Exhibit 12
Asian Infrastructure Investment Bank’s Financial Condition and Results of Operations as of and for the
Nine Months Ended September 30, 2023
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Amounts in tables in this Exhibit 12 to this annual report on Form 18-K may not sum exactly due to rounding differences.
CAPITALIZATION AND INDEBTEDNESS
The following table sets forth the capitalization and indebtedness of the Asian Infrastructure and Investment Bank (“AIIB” or the “Bank”) as of December 31, 2022 and does not give effect to any transaction since December 31, 2022. Since December 31, 2022 and through September 30, 2023, there have been no material changes to the capitalization and indebtedness of the Bank, except for (i) the issuance by the Bank of (a) US$2,000 million principal amount of 4.875% notes due 2026; (b) US$2,000 million principal amount of 4.000% notes due 2028; (c) US$4,961.0 million equivalent of fixed rate and zero coupon notes and US$50.0 million of floating rate notes under AIIB’s Global Medium Term Note Programme; (d) US$1,761.8 million equivalent of zero coupon notes under AIIB’s Euro-Commercial Paper Programme; (e) US$566.4 million equivalent of fixed rate notes under its Renminbi Bonds Issuance Programme; and (f) US$338.4 million equivalent of fixed rate notes under AIIB’s A$ and NZ$ Debt Issuance Programme; (ii) the repayment of (a) US$3,000 million principal amount of 0.250% notes due 2023 issued in 2020; (b) US$1,391.9 million principal amount of fixed rate and zero coupon notes issued under AIIB’s Global Medium Term Notes Programme; (c) US$1,347.8 million equivalent of zero coupon notes issued under AIIB’s Euro-Commercial Paper Programme; (d) US$424.6 million equivalent of fixed rate notes issued under the Bank’s Renmibi Bonds Issuance Programme; (e) US$364.0 million equivalent of fixed rate notes issued under AIIB’s A$ and NZ$ Debt Issuance Programme; and (iii) an increase of US$708.5 million in retained earnings.
| As of December 31, 2022 | ||||
| (in thousands of US$) | ||||
Borrowings | 24,475,728 | |||
Members’ equity | ||||
Paid-in capital | 19,392,900 | |||
Reserves for accretion of paid-in capital receivables | (2,268 | ) | ||
Reserves for unrealized loss on fair valued borrowings arising from changes in own credit risk | 9,548 | |||
Retained earnings | 1,065,545 | |||
Total members’ equity | 20,465,725 | |||
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SELECTED FINANCIAL INFORMATION
The financial information included herein for the nine-month periods ended September 30, 2023 and September 30, 2022 and as of September 30, 2023 and December 31, 2022 is derived from the unaudited interim condensed financial statements as of and for the nine months ended September 30, 2023, including the notes thereto (the “Interim Financial Statements”), of the Bank. The Interim Financial Statements have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting.” The financial condition and results of operations as of and for the nine-month period ended September 30, 2023 are not necessarily indicative of results to be expected for the full year 2023.
The selected financial information should be read in conjunction with the Interim Financial Statements in Exhibit 13 of this annual report on Form 18-K and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Exhibit 12 of this annual report on Form 18-K.
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (unaudited) | (unaudited) | |||||||
| (in thousands of US$) | ||||||||
Selected Profit and Loss Information | ||||||||
Interest income | 1,381,793 | 371,340 | ||||||
Interest expense | (563,915 | ) | (200,690 | ) | ||||
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Net interest income | 817,878 | 170,650 | ||||||
Net fee and commission income | 24,760 | 26,481 | ||||||
Net gain on financial instruments measured at fair value through profit or loss | 187,068 | 155,355 | ||||||
Net loss on financial instruments measured at amortized cost | (4,406 | ) | (13,172 | ) | ||||
Share of gain on investment in associate | 3,313 | 573 | ||||||
Impairment provision | (13,732 | ) | (158,673 | ) | ||||
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| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (unaudited) | (unaudited) | |||||||
| (in thousands of US$) | ||||||||
General and administrative expenses | (164,222 | ) | (131,948 | ) | ||||
Net foreign exchange loss | (142,181 | ) | (97,439 | ) | ||||
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Operating profit/(loss) for the period | 708,478 | (48,173 | ) | |||||
Accretion of paid-in capital receivables | 1,015 | 1,866 | ||||||
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Net profit/(loss) for the period | 709,493 | (46,307 | ) | |||||
Other comprehensive income | ||||||||
- Items will not be reclassified to profit or loss | ||||||||
Unrealized (loss)/gain on fair-valued borrowings arising from changes in own credit risk | (99,229 | ) | 82,321 | |||||
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Total comprehensive income | 610,264 | 36,014 | ||||||
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| As of September 30, | As of December 31, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | (audited) | |||||||
| (in thousands of US$) | ||||||||
Selected Balance Sheet Information | ||||||||
Total assets | 53,048,585 | 47,409,248 | ||||||
Total liabilities | 31,962,096 | 26,943,523 | ||||||
Total members’ equity | 21,086,489 | 20,465,725 | ||||||
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Total liabilities and members’ equity | 53,048,585 | 47,409,248 | ||||||
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Interim Financial Statements in Exhibit 13 of this annual report on Form 18-K.
Overview
AIIB is a multilateral development bank (“MDB”) with a mandate to (i) foster sustainable economic development, create wealth and improve infrastructure connectivity in Asia by investing in infrastructure and other productive sectors and (ii) promote regional cooperation and partnership in addressing development challenges by working in close collaboration with other multilateral and bilateral development institutions. The Bank commenced operations on January 16, 2016 to help its members meet a substantial financing gap between the demand for infrastructure in Asia and available financial resources. The Bank aims to work with public and private sector partners to channel its own public resources, together with private and institutional funds, into sustainable infrastructure investment. The Bank maintains its principal office in Beijing, People’s Republic of China (“China”) and has an additional office in Abu Dhabi, the United Arab Emirates (“UAE”).
The Bank’s mission is “Financing Infrastructure for Tomorrow,” which reflects AIIB’s commitment to sustainability, be it financial, economic, social or environmental in nature. The Bank has identified the following thematic priorities:
| • | Green Infrastructure: Prioritizing green infrastructure and supporting its members to meet their environmental and development goals by financing projects that deliver local environmental improvements and investments dedicated to climate action; |
| • | Connectivity and Regional Cooperation: Prioritizing projects that facilitate better domestic and cross-border infrastructure connectivity within Asia and between Asia and the rest of the world, and supporting projects that complement cross-border infrastructure connectivity by generating direct measurable benefits in enhancing regional trade, investment and digital and financial integration across Asian economies and beyond; |
| • | Technology-enabled Infrastructure: Supporting projects where the application of technology delivers better value, quality, productivity, efficiency, resilience, sustainability, inclusion, transparency or better governance along the full project life cycle; and |
| • | Private Capital Mobilization: Supporting projects that directly or indirectly mobilize private financing into sectors within the Bank’s mandate. |
The Bank has developed, and continues to develop, a wide range of operational policies, strategies and frameworks designed to ensure that there is a direct link between the Bank’s mandate, mission and thematic priorities and the projects it finances. Sustainable development is an integral part of the Bank’s identification, preparation and implementation of projects. In April 2021, the Bank launched its “Sustainable Development Bond Framework” which, among other things, summarizes the Bank’s sustainability commitments and the reporting that the Bank provides on its website concerning the environmental and/or social impacts of Bank financings. The Bank’s Sustainable Development Bond Framework and, unless otherwise indicated, information available on, or accessible through, AIIB’s website are not incorporated herein by reference.
