Sberbank reports 3Q 2020 Net Profit of RUB271.4 bn under International Financial Reporting Standards (IFRS)

Oct 29, 2020

Moscow, October 29, 2020  – Sberbank (hereafter ”the Group” or “Sber”) has released its interim condensed IFRS financial statements (hereafter “the Financial Statements”) as at and for the 9 months ended 30 September 2020, with report on review by AO PricewaterhouseCoopers Audit.

Alexandra Buriko, CFO, stated:

“Revival in corporate and consumer activity in 3Q further to the end of the lockdown and meaningful support to business and the population led to significant growth in loan portfolio and transactional volumes in Sber. Further development of digital services along with the anti-crisis cost optimization program supported efficiency: Cost-to-Income Ratio decreased to 29.6%.

Sber earned RUB271.4 bn in net profit and delivered 22.8% ROE5 in 3Q 2020.

We expect that business activity will somewhat slow in 4Q as the pandemic continues. However, our solid financial position and upcoming seasonal uptick allows us to remain cautiously optimistic until the end of the year.”

3Q 2020 Financial and Operational Highlights:

  • The Group net profit reached RUB271.4 bn (+73.9% y/y), and net profit from continuing operations totaled RUB265.6 bn (+15.1% y/y);
  • The Group earnings per ordinary share (EPS) came in at RUB11.82 (+63.05 y/y), and earnings per ordinary share from continuing operations came in at RUB11.55 (+7.7% y/y);
  • The Group return on equity (ROE)5 reached 22.8%, and return on assets (ROA)6 was 3.2%;
  • The Group gross loans1 stood at RUB24.5 trn, up by 5.7% excluding the FX revaluation effect. The retail loan portfolio was up by 7.4% to RUB8.9 trn, while the corporate loan portfolio amounted to RUB15.7 trn, up by 5.2% excluding the effect of FX revaluation;
  • Active retail client base grew by 1.3 mn to 98.2 mn;
  • Number of monthly active users (MAU) of mobile App Sberbank Online was up by 3 mn to 63 mn, and the number of daily active users (DAU) increased by 2.4 to 29.6 mn; DAU/MAU grew close to 47%;
  • Active corporate client base stood at 2.7 mn, while MAU in digital channels exceeded 2.3 mn users;
  • As of the end of 3Q 2020, over 13 mn clients were using Sber ID, a unified login that gives access to more than 90 Sber ecosystem services and partners.

Statement of Profit or Loss Results Highlights

RUB bn, unless stated otherwise

3Q

2020

3Q

2019

2Q

2020

3Q2020/

3Q2019

% change

3Q2020/

2Q2020

% change

9M

2020

9M

2019

9M2020/

9M2019

% change

Net interest income

411.3

353.9

398.5

16.2%

3.2%

1 181.7

1 044.5

13.1%

Net fee and commission income

147.7

130.0

120.0

13.6%

23.1%

394.1

349.6

12.7%

Other non-interest income / (expense) 3

33.6

27.1

-3.6

24.0%

-1033.3%

40.3

79.6

-49.4%

Operating income before provisions 2

592.6

511.0

514.9

16.0%

15.1%

1 616.1

1 473.7

9.7%

Net charge related to change in asset quality: 

