The European Bank for Reconstruction and Development (EBRD) committed €3.7bn and disbursed €2.1bn in 2003, signing 119 projects, more than ever before, in every country from central Europe to central Asia and in virtually every sector. In a region that outperformed the rest of the world for the third straight year, the bank saw investors” interest surge. New projects ranged from aircraft manufacturing in Russia to traffic management in Lithuania, from a bank privatisation in Romania to an upgrade of the phone network in Kazakhstan.

The pace of investment met the bank’s targets and would have topped last year’s record €3.9bn but for the weakening against the euro of the US dollar, in which many investments are denominated. For the same reason the value of disbursements would have been €2.3bn, near the previous year’s level.

It was the EBRD’s most successful year ever in terms of attracting commercial co-finance. Financial institutions invested €2.7bn alongside the EBRD, exceeding by 30% the record set in 2001. Net cumulative business volume – all committed loans, equity and other investments over the past 13 years – rose to €22.7bn from €21.6bn. Combined with funds from outside investors, the bank has mobilised financing commitments with a total project value of €69bn.

Business was strong in Russia and in the early and intermediate transition countries of central Asia, southern and eastern Europe and the Caucasus, reflecting the bank’s continuing efforts to extend its operations further east and south.

The bank’s net profit after provisions rose to €378.2mn from €108.1mn in 2002, principally because of strong returns from the equity and treasury portfolios, lower administrative expenses, and sharply reduced provisions against possible losses. Steven Kaempfer, vice-president, finance, says the bank’s business has remained robust, reflecting the strength of the region’s economic performance and financial markets. He says the EBRD’s pipeline of potential new projects is strong and the bank has budgeted for a solid but lower level of profitability in 2004. However, Kaempfer adds, the results will be vulnerable to the sustainability of the recovery in the global economic environment and in the financial markets.

Net profit on the sale of share investments rose to €155.9mn from €140mn a year ago, while dividend income from the equity portfolio rose to €52.2mn from €35.9mn, contributing to an operating profit from banking activities before provisioning charges of €328.4mn (2002: €284.7mn). Treasury activities achieved an operating profit before provisioning charges and adjustment for non-qualifying hedges of €60.3mn (2002: €48.3mn). Expenses fell by 8%, reflecting effective cost controls and a credit relating to the surrender of a sublease at the EBRD’s headquarters building. Successful work-outs and less-than-anticipated new provisions resulted in a provisioning charge against banking assets of €16.5mn (2002: €103.0mn) and a charge of €5.4mn (2002: €83.6mn) for provisions against treasury assets.

The results include a €10.3mn credit (2002: charge of €38.3mn) for non-qualifying hedges required under IAS 39. Excluding this impact and the provisioning charge, the EBRD’s operating profit was €389.6mn, compared with €333mn in 2002. At December 31, 2003 the EBRD had authorised capital of €20bn and paid-in capital and reserves of €6.2bn.

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