Financing Portfolio
As of October 31, 2023, the Bank has approved 238 financings (including 187 loans, 33 investments in funds, three equity financings, 13 investments in fixed-income securities and two guarantees) with a total amount of US$45,175.9 million. This amount includes financings approved as of October 31, 2023 under the COVID-19 Crisis Recovery Facility (the “CRF”). See “–AIIB Response to the COVID-19 Pandemic.” Of these financings, 206 were approved by the Board of Directors with a total approved amount of US$41,723.6 million, and 32 were approved by the President, pursuant to his delegated authority to approve certain financings, with a total approved amount of US$3,452.3 million. Of the approved financings, the Bank has terminated or cancelled seven financings. Of the seven, six were loans with a total amount of US$882.0 million, and one was a fixed-income investment with a total amount of US$95.0 million.
As of October 31, 2023, the aggregate amount of approved loans, excluding terminated or cancelled loans, totaled US37,921.9 million, of which US$13,534.2 million were committed amounts and US$21,547.6 million were disbursed amounts. Committed amounts are amounts the Bank has approved and committed to provide pursuant to legally binding documentation, but has not yet disbursed. For sovereign-backed loans, these amounts are further limited to financings for which all conditions precedent required for disbursement have been satisfied. Disbursed amounts as of October 31, 2023 are on a cash basis. Disbursed amounts included in the tables below represent the gross carrying amount of the loans (i.e., including the transaction costs and fees that are capitalized through the effective interest method). Of all approved loans as of October 31, 2023, 138 were sovereign-backed and 49 were non-sovereign-backed loans; 102 were co-financings and 85 were stand-alone financings.
As of October 31, 2023, approved investments in funds totaled US$2,945.0 million, of which the Bank has disbursed US$814.5 million.
As of October 31, 2023, approved equity financings totaled US$154.0 million, of which the Bank has disbursed US$138.6 million.
As of October 31, 2023, approved investments in fixed-income securities totaled US$2,073.0 million, of which the Bank has disbursed US$1,406.6 million.
As of October 31, 2023, the approved guarantees totaled US$1,200.0 million, of which the Bank has made no disbursements.
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As of October 31, 2023, approved financings (including approved financings under the CRF) span a broad range of sectors, including energy, digital infrastructure and technology, transport, urban, water, education infrastructure, economic resilience/policy-based financing (CRF), public health (CRF), finance/liquidity (CRF), rural infrastructure and agricultural development and other and, excluding multi-country financings (discussed below), would fund projects in the following members: Argentina; Azerbaijan; Bangladesh; Brazil; Cambodia; China; Cook Islands; Côte d’Ivoire; Ecuador; Egypt; Fiji; Georgia; Hong Kong, China; Hungary; India; Indonesia; Jordan; Kazakhstan; Kyrgyz Republic; Lao PDR; Maldives; Mongolia; Myanmar; Nepal; Oman; Pakistan; Philippines; Romania; Russia (as described under “–Recent Developments–AIIB Response to the Conflict in Ukraine,” all activities relating to Russia and Belarus are currently on hold and under review); Rwanda; Singapore; Sri Lanka; Tajikistan; Türkiye; Uzbekistan; and Viet Nam. As of October 31, 2023, of the approved financings, 26 (23 investments in funds, two investments in fixed-income securities and one guarantee) were classified as multi-country financings.
AIIB Response to the COVID-19 Pandemic and its Effects
The COVID-19 pandemic has had and continues to have an adverse impact on the global economy and on the individual economies of AIIB members. AIIB members continue their efforts to contain the COVID-19 pandemic and to mitigate the risks of long-lasting, structural harm to their economies. Developing economies, especially those with weak health care infrastructure, vulnerable macroeconomic or financial sector fundamentals or a high dependence on tourism, commodities exports or remittances, required support from the international financial community to respond to and contain the COVID-19 pandemic.
As part of a coordinated international response to counter the COVID-19 pandemic and its effects, AIIB has worked closely with other international financial institutions to create a network of support options, especially for the most vulnerable economies. Based on feedback from public and private sector partners, the Bank’s immediate assistance was required in three key areas: (i) immediate health care sector needs (including support for emergency public health responses and for the long-term sustainable development of the health care sector); (ii) economic resilience, mainly where clients require financing to supplement government measures supporting the social and economic response and recovery efforts (including infrastructure investments and investments in social and economic protection measures to prevent long-term damage to the productive capacity of the economy and to protect and restore productive capital); and (iii) investments in infrastructure and other productive sectors, mainly where clients might otherwise need to curtail long-term investments due to liquidity constraints.
The Bank has adopted a variety of measures to respond to the COVID-19 pandemic and its effects on AIIB members. In early April 2020, the Bank launched a US$5 billion CRF, which the Bank subsequently increased to US$5-10 billion, and then to US$13 billion due to high demand. The CRF, which is designed to adapt to emerging client needs, offers sovereign-backed and non-sovereign-backed financings for qualifying clients and projects within AIIB’s members. In March 2022, the scope was further increased to US$20 billion, and the scope of eligible CRF projects was re-focused to cover the following areas: (i) the co-financing of procurement, distribution and deployment of COVID-19 vaccines and therapeutics; (ii) the co-financing of policy-based financing for enhanced pandemic response, preparedness and recovery; and (iii) the financing of essential COVID-19 emergency health care or urgent expenditure needs. As of October 31, 2023, the Bank has approved 59 financings under the CRF, totaling US$14,657.0 million.
Representative examples of approved CRF financings that are intended to address the key areas described above include the following: i) US$200 million sovereign-backed financing in Jordan, as part of a co-financing led by the World Bank, to foster Jordan’s climate responsive investments and growth during and after the COVID-19 pandemic; (ii) a US$400 million sovereign-backed financing in Bangladesh, as part of a co-financing led by the Asian Development Bank (“ADB”), to support the deployment of policy reforms to accelerate economic recovery from the COVID-19 pandemic; and (iii) a US$530 million sovereign-backed financing, as part of a co-financing led by the World Bank, to support Uzbekistan’s inclusive market transition through reforms in a variety of sectors.
The table below sets out further information on the Bank’s approved CRF financings as of October 31, 2023.