-85.7

-54.0

-132.9

58.7%

-35.5%

-385.7

-108.3

256.1%

     Net credit loss allowance charge for debt financial assets

-63.3

-30.6

-126.5

106.9%

-50.0%

-327.8

-57.1

474.1%

     Negative revaluation of loans at fair value due to change in credit quality

-22.4

-23.4

-6.4

-4.3%

250.0%

-57.9

-51.2

13.1%

Net loss allowance / provision for credit related commitments

1.9

-3.9

-0.7

-148.7%

-371.4%

-13.4

-2.0

570.0%

Staff and administrative expenses

-175.5

-167.4

-172.4

4.8%

1.8%

-517.1

-486.6

6.3%

Net profit  from continuing operations

265.6

230.8

166.7

15.1%

59.3%

552.8

702.8

-21.3%

Profit / (Loss) from discontinued operations

5.8

-74.7

0.0

-107.8%

NA

5.8

-69.8

-108.3%

Net profit

271.4

156.1

166.7

73.9%

62.8%

558.6

633.0

-11.8%

Earnings per ordinary share from continuing operations. RUB

11.55

10.72

7.78

7.7%

48.5%

24.94

31.94

-21.9%

Earnings per ordinary share. RUB

11.82

7.25

7.78

63.0%

51.9%

25.21

28.70

-12.2%

Total comprehensive income 

293.6

271.8

229.1

8.0%

28.2%

644.2

758.7

-15.1%

Ratios

Return on equity 5

22.8%

15.2%

14.2%

--

--

15.9%

20.9%

--

Return on assets 6

3.2%

3.1%

2.1%

--

--

2.2%

3.2%

--

Net interest margin

5.48%

5.30%

5.61%

--

--

5.52%

5.33%

--

Cost of risk (amortized cost loans)

 111 bp

 63 bp

 224 bp

 --

 --

 194 bp

 41 bp

--

Cost of risk (amortized cost and FV loans)

 143 bp

 106 bp

 225 bp

 --

 --

 219 bp

 72 bp

--

Cost-to-income ratio 2

29.6%

32.8%

33.5%

--

--

32.0%

33.0%

--

Balance Sheet Highlights

RUB bn. unless stated otherwise

30.09.2020

30.06.2020

31.12.2019

30.09.2020/

31.06.2020

% change

30.09.2020/

31.12.2019

% change

Gross total loans1:

     24 546.2

     22 852.1

     21 749.4

7.4%

12.9%

Corporate loans 1

     15 664.3

     14 582.1

     13 865.4

7.4%

13.0%

Retail loans 1

      8 881.9

      8 270.0

      7 884.0

7.4%

12.7%

Securities portfolio

     5 687.8

      4 845.0

      4 369.7

17.4%

30.2%

Assets 3

     35 123.8

     32 383.4

     29 958.9

8.5%

17.2%

Total deposits:

     25 152.1

     23 312.4

     21 574.4

7.9%

16.6%

Retail deposits

    15 759.1

    15 108.2

    14 209.6

4.3%

10.9%

Corporate deposits

      9 393.0

      8 204.2

      7 364.8

14.5%

27.5%

Book value per share6. RUB

         214.2

         213.4

         198.3

0.4%

8.0%

Ratios

Net Loans / Deposits ratio (LDR)

91.2%

90.9%

94.4%

--

--

Stage 3 + POCI loans / total gross loans at amortized cost

6.9%

7.5%

7.5%

--

--

Provision coverage of Stage 3 + POCI loans

98.4%

102.0%

89.3%

--

--


Net interest income increased by 16.2% y/y in 3Q 2020 to RUB411.3 bn.

Interest income was down by 0.5% y/y in 3Q 2020 to RUB599.4 bn on the back of a gradual decline in yields following the market rates.

  • Retail loan portfolio expanded by 7.4% in 3Q 2020 and the balance came in at RUB8.9 trn, given the recovery in consumer activity once the pandemic-related restrictions were released as well as attractive loan rates. The share of retail lending in the total loan portfolio stayed at 36.2%. The yield on retail loans declined by 10 bp to 11.8%.
    • The mortgage portfolio grew by 8.5% in 3Q 2020, benefiting from robust demand for both the state and the bank’s own subsidized mortgage programs which accounted for about 40% of new loan origination. In the meantime, mortgage lending was enhanced by a variety of digital services on the Sber housing platform, whereby the monthly audience increased by 2.8 mn to 10.3 mn users.  
    • Consumer loan portfolio increased by 6.9%, boosted by higher demand on the back of favorable market rates and seasonal promos. Consumer lending was encouraged by growing issuances in digital channels, which accounted for 73% of the total.
    • Corporate loan portfolio1 grew by 7.4% in 3Q 2020 to RUB15.7 trn, driven by record loan production and the lower ruble. Growth adjusted for the impact of FX revaluation was 5.2%.  The yield on corporate loans was down by 30 bp for the quarter to 6.8%.
  • Thus far, Sber has been actively participating in the state support programs for business and signed loan agreements for more than RUB400 bn.     

