Sberbank reports 2019 net profit of RUB 845.0 bn under international Financial Reporting Standards (IFRS)

Feb 27, 2020

Moscow, February 27, 2020 – Sberbank (hereafter ”the Group”) has released its Annual consolidated IFRS financial statements (hereafter “the Financial Statements”) as at and for the 12 months ended 31 December 2019, with audit report by AO PricewaterhouseCoopers Audit. All information is presented net of Denizbank A.S. operations, unless stated otherwise.

 

Herman Gref, Chairman of the Executive Board, CEO:

“The most important achievement for 2019 was the industrial launch of the new Sberbank Digital Platform and the start of the large-scale migration of our products and services to it. By creating a private Cloud, not only did we increased the level of infrastructure utilization 4-fold, we also started offering Cloud solutions to our clients. The Artificial Intelligence has already become our important business driver: the economic effect of increasing AI use amounted to RUB42 bn last year.

Better customer experience allows us to widen our client base: the number of active retail clients has grown by 3 mln over the year up to 96 mln people. We have 54 mln monthly active digital users, and 24 mln daily active users. We have learned how to convert a growing number of Sberbank Online clients into sales: more than a half of consumer loans and over a third of mortgages are issued in digital channels.

We are focused on the extention of our digital sales experience to Ecosystem products. Last year we defined an Ecosystem framework, adding new digital services to the Sberbank Ecosystem, including food delivery, transportation, job classified and video streaming.

We remain client centric and continually work to improve efficiency on the back of technological development that allowed Sberbank to ensure a return on equity of more than 20%.”

 

The 2019 Operational and Financial Highlights:

  • The number of active retail clients was up by 3 mln for the year and exceeded 96 mln;
  • The number of monthly active users (MAU) of mobile App Sberbank Online was up by 11.71 mln for the year and exceeded 54 mln.
  • The number of daily active users (DAU) of mobile App Sberbank Online increased on about 10 mln for the year to 24.7; DAU/MAU improved by 10.5 pp for the year and exceeded 45%;
  • The number of Sberbank active corporate clients was up by more than 300 th for the year and exceeded 2.5 mln with 45% share of sales in digital channels. MAU in digital channels was up to 2.2 mln users;
  • As of the end of 4Q 2019 more than 6 mln clients use Sberbank ID, a unified login that provides an access to more than 40 Ecosystem partners, inc. Delivery Club, Okko, Citimobil and other companies.

The Group’s 2019 annual financial results were affected by Denizbank sale results recognition took place in the 3Q 2019.

  • The Group net profit including the effect from Denizbank sale amounted to RUB845,0 bn (+1.6% y/y). The Group net profit from continuing operations was RUB914.8 bn (+10.1% y/y);
  • The Group earnings per ordinary share (EPS) including the effect from Denizbank sale were RUB38.55 up by 1.0% y/y. The Group earnings per ordinary share (EPS) based on profit from continuing operations came at RUB41.80 up by 9.6% compared to 2018;
  • The Group annualized return on equity (ROE) including the effect from Denizbank sale came at 20.5%. The Group annualized return on equity (ROE) based on profit from continuing operations was 22.2%, while. The Group annualized return on assets (ROA) including the effect from Denizbank sale totaled 2.7%, the Group annualized return on assets (ROA) based on profit from continuing operations was 3.1%;
  • The Group net interest income was up by 1.4% to RUB1 415.5 bn compared to 2018;
  • The Group net fee and commission income was up by 13.6% to RUB497.9 bn compared to 2018;
  • The Group gross loans1 increased by 3.2% for the year to RUB21.7 trn for. Retail loan portfolio grew by 16.8% to RUB7.9 trn, corporate loan portfolio decreased in nominal terms by 3.2% to RUB13.9 trn, the growth in real terms (adjusted for FX revaluation) is 2.8%.
  • The Group Cost-to-Income ratio2 is 35.8% and up by 0.6pp y/y.

 

The 4Q 2019 Financial Highlights:

  • The Group net profit3 reached RUB212.0 bn up by 20.3% compared to 4Q 2018; the Group earnings per ordinary share (EPS) came at RUB9.9;
  • The Group net interest income was up by 4.6% y/y to RUB371.0 bn;
  • The Group net fee and commission income was up by 23.6% compared to 4Q 2018 to RUB148.3 bn;
  • The Group gross loans1 increased by 2.6% for the quarter to RUB21.7 trn for. Retail loan portfolio grew by 3.2% to RUB7.9 trn, corporate loan portfolio also increased by 2.2% to RUB13.9 trn, the growth adjusted for FX revaluation was 3.6%;
  • The quality of the Group loan portfolio improved: share of Stage 3 and POCI loans came at 7.5%, showing a 41 bp decrease compared to 3Q 2019.

