Annual Results

By Anthony Williams
@ebrdtony

2009 financing increases by over 50 percent

The EBRD responded vigorously to the global economic crisis in 2009, investing a record €7.9 billion and preparing to support eastern Europe through the recovery period with further increases in financing likely in the coming years.

Last year’s investments rose 55 percent, with the largest share of funding dedicated to the financial sector as the Bank sought to bolster banks across the region and help them maintain their lending flows, especially to small businesses.

The EBRD provided a strong flow of financing to the corporate sector directly and invested heavily in energy and infrastructure projects. Investments in sustainable energy projects, promoting energy efficiency and clean energy played a significant role.

As anticipated, the EBRD reported a net loss of €746 million in 2009, compared with a loss of €602 million a year earlier.

The loss primarily reflects an increase in provisions for future potential losses on the Bank’s loan portfolio and revaluation losses in the Bank’s equity holdings. Although there was a recovery in the value of the Bank’s listed equity investments, these were offset by revaluation losses in the Bank’s unlisted equity portfolio.

The Bank remains very well capitalised but in order to facilitate investments at this higher level over the coming years it has sought shareholder approval for an increase in capital.

The Bank expects investments in 2010 to be slightly higher than last year’s record level. With the capital increase that is under consideration, the EBRD would be able to continue to invest at similar enhanced levels during the coming five years.

Since it was created in 1991, the EBRD has now invested a total of over €47 billion on its own and a total of nearly €150 billion together with other public and private co-financiers.

Last year saw significant investments in the Western Balkans and Serbia, where financing rose by 36 percent to over €700 million. Sustainable energy investments jumped 34 percent to €1.3 billion while the EBRD maintained a strong flow of funding the less advanced economies in the Caucasus and Central Asia of over €500 million euros.

Looking ahead to the coming year, Vice President for Finance Manfred Schepers said, “The global economic slowdown will continue to affect the region where the EBRD invests. The recovery will be slow and varied across the region and private investment flows will continue to be scarce. As in 2009, the EBRD will stand ready to support eastern Europe during these difficult times.”

While maintaining support for the financial sector in coming years, the Bank is also providing increased financing to the corporate sector. The Bank has brought all its corporate activities under one umbrella with a view to boosting funding to enterprises and so reaching out to the real economies of the region.

A key aim of the new initiative is to promote the drive towards further economic diversification and helping add value to the chain of production.

Investments in sustainable energy projects will remain a key element of Bank activities.

The EBRD will also help economies to draw on the lessons learnt from the global crisis, specifically supporting the development of domestic and local currency capital markets and so reducing a dependence on foreign exchange borrowing that proved a key vulnerability in the crisis.

 In 2009, the EBRD played a key role together with other international financial institutions in addressing the immediate needs of economies hit by the crisis. With the World Bank Group and the European Investment Bank, it pledged funding of €25 billion over two years to support small and medium sized enterprises via the banking sector.

Under the “Vienna Initiative”, the Bank took a leading position in discussions with western banks and their subsidiaries in the region as well as with the relevant authorities in order to maintain the engagement and commitment of those institutions in eastern Europe.

The EBRD also demonstrated that it was prepared to assume a greater burden of risk in order to support the economies of the region, increasing its equity investments and providing a sharply higher level of equity type funding, such as subordinated debt.

One key example was the Bank’s decision to take a stake in Parex Banka in Latvia, one of the countries hardest hit by the crisis. But while supporting both locally owned banks and subsidiaries of western financial institutions, the EBRD reached out to other areas of the region’s economies.

Major infrastructure projects included a significant investment in the R1 motorway in Slovakia, while Romanian companies received important loans to boost environmental standards and improve energy efficiency, including a €170 million loan to power plant Turceni that was successfully syndicated to foreign commercial banks in difficult market conditions.

The EBRD also stepped up its drive to promote energy security, financing gas storage facilities in Croatia and Hungary, part of a series of such investments that are continuing this year.