Interest expense, including deposit insurance expenses, decreased by 24.4% y/y in 3Q 2020 to RUB188.1 bn on the back of lower market rates and reduction in deposit insurance contribution. Allocations for deposit insurance were down by 24.8% y/y to RUB16.1 bn in 3Q 2020.

  • Retail funding increased by 4.3% in 3Q 2020 to RUB15.8 trn. The average cost of retail funding decreased by 10 bp to 4.0%.
  • Corporate funding was up by 14.5% in 3Q 2020 to RUB9.4 trn, and grew by 7.9% adjusted for FX revaluation.  The average cost of corporate funding was down by 10 bp to 3.0%.

Net LDR ratio equaled 91.2% in 3Q 2020, up by 0.3 pp compared to 2Q 2020.

Securities portfolio grew by 17.4% in 3Q 2020 and amounted to RUB5,687.8 bn, driven by purchases of OFZ with a floating coupon for the amount of RUB500 bn aimed at forming a liquidity buffer without any impact on capital adequacy and negligible effect on interest rate risk.

The Group net fee and commission income increased by 13.6% y/y in 3Q 2020 to RUB147.7 bn due to upbeat transactional activity. 

  • Sber continues the development of digital services and touchless solutions, which grew deeper into client habits during lockdown. SberPay wallet for NFC payments was launched in 3Q 2020 for off- and online shopping.
  • SberPrime subscription and autodidact voice assistants became available in Sberbank Online.
  • Net income from bank cards grew by 14.5% y/y, driven by recovery in acquiring turnover and merchant activity.
  • Transport acquiring is now available in 131 Russian cities.
  • Over a third of Sber clients opted for purely cashless transactions and the share of cashless payments accounted for 89.7% of total in 3Q 2020.

Brokerage services are gathering momentum on the back of the growing range of investment instruments. Over the first 9 months in 2020, the number of brokerage accounts on the Sberbank Investor platform doubled and exceeded 2.5 mn.

According to management accounts, the operating income of insurance, pension and asset management businesses totaled RUB28.9 bn (-10% y/y) in 3Q2020. Total assets under management increased by 4.4% in 3Q 2020 to RUB1.66 trn.

The Group operating expenses (staff and administrative) were up by 4.8% y/y to RUB175.5 bn in 3Q 2020. Moderate cost growth was facilitated by the pandemic-related efficiency enhancement program. The increase in staff expenses slowed down to 2.1% y/y due to the leveling off the base effect from payroll indexation in July last year.

The Group Cost-to-Income ratio2 was down by 3.2 pp y/y to 29.6% in 3Q 2020.

Net credit loss allowance charge for loans at amortized costs amounted to RUB 62.5 bn in 3Q 2020. The Cost of Risk for loans at amortized cost was 111 bp. In accordance with IFRS 9 part of the loan portfolio is accounted at fair value through profit or loss. Negative revaluation of these loans due to change in credit quality amounting to RUB22.4 bn in 3Q. The combined provision charge including negative revaluation of loans at fair value amounted to RUB84.9 bn, while the combined Cost of Risk was down by 82 bp to 143 bp in 3Q 2020.

The credit quality of the loan portfolio remained stable in 3Q 2020. The decrease in the share of impaired loans by 0.6 pp to 6.9% for loans at amortized cost was mostly technical and related to the bad debt recovery procedure for the Eurocement Group. Based on agreements with a previous beneficiary Sber consolidated 100% shares of the parent company of this group. An investor search is currently in process to sell the shares for the benefit of Sber.

Total provision coverage of impaired loans in 3Q 2020 was down by 3.6 pp compared to the previous quarter to 98.4%.

Selected Capital Adequacy Results4

The data in the table is in accordance with standardized and IRB approaches applied to the corresponding assets groups.

Risk-weighted assets under a standardized approach as of 30.09.2020 were assessed according to Basel 3.5 and those for the previous periods were assessed according to Basel III.

