 bn (EUR 87.5 m)
Euronext Dublin (May) 3y CZK 621 m (EUR 22.5 m)
Moscow Exchange (September) 2.5 y RUB 7 bn (EUR 78.7 m)
Euronext Dublin (September) 3y HUF 15 bn (EUR 41.6 m)
Euronext Dublin (October) 3y RON 340 m (EUR 69.8 m)
Euronext Dublin (January 2021) 20 y EUR 30 m 0.95% p.a.
Euronext Dublin (February 2021) 3y EUR 25 m 0.119% p.a.
Euronext Dublin (March 2021) 3y HUF 8.5 bn (EUR 23.4 m) 0.065% p.a.
Euronext Dublin (March 2021) 2y RON 190 m (EUR 38.9 m) -0.05% p.a.
Euronext Dublin (April 2021) 3y CZK 2.499 bn ( EUR 96.4 m) -0.041% p.a.
In terms of funding, IIB had reached a qualitatively new level when successfully registering the inaugural MTN Programme, which has been registered with Euronext Dublin on March 19, 2020
(Programme on the Euronext Dublin https://www.ise.ie/Market-Data-Announcements/Debt/Individual-Debt-Instrument-Data/ShowSecSpecialist/?secID=10801) with JP Morgan as lead arranger for
the Programme.
IIB’s funding is based on two strong pillars: EUR 1.5 bn MTN Programme registered on the Euronext Dublin and RUB 100 bn Programme registered with Moscow Exchange.
For IIB, small private placements (either local currency issuance or hard currency) provide further cost effectiveness vs a first sub-benchmark/benchmark Eurobond. The flexibility of issuing under
the newly created MTN offers potential to exploit market windows.
21
19LONG-TERM FUNDING STRUCTURE
MTN Programme
AVERAGE EUR INTEREST RATES AND August April 2021
2018 YE 2019 YE 2020 YE CZK 2.499 bn
DIVERSIFICATION 2021
MTN Programme
March 2021
Avg. Balance EUR Interest Rate 1.37% 0.91% 1.10% 0.85% RON 190 m
MTN Programme
EU share of Funding 59% 70% 64% 67% March 2021
HUF 8.5 bn
MTN Programme
February 2021
EUR 25 m
LONG-TERM FUNDING BY LONG-TERM FUNDING BY
MTN Programme
CURRENCY AS OF 1H 2021 INVESTOR GEOGRAPHY AS January 2021
EUR 30 m
OF 1H 2021*
USD 4% Supranationals Czech Republic MTN programme
Others 2%
12%
October 2020
5% RON 340 m
CZK 11%
MTN Programme
RUB 27%
September 2020
HUF 15 bn
Romania Hungary
26% 18% RUB 7 bn September2020
EUR 15%
MTN programme
May 2020
CZK 621 m
RUB 7 bn May 2020
Germany
9%
RON 25%
HUF 18% MTN Programme
April 2020
RON 110
Russia
28%
BILATERAL LOANS AND EXPOSURES WITH FI: RUB 12 bn April 2020
IIB is also using other long-term funding instruments such as bilateral loans, syndicated loans and loans RON 500 m November 2019
from other International Financial Institutions. In 2020, IIB has disbursed in March the last USD 12.5m
tranche out of a USD 50m, 12yr bilateral facility from NDB and contracted also a 1.5yr EUR 20 m bilateral
HUF 22,5 bn October 2019
facility from Rosbank in April.
IIB is taking advantage of very low rates for the short-term borrowings and it is opening new lines and HUF 24,7 bn March 2019
continuously reviewing the current lines for money market operations. IIB has credit lines for MM, FX,
Repo, TF, DCM, bonds, etc. from approx. 135 financial Institutions amounting to above EUR 2.2 bn. The RON 300 m and
total volume of limits set by IIB on approx. 135 financial Institutions amounts to above EUR 3 bn. October 2018
EUR 80 m
22
20T R E A S U RY A S S E T S D I V E R S I F I C AT I O N
BY RATINGS* BY COUNTRIES* SECURITIES STRUCTURE
YE 2020 YE 2020 Other YE 2020
Corporate Development
BB+ - BB- 7% bonds 17% banks
6% AAA - AA- portfolio 11%
30% EU
33%
BBB+ - BBB- Sovereign
26% Supranational bonds 10%
37%
China ESG Portfolio
17% 62%
A+ - A- Russia
38% 6%
1H2021 1H2021 1H2021
BB+-BB-
BBB+-BBB-
2%
14% EU 17% Corporate bonds Development
14% banks portfolio
AAA-AA- 20%
34%
Others 41%
China 30%
A+-A- Supranational
49% 6% Russia 6% ESG Portfolio
66%
*Treasury assets incl. securities portfolio, cash and cash equivalents, deposits 21
Source: Audited Consolidated IFRS Financial Statement 2020, Interim condensed consolidated financial statements 1H2021,
Management Reports 2020-2021
21S U S TA I N A B I L I T Y
ENVIRONMENTAL AND SOCIAL SUSTAINABLE DEVELOPMENT GOALS LOAN AND DOCUMENTARY
POLICY FRAMEWORK (SDG) PORTFOLIO SDG ASSESSMENT
EUR m, each transaction may contribute to several SDGs
Assessment of environmental and social risks of Pursuant to the existing internal plan to measure the SDG 3 Good
projects is currently based on the Environmental and development impact from the projects financed in order to SDG 1 No SDG 2 Zero health…
Social Impact Guidelines. raise awareness among investors, rating agencies, partner poverty hunger SDG 5
SDG 17 18.7 70 Gender
IFIs and international financial community on the Bank’s Partnerships
In July 2019 Organization for Economic Cooperation 237.3
equality
impact in achieving SDGs outlined by the United Nations, IIB 1.9
and Development (OECD) included IIB in the list of SDG 6 Clean
has performed a portfolio breakdown by purposes of finance water
international institutions eligible for acceptance of the 4.8
and targeted SDG.