Table 1: Overview of Approved Financings under the CRF
Member | Project Name | AIIB Financing | Lead Co-financier (if any) | |||||
| (in US$ million) | ||||||||
Azerbaijan | Republic of Azerbaijan COVID-19 Active Response and Expenditure Support Program | 100.0 | ADB | |||||
Bangladesh | Bangladesh COVID-19 Active Response and Expenditure Support Program | 250.0 | ADB | |||||
Bangladesh | Bangladesh COVID-19 Emergency and Crisis Response Facility | 300.0 | Standalone | |||||
Bangladesh | Bangladesh COVID-19 Emergency Response and Pandemic Preparedness Project | 100.0 | World Bank(1) | |||||
Bangladesh | Bangladesh Sustainable Economic Recovery Program (Subprogram 1) | 250.0 | ADB | |||||
Bangladesh | Bangladesh Sustainable Economic Recovery Program (Subprogram 2) | 400.0 | ADB | |||||
Bangladesh | Strengthening Social Resilience Program (Subprogram 2) | 250.0 | ADB | |||||
Cambodia | Cambodia Emergency and Crisis Response Facility | 100.0 | Standalone | |||||
Cambodia | Cambodia PRASAC COVID-19 Response Facility | 75.0 | Standalone | |||||
Cambodia | Cambodia Rapid Immunization Support Project | 50.0 | ADB | |||||
Cambodia | National Restoration of Rural Productive Capacity Project | 60.0 | Standalone | |||||
China | Emergency Assistance to China Public Health Infrastructure Project | 355.0 | Standalone | |||||
China | FOSUN COVID-19 Vaccine Project | 100.0 | IFC(2) | |||||
Cook Islands | COVID-19 Active Response and Economic Support Program | 20.0 | ADB | |||||
Côte d’Ivoire | Strengthening of Vaccination and Health Systems under the COVID-19 Strategic Preparedness and Response Project | 100.0 | World Bank | |||||
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Ecuador | Corporación Financiera Nacional COVID-19 Credit Line Project | 50.0 | Standalone | |||||
Egypt | Inclusive Growth for Sustainable Recovery Development Policy Financing Program | 360.0 | World Bank | |||||
Fiji | Sustainable and Resilient Recovery Program for Fiji | 50.0 | ADB | |||||
Fiji | Sustained Private Sector-Led Growth Reform Program | 50.0 | ADB | |||||
Georgia | Georgia Emergency COVID-19 Response Project | 100.0 | World Bank | |||||
Georgia | Economic Management and Competitiveness Program: COVID-19 Crisis Mitigation | 50.0 | World Bank | |||||
Georgia | TBC Bank COVID-19 Credit Line Project | 100.0 | Standalone | |||||
Hungary | Emergency Assistance for Healthcare Expenditures | 216.1 | Standalone | |||||
India | Creating a Coordinated and Responsive Indian Social Protection System | 500.0 | World Bank | |||||
India | India COVID-19 Active Response and Expenditure Support Program | 750.0 | ADB | |||||
India | India COVID-19 Emergency Response and Health Systems Preparedness Project | 500.0 | World Bank | |||||
India | India Responsive COVID-19 Vaccines for Recovery | 500.0 | ADB | |||||
Indonesia | Additional Financing for Emergency Response to COVID-19 Program | 500.0 | World Bank | |||||
Indonesia | COVID-19 Active Response and Expenditure Support Program | 750.0 | ADB | |||||
Indonesia | Emergency Response to COVID-19 Program | 250.0 | World Bank | |||||
Jordan | Additional Financing for Inclusive, Transparent and Climate Responsive Investments Program | 200.0 | World Bank | |||||
Jordan | Inclusive Transparent and Climate Responsive Investments Program | 250.0 | World Bank | |||||
Kazakhstan | Kazakhstan COVID-19 Active Response and Expenditure Support Program | 750.0 | ADB | |||||
Kyrgyz Republic | Emergency Support for Private and Financial Sector Project | 50.0 | World Bank | |||||
Maldives | COVID-19 Emergency Response and Health Systems Preparedness Project | 7.3 | World Bank | |||||
Mongolia | Mongolia COVID-19 Rapid Response Program | 100.0 | ADB | |||||
Mongolia | COVID-19 Vaccine Delivery Project | 21.0 | ADB | |||||
Mongolia | Weathering Exogenous Shocks Program | 100.0 | ADB | |||||
Pakistan | Building Resilience with Countercyclical Expenditures Program | 500.0 | ADB | |||||
Pakistan | COVID-19 Active Response and Expenditure Support Program | 500.0 | ADB | |||||
Pakistan | Resilient Institutions for Sustainable Economy | 250.0 | World Bank | |||||
Philippines | Additional Financing: PHI Second Health System Enhancement to Address and Limit COVID-19 under Asia Pacific Vaccine Access Facility Project (HEAL2-AF) | 250.0 | ADB | |||||
Philippines | COVID-19 Active Response and Expenditure Support Program | 750.0 | ADB | |||||
Philippines | Post-COVID-19 Business and Employment Recovery Program (Subprogram 1) | 500.0 | ADB | |||||
Philippines | Second Health System Enhancement to Address and Limit COVID-19 (HEAL-2) | 300.0 | ADB | |||||
Russia | Russian Railways COVID-19 Emergency Response Project | 300.0 | Standalone | |||||
Rwanda | Digital Acceleration Project (Digital Investment for Recovery, Resilience and Connectivity) | 100.0 | World Bank | |||||
Rwanda | Private Sector Access to Finance for Post-COVID Recovery and Resilience | 100.0 | World Bank | |||||
Sri Lanka | Sri Lanka COVID-19 Emergency and Crisis Response Facility | 180.0 | Standalone | |||||
Türkiye | Akbank COVID-19 Crisis Recovery Facility | 100.0 | Standalone | |||||
Türkiye | COVID-19 Credit Line Project | 500.0 | Standalone | |||||
Türkiye | COVID-19 Medical Emergency Response Project | 82.6 | EBRD(3) | |||||
Türkiye | Eximbank COVID-19 Credit Line Project | 250.0 | Standalone | |||||
Türkiye | İşbank COVID-19 Credit Line Project | 100.0 | Standalone | |||||
Türkiye | Türkiye COVID-19 Vaccine Project under the CRF | 250.0 | World Bank | |||||
Uzbekistan | Advancing Uzbekistan Economic and Social Transformation Development Policy Operation | 530.0 | World Bank | |||||
Uzbekistan | Healthcare Emergency Response Project | 100.0 | ADB | |||||
Uzbekistan | National Bank of Uzbekistan COVID-19 Credit Line Project | 200.0 | Standalone | |||||
Viet Nam | VP Bank COVID-19 Response Facility | 100.0 | IFC | |||||
Total | 14,657.0 |
Notes:
| (1) | International Bank for Reconstruction and Development |
| (2) | International Finance Corporation |
| (3) | European Bank for Reconstruction and Development |
AIIB is reviewing further projects to address the effects of the COVID-19 pandemic in several of its members, in some cases in collaboration with other MDBs. As of October 31, 2023, the Bank has nine proposed CRF financings in the rolling investment pipeline, totaling US$3,820.0 million. Representative examples of such projects under review include the following: (i) a US$670 million sovereign-backed financing, as part of a co-financing led by the World Bank, to support Uzbekistan’s transition to an inclusive and resilient market economy by supporting reforms that will improve fiscal risk management and support social inclusion and (ii) a US$500 million sovereign-backed financing, as part of a co-financing led by the ADB, to support the government of Indonesia in the establishment of a competitive and investment-friendly business environment in order to accelerate economic recovery from the COVID-19 pandemic.