Risk-weighted assets under an IRB approach as of 30.09.2020 and 30.06.2020 were assessed according to Basel 3.5 and those for 31.12.2019 were assessed according to Basel III.

Under Basel III

RUB bn, unless stated otherwise 

30.09.2020

30.06.2020

31.12.2019

30.09.2020 /

30.06.2020

% change

30.09.2020 /

31.12.2019

% change

Common equity Tier 1 capital

 4 554.8

 4 721.2

 4 375.4

-3.5%

4.1%

Tier 1 capital

 4 704.8

 4 721.2

 4 375.4

-0.3%

7.5%

Total capital

 4 836.4

 4 863.2

 4 433.5

-0.6%

9.1%

Risk-weighted assets

 34 004.7

 31 936.4

 32 634.1

6.5%

4.2%

Credit risk

 29 468.4

 27 538.6

 28 062.7

7.0%

5.0%

Operational risk

 3 486.8

 3 486.8

 3 486.8

0.0%

0.0%

Market risk

 1 049.5

 911.0

 1 084.6

15.2%

-3.2%

Ratios

Common equity Tier 1 capital adequacy ratio

13.39%

14.78%

13.41%

--

--

Tier 1 capital adequacy ratio

13.84%

14.78%

13.41%

Total capital adequacy ratio

14.22%

15.23%

13.59%

--

--

Leverage ratio

12.7%

13.7%

13.7%

--

--

Common equity Tier 1 capital decreased by 3.5% to RUB4,554.8 bn on the back of dividends for 2019 declared in 3Q 2020.

Tier 1 capital decreased by 0,3% to RUB4,554.8 bn. In 3Q 2020, the subordinated loan agreement in the amount of RUB150.0 bn, that was previously assigned by the Bank of Russia in favor of the Ministry of Finance, was included in the sources of additional capital.

The Group’s total capital changed insignificantly and amounted to RUB4,836.4 bn as of 30.09.2020.

The Group’s risk-weighted assets were up by 6.5% to RUB34,004.7 bn in 3Q 2020 mostly due to a 7% increase in the credit risk component of the risk-weighted assets on the back of loan portfolio growth and its FX revaluation. The increase was partially offset by the reduction of risk-weighted assets driven by transition to Basel 3.5 for Standardized approach and the cancellation of the macro add-on for unsecured consumer loans issued before 01.09.2019. Risk-weighted assets density decreased for the quarter from 92.9% to 92.0%. 

The Group’s leverage ratio was down by 100 bp to 12.7% in 3Q 2020.

Common equity Tier 1 capital adequacy ratio decreased by 139 bp to 13.39% in 3Q 2020, Tier 1 capital adequacy ratio was down by 94 bp to 13.84%, while total capital adequacy ratio decreased by 101 bp to 14.22%.  

Before loan loss allowance and including loans at amortized cost and at fair value

Operating income before provisions for debt financial assets, credit related commitments and revaluation of loans at fair value due to change in credit quality

Other non-interest income / (expense) includes: Net losses from non-derivative financial instruments at fair value through profit or loss (excluding revaluation of loans at fair value due to change in credit quality); Net gains from financial instruments at fair value through other comprehensive income; Net gains from derivatives, trading in foreign currencies, foreign exchange and precious metals accounts translation; Net  losses arising on initial recognition of financial instruments and loan modification; Impairment of non-financial assets; Net (charge for) / recovery of other provisions and allowances (excluding Net loss allowance / provisions for credit related commitments); Revenue of non-core business activities; Cost of sales and other expenses of non-core business activities; Net premiums from insurance and pension fund operations; Net claims, benefits, change in contract liabilities and acquisition costs on insurance and pension fund operations; Income from operating lease of equipment; Expenses related to equipment leased out; Other net operating (expense) / income

Total equity attributable to shareholders of the Bank / Total numbers of shares outstanding (ordinary + preferred)

Excluding the subordinated loan agreement in the amount of RUB150.0 bn classified as equity financial instrument that was previously ceded by the Bank of Russia in favor of the Ministry of Finance

Based on profit from continuing operations

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