Official Development Assistance (ODA). In 2021 IIB SDG 13
SDG 7 Energy
Climate
presented to OECD its annual Report about 107.5 153.6
developmental activities towards developing countries SDG 12
for the year 2020. Responsible
cons/prod…
An internal ESG Steering Committee is responsible for
SDG 11 Sust. cities
all matters related to sustainable development. 46.2
Currently, work is being carried out in relation to
SDG 10
actualisation of the documentary framework Reduced SDG 8
concerning appraisal of developmental impact of inequalities… Economic
projects financed. growth…
SDG 9
As a result of the above work IIB is aiming to develop a Infrastructure
sustainable bond framework. 381.7
23
22I N T E R N AT I O N A L PA R T N E R S H I P N E T W O R K
IIB BUSINESS PARTNERS I I B N O N - C O M M E R C I A L O R G A N I S AT I O N S
PAR T N E R S
International Financial Organizations (The World Bank Group, EBRD, EIB, NDB, IBEC and
others) IIB takes a strong stance on supporting initiatives aimed at environmental protection
Regional development banks (BSTDB, CAF, CABEI, NIB, EDB and others) and sustainable development. The Bank not only extends financial support to such
projects (loans and grants), but also actively cooperates with non-profit international
National development banks
organizations to develop new policies and promote responsible development
National Chambers of Trade and Industry financing.
Export credit agencies
These esteemed organisations include:
State and private financial institutions.
United Nations (IIB is a member of UN Global Compact)
Platforms and associations of financial institutions (IDFC, ADFIAP, BACEE, D20)
UNEP FI
Commercial banks Commercial and Investment Banks via syndicated loans, funding support
and treasury business (Citibank, Societe Generale, UniCredit Bank, ING Bank, Erste Group WWF
Bank, JP Morgan, Credit Suisse, RBI, Banca Transilvania, OTP Bank, Nord LB and others) Wetlands International
ICC Green Finance Working Group
RECOGNITION
International publication “Global Banking and Finance Review” recognition as “The Fastest
growing infrastructure bank of CEE region” (2018)
Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) award for
best Corporate Governance Reform (2019)
“The European” Global Banking Award for “Best Trade and Investment Bank – CEE” (2019)
The international media holding Global Banking and Finance Review (GBFR) has published a
list of 2019 GBFR Award winners. International Investment Bank was awarded as the "Best
Bank for Sustainable Development Central and Eastern Europe“
In 2020 the Bank won an award for “Best International Issuer” at the Budapest Stock
Exchange annual ceremony
23
23G R A N T P O L I C Y & T E C H N I C A L A S S I S TA N C E F U N D
The Bank regularly allocates funds for various grants aimed at environmental protection, especially for projects and programs related to water and sanitation. The Bank’s strategic partners in these
activities are Wetlands International and World Wildlife Fund (WWF).
Amount
No. Supported projects Country Recipient Organization Date
(EUR)
June
1. Preservation of endangered animal and bird species in Mongolia Mongolia Ministry of Environment c. 28,000
2015
December
2. Wild Asian Elephants Program Vietnam WWF Vietnam 45,000
2015
3. The Hungarian Water Risk Filter Hungary WWF Hungary June 2016 30,000
December
70,000
4. Restoring Peatlands in Russia – for fire prevention and climate change mitigation Russia Wetlands International 2016
70,000
June 2018
June
5. Environmental education and awareness raising in protected areas Romania Milvus Group Association 30,000
2017
WWF International Danube- December
6. Restoration of natural river ecosystems in Northern Slovakia Slovakia 30,000
Carpathian Program 2017
November
7. Restoration of wetlands of the upper creek of the Tuula Gol river in central Mongolia Mongolia Mongolian Academy of Sciences c. 34,000
2018
September
8. Project on water preservation of the River Tisza and its cleaning from plastic waste Hungary Plastic Cup 50,000
2019 (ongoing)
TECHNICAL ASSISTANCE FUND About Completed projects under TAF framework:
INITIAL FUND SIZE: EUR 1,245,000
Technical Assistance Fund (TAF) was established at the supporting Mongolian legal framework in AML area for
initiative of the Ministry of Finance of the Slovak Republic Financial Regulatory Commission of Mongolia;
17% 9% 8% 20% 17% 28%
in 2016 and is co-financed and managed by IIB. The main technical expertise project for Proxenta Cuban investments
purpose of TAF is to finance the provision of advisory a.s.;
FRC of Mongolia PeWaS s.r.o. services and technical assistance in respect of the projects testing innovative Aquaholder products for PeWaS s.r.o.;
Proxenta Cuban Investments, a.s. Asseco Central Europe, a.s. financed, or to be financed, by the IIB within its mandate. Providing expertise related to opening and development of
IMAO electric, s.r.o. Available (317 281 EUR) The target countries include Mongolia, Vietnam, and Cuba. biomass power plants for IMAO Electric s.r.o.
Slovak nationals or firms registered in the Slovak Republic 24
are eligible to bid for projects supported by the TAF.
24C O N TA C T
I N F O R M AT I O N
Stefan Nanu
Head of DCM&FI Department
stefan.nanu@iibbank.com
Csaba Pasztor
Deputy Head of DCM&FI Department
csaba.pasztor@iibbank.com
IIB IFRS (International Financial
Reporting Standards) Statements
https://iib.int/en/for-
investors/disclosure/annual
www.iib.int
IR@iibbank.com
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