 

 

Selected Statement of Profit or Loss Results

RUB bn, unless stated otherwise

4Q

4Q

3Q

4Q

4Q

12M

12M

12M

2019

2018

2019

2019/

2019/

2019

2018

2019/

   

4Q

3Q

  

12M

   

2018,

2019,

  

2018,

   

% change

% change

  

% change

Net interest income

371.0

354.7

353.9

4.6%

4.8%

1 415.5

1 396.5

1.4%

Net fee and commission income

148.3

120.0

130.0

23.6%

14.1%

497.9

438.1

13.6%

Other non-interest income/ (expense) 4

21.8

-0.9

23.2

--

-6.0%

99.4

23.3

326.6%

Operating income before provisions 2

541.1

473.8

507.1

14.2%

6.7%

2 012.8

1 857.9

8.3%

Net charge related to change in asset quality: 

-41.2

-36.2

-54.0

13.8%

-23.7%

-149.5

-154.1

-3.0%

     Net credit loss allowance charge for debt financial assets

-35.5

-21.0

-30.6

69.0%

16.0%

-92.6

-96.8

-4.3%

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

-5.7

-15.2

-23.4

-62.5%

-75.6%

-56.9

-57.3

-0.7%

Staff and administrative expenses

-238.0

-206.0

-167.4

15.5%

42.2%

-724.6

-657.6

10.2%

Net profit  from continuing operations

212.0

180.7

230.8

17.3%

-8.1%

914.8

831.2

10.1%

Profit / (Loss) from discontinued operations

--

-4.5

-74.7

-100.0%

-100.0%

-69.8

0.5

--

Net profit

212.0

176.2

156.1

20.3%

35.8%

845.0

831.7

1.6%

Earnings per ordinary share  from continuing operations, RUB

9.86

8.45

10.72

16.7%

-8.0%

41.80

38.13

9.6%

Total comprehensive income  from continuing operations attributable to the shareholders of the Bank

234.4

179.9

252.7

30.3%

-7.2%

989.4

789.1

25.4%

Ratios  based on continuing operations

Return on equity based on profit from continuing operations

19.4%

19.2%

22.4%

--

--

22.2%

23.1%

--

Return on assets based on profit from continuing operations

2.8%

2.6%

3.1%

--

--

3.1%

3.2%

--

Net interest margin

5.35%

5.42%

5.13%

--

--

5.16%

5.66%

--

Net interest margin 5

5.52%

5.62%

5.30%

--

--

5.38%

5.92%

--

Cost of risk (amortized cost loans)

 72 bp

 39 bp

 63 bp

 --

 --

 49 bp

 51 bp

--

Cost of risk (amortized cost and FV loans)

 80 bp

 67 bp

 106 bp

 --

 --

 74 bp

 78 bp

--

Cost-to-income ratio 2

43.4%

43.6%

32.8%

--

--

35.8%

35.2%

--

 

Selected Statement of Financial Position Results

RUB bn, unless stated otherwise

31.12.2019

30.09.2019

31.12.2018

31.12.2019/ 30.09.2019,

% change

31.12.2019/ 31.12.2018,

% change

Gross total loans1:

     21 749.4

     21 200.4

     21 082.3

2.6%

3.2%

Corporate loans 1

     13 865.4

     13 562.2

     14 331.1

2.2%

-3.2%

Retail loans 1

      7 884.0

      7 638.2

      6 751.2

3.2%

16.8%

Securities portfolio

      4 369.7

      4 181.8

      3 749.5

4.5%

16.5%

Assets 3

     29 958.9

     30 254.2

     31 197.5

-1.0%

-4.0%

Total deposits:

     21 574.4

     22 318.1

     20 897.3

-3.3%

3.2%

Retail deposits

    14 209.6

    13 717.5

    13 495.1

3.6%

5.3%

Corporate deposits

      7 364.8

      8 600.6

      7 402.2

-14.4%

-0.5%

Book value per share6, RUB

         198.3

         188.3

         170.5

5.3%

16.3%

Ratios

 

 

Net Loans / Deposits ratio (LDR)

94.4%

88.7%

93.7%

--

--

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

7.5%

7.9%

8.1%

--

--

Provision coverage of Stage 3 + POCI loans

89.3%

88.0%

90.4%

--

--

 

 

Net interest income came at RUB371.0 bn in 4Q 2019, up by 4.6% y/y.

Interest income increased by 5.8% y/y to RUB607.5 bn in 4Q2019 on the back of both the loan portfolio1 expansion by 3.2% y/y to RUB21.7 trn or 4.0% y/y adjusted for FX revaluation as well as the increase in the yield of working assets by 10 bp to 8.8% and optimization of the balance sheet structure.