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As a temporary facility put in place to address the COVID-19 pandemic and its effects in AIIB’s members, the CRF is currently open for the approval of qualifying projects until December 31, 2023. Disbursements of financings under the CRF are generally occurring more rapidly than disbursements of AIIB’s other financings.
Geographic Distribution of Loans
The following table sets forth AIIB’s loan portfolio classified by geographic distribution:
| As of September 30, 2023 | As of December 31, 2022 | |||||||||||||||
| Amount (in millions of US$)(1) | As a percentage of total loan portfolio | Amount (in millions of US$)(1) | As a percentage of total loan portfolio | |||||||||||||
Committed Amounts | ||||||||||||||||
Central Asia | 910.1 | 7 | % | 999.9 | 8 | % | ||||||||||
Eastern Asia | 1,173.5 | 10 | % | 1,619.7 | 13 | % | ||||||||||
South-Eastern Asia | 1,386.8 | 11 | % | 1,453.5 | 11 | % | ||||||||||
Southern Asia | 7,339.9 | 59 | % | 7,461.9 | 57 | % | ||||||||||
Western Asia | 1,122.2 | 9 | % | 1,072.3 | 8 | % | ||||||||||
Oceania | — | 0 | % | — | 0 | % | ||||||||||
Other Regional | — | 0 | % | — | 0 | % | ||||||||||
Non-Regional | 411.9 | 3 | % | 431.7 | 3 | % | ||||||||||
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Total Committed | 12,344.4 | 100 | % | 13,039.0 | 100 | % | ||||||||||
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Disbursed Amounts(2) | ||||||||||||||||
Central Asia | 1,510.5 | 7 | % | 1,426.2 | 8 | % | ||||||||||
Eastern Asia | 1,873.5 | 9 | % | 1,318.3 | 7 | % | ||||||||||
South-Eastern Asia | 4,207.7 | 20 | % | 3,456.9 | 19 | % | ||||||||||
Southern Asia | 7,920.2 | 38 | % | 6,560.5 | 37 | % | ||||||||||
Western Asia | 4,102.3 | 20 | % | 3,840.2 | 21 | % | ||||||||||
Oceania | 122.1 | 1 | % | 120.1 | 1 | % | ||||||||||
Other Regional | 251.6 | 1 | % | 332.4 | 2 | % | ||||||||||
Non-Regional | 930.9 | 4 | % | 880.5 | 5 | % | ||||||||||
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Total Disbursed | 20,918.7 | 100 | % | 17,935.1 | 100 | % | ||||||||||
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Notes:
| (1) | The amounts set forth in this table include both sovereign-backed and non-sovereign-backed loans. |
| (2) | Disbursed amounts represent the gross carrying amount of the loans. |
Loans by Sector
AIIB classifies its financings by sector and subsector. AIIB has developed the methodology for classifying financings by sector and subsector based on AIIB’s current and upcoming business focus, which reflects AIIB’s mission of “Financing Infrastructure for Tomorrow” as well as sector and non-sector strategies. The classifications were also developed by reference to sector taxonomies developed by other MDBs. AIIB recognizes that the sectors and sub-sectors in its classification methodology may be cross-cutting. As a result, although the classification methodology has been developed to provide a consistent approach to classifying financings, AIIB may exercise discretion in determining how to classify certain financings, including projects that may relate to more than one sector or be in new business areas. AIIB periodically reviews its classification methodology to enable it to continue to reflect AIIB’s priorities.
AIIB classifies its financings into 13 sectors: energy, digital infrastructure and technology, transport, urban, water, health infrastructure, education infrastructure, economic resilience/policy-based financing (CRF), public health (CRF), finance/liquidity (CRF), rural infrastructure and agricultural development, other productive sectors and other. AIIB may also classify a financing as multisector.
Financings in the energy sector mainly relate to (i) conventional energy generation; (ii) renewable energy generation, including solar, wind, hydropower, geothermal, biomass and waste, as well as hybrid forms that combine energy storage and/or multiple renewable energy generation technologies; (iii) electricity transmission and distribution; (iv) energy storage; (v) hydrogen production and transportation; (vi) gas processing, storage, transportation and distribution; (vii) district heating and cooling networks; and (viii) energy efficiency and demand-side management.
Financings in the digital infrastructure and technology sector mainly relate to digital infrastructure and technology that is applicable to infrastructure, and include projects to support (i) connectivity; (ii) data processing and storage; (iii) development of new software and applications; and (iv) interfaces between users, digital services and applications through terminals and devices.
Financings in the transport sector mainly relate to (i) road connectivity and safety; (ii) railway projects; (iii) port and other waterway infrastructure; (iv) aviation; (v) urban transportation; and (vi) other issues related to transport logistics.
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Financings in the urban sector mainly relate to (i) urban re-development; (ii) affordable housing; (iii) projects for the improvement of urban public services, such as street lighting, park facilities and digital public service delivery portals; (iv) integrated waste management; (v) renovation and protection of cultural heritage; (vi) urban tourism; (vii) urban resilience in the form of systems or facilities that enable cities to maintain continuity during shocks and stress; and (viii) urban integrated development in the form of multisectoral urban or suburban development initiatives, such as industrial parks, special economic zones, commercial business districts, new district development and satellite cities.
Financings in the water sector mainly relate to (i) water supply, sanitation and wastewater treatment; (ii) irrigation and drainage; (iii) water resources management; and (iv) water disaster resilience.
Financings in the health infrastructure sector mainly relate to (i) the construction, rehabilitation, upgrade and expansion of health care facilities; (ii) the digitalization of health care service; (iii) the improvement of energy efficiency; and (iv) the improvement of vaccine manufacturing processes.
Financings in the education infrastructure sector mainly relate to (i) the construction, rehabilitation, upgrade and expansion of educational facilities and (ii) the development of the digital infrastructure of schools.
The economic resilience/policy-based financing, public health and finance/liquidity sectors represent financings under the CRF. Economic resilience/policy-based financings are designed to supplement government measures supporting the social and economic response and recovery efforts (including infrastructure investments and investments in social and economic protection measures to prevent long-term damage to the productive capacity of the economy and to protect and restore productive capital) in cases such as the COVID-19 pandemic. Financings in the public health sector are designed to address immediate health care sector needs (including support for emergency public health responses and for the long-term sustainable development of the health care sector). Financings in the finance/liquidity sector mainly relate to (i) capital markets transactions; (ii) loans to financial institutions; and (iii) investment funds transactions.
