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EBRD responds to financing challenges with record 2015 investments

January 13, 2016 | Cbonds

Bank also secures sharp increase in commercial bank funding

The European Bank for Reconstruction and Development (EBRD) responded to another challenging year for financing in 2015 by delivering huge impact on the ground in the countries where it operates, through record investments of €9.4 billion.

The rise in investment from €8.9 billion in 2014 came as emerging markets worldwide witnessed the worst year for capital inflows since the start of the global financial crisis in 2008 and as banks continued to reduce their exposure to a number of EBRD economies.

The Bank financed 381 individual projects in some three dozen countries stretching from Estonia to Egypt and Morocco to Mongolia in 2015.

“The EBRD has put in a very impressive performance, defying very tough business conditions and once again responding to the needs of the countries where we work and of the people that we serve,” said EBRD President Sir Suma Chakrabarti.

“At the same time we unveiled a strategy for the coming years that makes certain that the Bank can carry on preparing its countries for a more robust – and more inclusive – economic future.”

The EBRD also expects to report a net profit of around €0.8 billion after reporting a loss of €0.6 billion in 2014. The 2014 loss largely reflected economic weakness in Russia and Ukraine.

The Bank was particularly successful last year in attracting additional finance for its projects from commercial banks. It mobilised more than €2.3 billion via syndicated loans in over 40 projects, the highest level for syndicated lending since the start of the crisis.

2015 was the first full year in which the EBRD brought no new projects to Russia – once the single largest recipient of annual funding – following guidance from a majority of shareholders in 2014.

Turkey saw another rise in investment to €1.9 billion from €1.4 billion and retained its position as the largest recipient of EBRD finance. Ukraine ranked second with investments of just under €1 billion. There were significant increases in financing in Central Asia and the countries of the southern and eastern Mediterranean region.

Economic conditions are expected to remain challenging in 2016 with global forecasts revised down at the start of the year and the continuing weakness in commodity and energy prices likely to carry on putting pressure on some of the larger resource-dependent EBRD countries.

However, the EBRD has begun its 25th anniversary year with a very strong pipeline of projects and the Bank will complement a continued high level of financial engagement with an increase in support for policy reform that helps to improve the overall investment climate.

At its May 2015 Annual Meeting, the Bank unveiled a strategy for the EBRD regions for the coming years, guided by three overriding priorities that are closely aligned with new international development goals adopted in September 2015.

The EBRD will focus on strengthening transition resilience by supporting policies that improve the investment climate and achieve greater social cohesion and inclusion.

The strategy also aims to promote integration by supporting investments that strengthen economic, financial and infrastructure links and to address global and regional challenges, such as food security and climate change.

The Bank also underscored its commitment to combating climate change by unveiling its Green Economy Transition approach, which envisages climate finance rising to 40 per cent of annual investments by 2020. In 2015, the EBRD’s sustainable resource funding – which includes resource efficiency and renewable energy projects – accounted for 30 per cent of the €9.4 billion total.

2015 saw the EBRD’s first investments in Greece, which has become a temporary country of operations until 2020. Its debut funding in Greece aimed to stabilise the financial sector and the EBRD took shares worth a total of €250 million in the four leading Greek banks.

Elsewhere, EBRD funding to Kazakhstan rose strongly to €708 million from €576 million. Investments in Poland rose to €647 million from €593 million. Investments in the southern and eastern Mediterranean countries rose to €1.5 billion from €1.0 billion.

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