The European Bank for Reconstruction and Development (EBRD) recorded a net loss of €1.1 billion last year after Russia’s war on Ukraine had a strongly negative impact on the value of its investment portfolio, APA-Economics reports citing the Bank.
The loss in 2022 followed the Bank’s record profit of €2.5 billion the previous year.
The loss for the year as a whole also represented a significant recovery from that incurred in the first quarter of 2022 as a consequence of the war’s initial financial impact.
At the same time, the EBRD continues to be rated triple-A with a stable outlook, a status reaffirmed by all three major credit ratings agencies over the course of the year.
Russia’s invasion of its neighbour last February resulted in impairment losses, primarily on loans based in Ukraine and Belarus, amounting to €1.4 billion.
The proportion of non-performing loans (NPLs) also increased from 4.9 per cent to 7.9 per cent over the year.
In addition, the conflict led to a significant fall in the value of the EBRD’s equity investments based in Russia, where a legacy of portfolio assets remained.
As a result, overall equity losses were €1.1 billion.
Given the volatility of markets in which the Bank invests, gains and losses from both impairment and equity investments are expected to continue to show significant variability from year to year.
Soha El-Turky, the EBRD’s Chief Financial Officer, said: “Last spring, we flagged the strong likelihood that the war in Ukraine would have a significant impact on our financial performance in 2022. And so it proved.
“Notwithstanding the challenges we have had to negotiate, our prudently managed balance sheet has demonstrated resilience and the Bank’s financial position remains strong.
“The Bank’s strong capitalisation and ample liquidity buffer will ensure that we are able to support our operations this year and beyond.”
Despite the war and the EBRD’s financial losses, the Bank undertook a record level of annual investments last year.
The unprecedented volume of Annual Bank Investment reached €13.1 billion through 431 projects across the three continents where the Bank works.