Financings in the rural infrastructure and agricultural development sector mainly relate to (i) land conservation and soil management and (ii) the support of rural market infrastructure.
Financings in other productive sectors mainly relate to projects that support industry, non-urban tourism and agricultural production.
Financings in other sectors include projects that support disaster prevention and rehabilitation.
The following table sets forth AIIB’s loan portfolio by sector, as classified by AIIB in accordance with the methodology described above:
| As of September 30, 2023 | As of December 31, 2022 | |||||||||||||||
| Amount (in millions of US$)(1) | As a percentage of total loan portfolio | Amount (in millions of US$)(1) | As a percentage of total loan portfolio | |||||||||||||
Committed Amounts | ||||||||||||||||
Energy | 2,833.5 | 23 | % | 2,914.4 | 22 | % | ||||||||||
Digital Infrastructure and Technology | 22.8 | 0 | % | 76.2 | 1 | % | ||||||||||
Transport | 4,458.7 | 36 | % | 3,905.3 | 30 | % | ||||||||||
Urban | 907.9 | 7 | % | 1,056.4 | 8 | % | ||||||||||
Water | 2,515.7 | 20 | % | 2,779.2 | 21 | % | ||||||||||
Health Infrastructure | — | 0 | % | — | 0 | % | ||||||||||
Education Infrastructure | 130.6 | 1 | % | 196.4 | 1 | % | ||||||||||
Economic Resilience/PBF(2) (CRF) | 253.8 | 2 | % | 269.4 | 2 | % | ||||||||||
Public Health (CRF) | 643.0 | 5 | % | 887.0 | 7 | % | ||||||||||
Finance/Liquidity (CRF) | 149.8 | 1 | % | 410.7 | 3 | % | ||||||||||
Rural Infrastructure and Agricultural Development | 55.0 | 0 | % | 71.0 | 1 | % | ||||||||||
Other Productive Sectors | — | 0 | % | — | 0 | % | ||||||||||
Other | 59.0 | 0 | % | 67.0 | 1 | % | ||||||||||
Multisector | 314.7 | 3 | % | 406.0 | 3 | % | ||||||||||
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Total Committed | 12,344.4 | 100 | % | 13,039.0 | 100 | % | ||||||||||
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Disbursed Amounts(3) | ||||||||||||||||
Energy | 3,188.5 | 15 | % | 3,007.5 | 17 | % | ||||||||||
Digital Infrastructure and Technology | 185.8 | 1 | % | 133.6 | 1 | % | ||||||||||
Transport | 2,036.1 | 10 | % | 1,373.2 | 8 | % | ||||||||||
Urban | 968.2 | 5 | % | 854.9 | 5 | % | ||||||||||
Water | 1,115.4 | 5 | % | 848.4 | 5 | % | ||||||||||
Health Infrastructure | — | 0 | % | — | 0 | % | ||||||||||
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| As of September 30, 2023 | As of December 31, 2022 | |||||||||||||||
| Amount (in millions of US$)(1) | As a percentage of total loan portfolio | Amount (in millions of US$)(1) | As a percentage of total loan portfolio | |||||||||||||
Education Infrastructure | 120.9 | 1 | % | 53.5 | 0 | % | ||||||||||
Economic Resilience/PBF(CRF) | 8,006.9 | 38 | % | 6,884.3 | 37 | % | ||||||||||
Public Health (CRF) | 2,963.3 | 14 | % | 2,861.5 | 16 | % | ||||||||||
Finance/Liquidity (CRF) | 1,917.9 | 9 | % | 1,799.5 | 10 | % | ||||||||||
Rural Infrastructure and Agricultural Development | 27.7 | 0 | % | 11.1 | 0 | % | ||||||||||
Other Productive Sectors | — | 0 | % | — | 0 | % | ||||||||||
Other | 21.3 | 0 | % | 13.0 | 0 | % | ||||||||||
Multisector | 366.8 | 2 | % | 94.6 | 1 | % | ||||||||||
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Total Disbursed | 20,918.7 | 100 | % | 17,935.1 | 100 | % | ||||||||||
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Notes:
| (1) | The amounts set forth in this table include both sovereign-backed and non-sovereign-backed loans. |
| (2) | PBF refers to policy-based extension financing. |
| (3) | Disbursed amounts represent the gross carrying amount of the loans. |
Loan Maturity
As of September 30, 2023, based on the final repayment date of the loans, US$ 2,093.8 million of AIIB’s committed and disbursed loans is scheduled to mature through 2027, US$ 12,905.6 million is scheduled to mature in 2028-2038 and US$ 18,263.8 million is scheduled to mature from 2039 onwards.
Ten Largest Borrowers
The following table sets forth the aggregate principal amount of loans (reflecting amounts that are both committed and disbursed) to AIIB’s 10 largest borrowers (including both sovereign-backed and non-sovereign-backed borrowers) as of September 30, 2023:
Borrower | Amount (in millions of US$) | As a percentage of total loan portfolio | ||||||
Republic of India | 8,478.7 | 25.6 | % | |||||
People’s Republic of Bangladesh | 3,400.3 | 10.3 | % | |||||
Republic of Indonesia | 2,362.6 | 7.1 | % | |||||
People’s Republic of China | 2,290.5 | 6.9 | % | |||||
Islamic Republic of Pakistan | 2,185.3 | 6.6 | % | |||||
Republic of the Philippines | 2,034.6 | 6.1 | % | |||||
Republic of Uzbekistan | 1,371.7 | 4.1 | % | |||||
Republic of Türkiye | 935.0 | 2.8 | % | |||||
Ministry of Finance of Kazakhstan | 711.5 | 2.1 | % | |||||
Turkiye Kalkinma ve Yatirim Bankasi | 610.3 | 1.8 | % | |||||
Income Statement
Interest Income
Interest income mainly consists of (i) interest earned on loan investments, including the amortization of front-end fees and other costs related to loan origination; (ii) interest earned on cash, cash equivalents and deposits (primarily, term deposits); and (iii) interest earned on bond investments.
Nine Months Ended September 30, 2023 and 2022. AIIB’s total interest income increased to US$1,381.8 million for the nine months ended September 30, 2023 from US$371.3 million for the nine months ended September 30, 2022, mainly as a result of increases in interest income earned on loan investments, on cash, cash equivalents and deposits and on bond investments. Interest income from loan investments increased to US$874.5 million for the nine months ended September 30, 2023 from US$246.6 million for the nine months ended September 30, 2022, mainly due to an increase in AIIB’s loan volume as well as higher interest rates. Interest income from cash, cash equivalents and deposits increased to US$384.4 million for the nine months ended September 30, 2023 from US$79.0 million for the nine months ended September 30, 2022, mainly due to a higher interest rate environment. Interest income from bond investments increased to US$122.9 million for the nine months ended September 30, 2023 from US$45.8 million for the nine months ended September 30, 2022, mainly as a result of an increase in bond investments combined with a higher interest rate environment.
For the nine months ended September 30, 2023, 63% of AIIB’s total interest income was from loan investments, 28% was from cash, cash equivalents and deposits and 9% was from bond investments. For the nine months ended September 30, 2022, 66% of AIIB’s total interest income was from loan investments, 21% was from cash, cash equivalents and deposits and 12% was from bond investments.
8
Interest Expense
Nine Months Ended September 30, 2023 and 2022. AIIB’s interest expense increased to US$563.9 million for the nine months ended September 30, 2023 from US$200.7 million for the nine months ended September 30, 2022, mainly as a result of higher interest rates and a net increase in outstanding bond issuances. Since September 30, 2022 and through September 30, 2023, AIIB (i) issued (a) US$2,000 million principal amount of 4.000% notes due 2028; (b) US$2,000 million principal amount of 4.875% notes due 2026; (c) US$566.4 million equivalent of fixed rate notes under its Renminbi Bonds Issuance Programme; (d) US$1,761.8 million equivalent of zero coupon notes under AIIB’s Euro-Commercial Paper Programme; (e) US$372.0 million equivalent of fixed rate notes under AIIB’s A$ and NZ$ Debt Issuance Programme; (f)US$100.0 million equivalent of floating rate notes through private placement in the local onshore market in Georgia and (g) US$5,014.7 million equivalent of fixed rate and zero coupon notes and US$50.0 million of floating rate notes under AIIB’s Global Medium Term Note Programme; (ii) and repaid (a) US$3,000 million principal amount of 0.250% notes due 2023 issued in 2020, (b) US$424.6 million equivalent of fixed rate notes issued under the Bank’s Renmibi Bonds Issuance Programme; (c) US$1,347.8 million equivalent of zero coupon notes issued under AIIB’s Euro-Commercial Paper Programme; (d) US$1,403.1 million principal amount of fixed rate notes issued under AIIB’s Global Medium Term Notes Programme; and (e) US$364.0 million equivalent of fixed rate notes issued under AIIB’s A$ and NZ$ Debt Issuance Programme.
Net Interest Income
Net interest income is interest income less interest expense.
Nine Months Ended September 30, 2023 and 2022. Mainly for the reasons set forth above, AIIB’s net interest income increased to US$817.9 million for the nine months ended September 30, 2023 from US$170.7 million for the nine months ended September 30, 2022.
Net Fee and Commission Income
Net fee and commission income mainly consists of loan commitment and service fees charged to borrowers less co-financing service fees paid in respect of co-financing arrangements.
Nine Months Ended September 30, 2023 and 2022. AIIB’s net fee and commission income decreased to US$24.8 million for the nine months ended September 30, 2023 from US$26.5 million for the nine months ended September 30, 2022, mainly as a result of an increase in co-financing service fees paid in respect of co-financing arrangements. Total co-financing service fees paid in respect of co-financing arrangements increased to US$3.4 million for the nine months ended September 30, 2023 from US$1.9 million for the nine months ended September 30, 2022.
Net Gain on Financial Instruments Measured at Fair Value through Profit or Loss
Net gain on financial instruments measured at fair value through profit or loss mainly reflects the change in fair value of AIIB’s investments in (i) money market funds; (ii) bond investments of high credit quality measured at fair value through profit or loss managed as part of AIIB’s treasury investment portfolio; (iii) bond investments measured at fair value through profit or loss managed as part of AIIB’s investment operations; (iv) limited partnership funds managed by general partners that make investment decisions on behalf of the limited partners of such funds (including AIIB); (v) investments in trust; (vi) a fixed-income portfolio managed by an external asset manager whose primary objective is to develop climate bond markets in Asia; (vii) portfolios of high credit quality securities managed by external asset managers engaged by AIIB; and (viii) high credit quality certificates of deposit and commercial paper which are actively managed as part of the Bank’s treasury portfolio, as well as changes in the fair value of AIIB’s own borrowings and derivatives.
Nine Months Ended September 30, 2023 and 2022. AIIB’s net gain on financial instruments measured at fair value through profit or loss increased to US$187.1 million for the nine months ended September 30, 2023 from US$155.4 million for the nine months ended September 30, 2022. The net gain for the nine months ended September 30, 2023 was mainly due to gains on (i) derivatives held by AIIB to hedge its treasury investment portfolio, (ii) AIIB’s treasury investment portfolio, including bond investments of high credit quality, high credit quality certificates of deposit and commercial paper, money market funds and portfolios of high credit quality securities managed by external asset managers engaged by AIIB; (iii) limited partnership funds managed by general partners that make investment decisions on behalf of the limited partners of such funds (including AIIB) and investments in trust, as well as on bond investments managed as part of AIIB’s investment operations; and (iv) a fixed-income portfolio managed by an external asset manager whose primary objective is to develop climate bond markets in Asia. The net gain on financial instruments measured at fair value through profit or loss for the nine months ended September 30, 2023 was offset in part by fair value losses on derivatives AIIB has entered into for hedging AIIB’s own borrowings. The net gain for the nine months ended September 30, 2022 was mainly due to fair value gains on the derivatives held by AIIB to hedge its portfolio of local currency denominated loans, offset in part by fair value losses on AIIB’s portfolios of high credit quality securities managed by external asset managers engaged by AIIB and fair value losses on the fixed income portfolio managed by an external asset manager whose primary objective is to develop climate bond markets in Asia.
Net Loss on Financial Instruments Measured at Amortized Cost
Net loss on financial instruments measured at amortized cost reflects the change in amortized cost of the Bank’s investments in (i) a fixed-income portfolio of high credit quality securities with a hold-to-maturity strategy managed by an external asset manager engaged by AIIB; (ii) a fixed-income portfolio of high credit quality securities with a hold-to-maturity strategy, managed internally by AIIB; and (iii) a fixed-income portfolio which comprises primarily Asian infrastructure-related bonds.
Nine Months Ended September 30, 2023 and 2022. AIIB’s net loss on financial instruments measured at amortized cost was US$4.4 million for the nine months ended September 30, 2023 and US$13.2 million for the nine months ended September 30, 2022. The net loss for the nine months ended September 30, 2023 and the nine months ended September 30, 2022 mainly resulted from the disposal of certain bonds in AIIB’s fixed-income portfolios.
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Share of Gain on Investment in Associate
In April 2020, the Bank subscribed for a 30% economic interest in an entity incorporated in Singapore (the “Associate”), thereby giving the Bank significant influence over the financial and operating decisions of the Associate. Share of gain or loss on investment in associate reflects AIIB’s share in the gain or loss recognized by the Associate in the respective period.
Nine Months Ended September 30, 2023 and 2022. AIIB’s share of gain on investment in associate for the nine months ended September 30, 2023 was US$3.3 million. The share of gain on investment in associate for the nine months ended September 30, 2022 was US$0.6 million. The share of gain on investment in associate for the nine months ended September 30, 2023 mainly resulted from higher operating income generated by the Associate.
Impairment Provision
AIIB uses an expected credit loss (“ECL”) model to estimate credit losses on financial assets, such as loan disbursements or bond investments, and on other instruments, such as undrawn loan commitments. AIIB recognizes an ECL allowance at each reporting date and recognizes an impairment provision (either an impairment loss or the reversal of an impairment loss) that reflects the change in the ECL allowance between such reporting date and the previous reporting date. Impairment provisions are driven in large part by changes in loan volumes, risk parameters related to macroeconomic outlook and changes in AIIB’s assessment of the credit risk of individual financings.
Nine Months Ended September 30, 2023 and 2022. AIIB’s impairment provision was US$13.7 million for the nine months ended September 30, 2023, compared to US$158.7 million for the nine months ended September 30, 2022.
The impairment provision recognized in the nine months ended September 30, 2023 was mainly due to (i) changes in the risk parameters of certain sovereign-backed and non-sovereign-backed loans, and (ii) an increase in outstanding loan volumes.
The impairment provision recognized in the nine months ended September 30, 2022 was mainly due to (i) increases in the credit risks associated with certain non-sovereign-backed loans; (ii) the assessment as credit impaired of seven bond investments in the fixed-income portfolio, which comprises primarily Asian infrastructure-related bonds, and their transfer to Stage 3; and (iii) an increase in outstanding loan volumes.
General and Administrative Expenses
General and administrative expenses mainly consist of (i) staff costs, such as short-term employee benefits, including salaries, location premiums and medical and life insurance, and costs related to AIIB’s defined contribution (i.e., retirement) plans; (ii) professional service expenses; (iii) IT services; (iv) facilities and administration expenses; (v) travel expenses; (vi) issuance cost in respect of borrowings; and (vii) other expenses.
Nine Months Ended September 30, 2023 and 2022. AIIB’s general and administrative expenses increased to US$164.2 million for the nine months ended September 30, 2023 from US$131.9 million for the nine months ended September 30, 2022, mainly due to an increase in staff costs, travel expenses, issuance cost for borrowings, professional service expenses and costs related to IT. Mainly as the result of the continuing ramp-up of AIIB’s organizational activities, staff costs increased to US$86.1 million for the nine months ended September 30, 2023 from US$71.3 million for the nine months ended September 30, 2022. Mainly as a result of the gradual lifting of travel restrictions put in place in response to the COVID-19 pandemic, costs related to travel expenses increased to US$10.3 million for the nine months ended September 30, 2023 from US$2.2 million for the nine months ended September 30, 2022. Issuance cost for borrowings increased to US$9.2 million for the nine months ended September 30, 2023 from US$5.3 million for the nine months ended September 30, 2022, due to an increase in the amount of issuances in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Professional service expenses increased to US$23.1 million for the nine months ended September 30, 2023 from US$21.1 million for the nine months ended September 30, 2022. Costs related to IT services increased to US$15.4 million for the nine months ended September 30, 2023 from US$14.2 million for the nine months ended September 30, 2022.
Net Foreign Exchange Loss
Net foreign exchange loss or gain reflects the change in value, due to movements in currency exchange rates, of financial instruments held by the Bank that are measured at amortized cost. For financial instruments held by the Bank measured at fair value through profit or loss, the change in value due to movements in currency exchange rates is reported as part of their overall change in fair value through profit or loss. See “–Net Gain on Financial Instruments Measured at Fair Value through Profit or Loss.”
Nine Months Ended September 30, 2023 and 2022. AIIB had a net foreign exchange loss of US$142.2 million for the nine months ended September 30, 2023, compared to a net foreign exchange loss of US$97.4 million for the nine months ended September 30, 2022. The net foreign exchange loss for the nine months ended September 30, 2023 was mainly due to foreign exchange losses from the depreciation of the Russian ruble against the U.S. dollar and the impact such depreciation had on the U.S. dollar value of the Bank’s outstanding Russian ruble denominated loan. See “Recent Developments–AIIB Response to the Conflict in Ukraine.” These losses were partially offset by foreign exchange gains deriving from fair value movements on financial instruments held by the Bank to mitigate currency risks, namely, swaps. The net foreign exchange loss for the nine months ended September 30, 2022 was mainly due to the depreciation of the Euro, the Chinese yuan, the Indian rupee and the Turkish lira against the U.S. dollar and the impact such depreciations had on the U.S. dollar value of the Bank’s portfolio of local currency denominated loans (partially offset by the appreciation of the Russian ruble against the U.S. dollar and the impact such appreciation had on the U.S. dollar value of the Bank’s exposure to a Russian ruble-denominated loan). Such net foreign exchange gain for the nine months ended September 30, 2022 was largely offset, however, by fair value movements on financial instruments held by the Bank to mitigate currency risks, namely, swaps.
10
Operating Profit or Loss
Nine Months Ended September 30, 2023 and 2022. Mainly for the reasons set forth above, AIIB’s operating profit was US$708.5 million for the nine months ended September 30, 2023, compared to an operating loss of US$48.2 million for the nine months ended September 30, 2022.
Accretion of Paid-in Capital Receivables
Paid-in capital receivables represent amounts due from the Bank’s members in respect of paid-in capital. These amounts are initially recognized at fair value, which reflects the discounted present value of future paid-in capital inflows, and subsequently measured at amortized cost. The difference between amortized cost and fair value is accounted for as a reserve under members’ equity and is accreted through the income statement using the effective interest method.
Nine Months Ended September 30, 2023 and 2022. AIIB’s accretion of paid-in capital receivables decreased to US$1.0 million for the nine months ended September 30, 2023 from US$1.9 million for the nine months ended September 30, 2022. This decrease was mainly due to lower contractual balances in paid-in capital receivables as of September 30, 2023 compared to September 30, 2022.
Other Comprehensive Income
For financial liabilities, such as AIIB’s borrowings, that are designated at fair value through profit or loss, fair value changes attributable to changes in AIIB’s own credit risk are recognized in other comprehensive income (while other fair value changes are recognized under net gain or loss on financial instruments measured at fair value through profit or loss). Upon maturity of such financial liabilities, the recognition in other comprehensive income of fair value changes attributable to changes in AIIB’s own credit risk is reversed.
Nine Months Ended September 30, 2023 and 2022. AIIB experienced an unrealized loss on borrowings arising from changes in AIIB’s own credit risk of US$99.2 million for the nine months ended September 30, 2023, compared to an unrealized gain of US$82.3 million for the nine months ended September 30, 2022. This change was mainly the result of the tightening of the Bank’s overall credit spread against the relevant benchmark discount curves, particularly the U.S. dollar discount curves. The tightening of the Bank’s own credit spread reflected decreases in credit spreads in financial markets in the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.
Total Comprehensive Income
Nine Months Ended September 30, 2023 and 2022. Mainly for the reasons set forth above, AIIB’s total comprehensive income increased to US$610.3 million for the nine months ended September 30, 2023 from US$36.0 million for the nine months ended September 30, 2022.
Balance Sheet
Assets
Total assets mainly consist of (i) loan investments at amortized cost; (ii) investments at fair value through profit or loss; (iii) bond investments at amortized cost; (iv) term deposits with initial maturities of more than three months; (v) cash and cash equivalents; (vi) cash collateral receivables; (vii) derivative assets; and (viii) paid-in capital receivables.
Investments at fair value through profit or loss mainly consist of (i) bond investments of high credit quality measured at fair value through profit or loss; (ii) the Bank’s investments in portfolios of high credit quality securities managed by external asset managers engaged by AIIB and measured at fair value through profit or loss; and (iii) high credit quality certificates of deposit and commercial paper, which are actively managed as part of the Bank’s treasury portfolio. Bond investments at amortized cost consist of (i) a fixed-income portfolio of high credit quality securities with a hold-to-maturity strategy managed by an external asset manager engaged by AIIB; (ii) a fixed-income portfolio of high credit quality securities with a hold-to-maturity strategy, managed internally by AIIB; and (iii) a fixed-income portfolio which comprises primarily Asian infrastructure-related bonds. Cash and cash equivalents consist of (i) term deposits with initial maturities of three months or less; (ii) money market funds; and (iii) demand deposits. Cash collateral receivables reflect the collateral paid to swap counterparties.
Assets of the Bank include high-quality liquid assets, which are defined as cash or assets that can be converted into cash at little or no loss in value.
As of September 30, 2023 and December 31, 2022. As of September 30, 2023, AIIB’s total assets were US$53,048.6 million, compared to total assets of US$47,409.2 million as of December 31, 2022. This increase resulted mainly from (i) an increase of US$3,872.1 million in investments at fair value through profit or loss; (ii) an increase of US$3,136.2 million in bond investments at amortized cost; (iii) an increase of US$2,971.6 million in loan investments at amortized cost; and (iv) an increase of US$179.2 million in derivative assets offset in part by (a) a decrease of US$3,468.0 million in term deposits; (b) a decrease of US$878.8 million in cash and cash equivalents; and (c) a decrease of US$214.9 million in cash collateral receivables.
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Liabilities
Total liabilities mainly consist of (i) borrowings; (ii) derivative liabilities; (iii) prepaid paid-in capital; and (iv) other liabilities, such as cash collateral payables, payable and advance receipt for unsettled trades, deferred interest, accrued expenses, staff costs payable, lease liability and provisions.
As of September 30, 2023 and December 31, 2022. As of September 30, 2023, AIIB’s total liabilities were US$31,962.1 million, compared to total liabilities of US$26,943.5 million as of December 31, 2022. This increase resulted primarily from (i) an increase of US$4,845.7 million in borrowings (see under “–Income Statement–Interest Expense”) and (ii) an increase of US$275.5 million in other liabilities mainly associated with an increase in payable and advance receipt for unsettled trades.
Members’ Equity
Members’ equity consists of (i) paid-in capital; (ii) retained earnings; (iii) reserves for unrealized loss or gain on borrowings measured at fair value attributable to changes in the Bank’s own credit risk; and (iv) reserves for accretion of paid-in capital receivables.
As of September 30, 2023 and December 31, 2022. As of September 30, 2023, AIIB’s total members’ equity was US$21,086.5 million, compared to total members’ equity of US$20,465.7 million as of December 31, 2022. This increase mainly resulted from an increase of US$708.5 million in retained earnings.
Asset Quality
As of September 30, 2023, no AIIB assets were categorized as overdue or written off, except for (i) a non-sovereign-backed loan that was assessed as credit impaired with an amount of US$4.6 million (carrying amount net of the associated ECL allowance); (ii) seven bond investments measured at amortized cost that were assessed as credit impaired with a carrying amount of US$0.7 million (carrying amount net of the associated ECL allowance); (iii) four bond investments measured at fair value through profit or loss that were assessed as non-performing with an amount of US$3.5 million (fair value); and (iv) US$198.6 million of overdue contractual undiscounted paid-in capital receivables, which are not considered impaired.
Recent Developments
AIIB Response to the Conflict in Ukraine
On March 3, 2022, in response to events taking place in Ukraine, the Bank announced it would place all activities relating to Russia and Belarus on hold and under review, including all Russia- and Belarus-related projects in the Bank’s rolling investment pipeline. AIIB’s exposure to Russia and to the Russian ruble (“RUB”), including through its financing activities, borrowings and governance and administration, is limited, consisting of the following:
| • | Financing activities. The Bank has one loan outstanding to a borrower in Russia, a RUB-denominated loan of RUB24 billion (approximately US$300 million as of the time of approval). The aggregate amount of this loan represents less than 1.0% of the total commitments and less than 1.5% of the total disbursements in AIIB’s overall loan portfolio as of October 31, 2023. This loan was approved in October 2020 and made to JSC Russian Railways (“RZD”), under the CRF, to support RZD against adverse effects of the COVID-19 pandemic. RZD is subject to U.S. sanctions that prohibit certain dealings in certain newly issued debt or equity of RZD (issued on or after March 26, 2022). RZD is also subject to European Union sanctions that prohibit certain dealings in certain newly issued debt or equity of RZD (issued after April 12, 2022) and making new loans or credit to RZD after February 26, 2022. In the event the Bank were required to comply with these prohibitions related to RZD, they would be inapplicable to the Bank’s outstanding loan to RZD, which was fully disbursed as of December 2020. RZD is, as of March 24, 2022, also subject to an asset freeze under United Kingdom sanctions. The Bank does not believe that any transactions related to its outstanding loan to RZD will have a nexus to the United Kingdom. As of October 31, 2023, all funds in which the Bank has investments that are classified as multi-country financings have divested any securities that provided the Bank with direct or indirect exposure to Russia. As a result, the Bank has no such exposure through its investments in these funds. |
| • | Borrowings. AIIB has issued four series of bonds denominated in RUB under its Global Medium Term Note Programme. One of these series of bonds remains outstanding, with an aggregate amount outstanding of RUB6.7 billion (approximately US$88.8 million equivalent as of October 31, 2023), which represents less than 0.3% of AIIB’s outstanding borrowings as of October 31, 2023. All RUB-denominated bonds issued by AIIB were hedged at the time of issuance to remove the associated interest rate and foreign exchange risk. The terms and conditions of these bonds allow for the Bank to make principal or interest payments in U.S. dollars in certain circumstances, including if the RUB is not used in the international banking community. |
| • | Governance and administration. The Governor appointed by Russia to AIIB’s Board of Governors is currently a subject of sanctions imposed by the United States, European Union, United Kingdom and certain other jurisdictions. AIIB does not expect that these sanctions, or other sanctions that may be imposed on Governors or Directors of AIIB appointed by Russia, would be reasonably likely to affect the Bank’s operations. Neither AIIB’s Governors nor its Directors have signing authority over the Bank’s operations, and no individual Governor or Director has sole or majority decision making power with respect to the Bank. One member of AIIB’s senior management is a Russian national. This individual is not a subject of sanctions imposed by any jurisdiction. |
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AIIB does not have exposure to Belarus or the Belarussian ruble, other than with respect to the same governance matters and processes common to all non-regional members.
13