  • Retail loan portfolio increased by 3.2% to RUB7.9 trn for the quarter. The share of retail loans in total loan portfolio exceeded 36%.
    • Consumer loan portfolio was up by 4.5% in 4Q 2019 supported by fast-growing online sales that accounted for 56% of total origination at the end of the reporting period vs. 44% a year ago. Consumer loan portfolio was up by 25.8% in 2019.
    • Mortgage portfolio grew by 3.1% in 4Q 2019. The dynamics is significantly affected by interest rates decrease as well as the time of the underwriting process – 60% of mortgage approvals are executed for less than an hour. Mortgage portfolio was up by 11.4% in 2019. The platform DomClick substantially supports mortgage lending: the total number of listings on the platform doubled last year to reach 2 mln.
    • Retail loan yield increased by 40 bp to 12.5% in 4Q 2019 driven by the increase of the share of consumer loans in the total loan portfolio.
  • Corporate loan portfolio1 showed a positive dynamic in all currencies and increased by 2.2% to RUB13.9 bn for the quarter on the back of accelerated growth in SME lending by 7.9% in 4Q 2019 and more than 20% for the year. Corporate loan yield decreased by 30 bp to 7.8% in 4Q 2019.

Interest expense, including deposit insurance expenses, was up by 7.7% y/y in 4Q 2019 to RUB236.5 bn.

  • Retail deposits grew by 3.6% compared to the previous quarter to RUB14.2 trn. The average cost of retail term deposits decreased by 20 bp for the quarter. Share of Ruble-denominated deposits exceeded 80%. Retail deposits were up by 5.3% for the year.
  • Corporate deposits declined by 14.4% to RUB7.4 trn. The average cost of term deposits decreased by 20 bp in 4Q 2019 to 4.3%. Corporate deposits decreased by 0.5% in 2019 while the FX-adjusted growth came at 4.6%.
  • The growth of current/settlement accounts was up by 8.4% and their share in the total corporate deposits exceeded 30%.

Sberbank Group issued bonds in the nominal amount of RUB392 bn on the Russian market by the end of 2019. At the same time the Group repaid USD2.5 bn and EUR1.5 bn on the wholesale market, thus the share of foreign funding in the Group`s total liabilities decreased to 1.0% in 2019, the carrying amount of which came at USD4.2 bn.

Net LDR ratio equaled to 94.4%, up by 5.7 pp compared to 3Q 2019.

The Group net fee and commission income came at RUB148.3 bn in 4Q 2019, up by more than 23.6% y/y mainly driven by operations with banking cards and cash and settlements transactions income. Starting from 1 January 2019 VAT for loyalty programs, which was earlier recognized in operating expenses, is included into net fee and commission income. The comparative base of the previous year was adjusted as well.

  • More than 20% of public transport rides in Russia is payed for by bank cards. Among other things this became possible due to development of Sberbank transport acquiring, which covered more than 102 Russian cities at the end of the year. 

According to management accounts, operating income of insurance, pension and asset management businesses amounted to RUB126 bn in 12M 2019, up by 13% y/y.

Assets under management of the Wealth Management business increased by 22% from the beginning of the year and achieved RUB1.5 trn.

The Group operating expenses (staff and administrative) were up by 15.5% y/y to RUB238.0 bn in 4Q 2019 and by 10.2% y/y to RUB724.6 bn for 12M 2019. The operating expenses dynamics was mainly affected by growth of IT costs, related to the industrial launch and further development of the new technological platform.

The VAT rate increase from the beginning of 2019 also affected the cumulative operating expenses dynamics. The Group Cost-to-Income ratio2 came at 43.4% in 4Q 2019 and 35.8% for the full year. 

Net credit loss allowance charge for loans at amortized costs amounted to RUB 35.5 bn in 4Q 2019. The Cost of Risk for loans at amortized cost was 72 bps in 4Q 2019. According to 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 amounted to RUB5.7bn for the quarter. The combined Cost of Risk for loans at amortized cost and at fair value was down by 26 bp to 80 bp in 4Q 2019. The FX component was shown as foreign exchange translation (losses) / gains and amounted to RUB 12.7 bn in 4Q 2019.8

The loan portfolio quality improved in 2019. The share of impaired loans, including the POCI loans, in total gross loan portfolio at amortized cost decreased by 0.4 pp to 7.5%. Total provision coverage of Stage 3 and POCI loans was up by 1.3 pp compared to the previous quarter to 89.3% in 4Q 2019.

 

Selected Capital Adequacy Results3

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

Under Basel III

31.12.2019

30.09.2019

31.12.2018

31.12.2019/

31.12.2019/

RUB bn, unless stated otherwise 

30.09.2019,

% change

31.12.2018,

% change

Total Tier 1 capital

       4 377.6

       4 164.7

       3 766.5

5.1%

16.2%

Total capital

       4 435.7

       4 273.3

       3 950.6

3.8%

12.3%

Risk-weighted assets

     32 634.1

      30 791.8

      31 793.1

6.0%

2.6%

Credit risk

    28 062.7

     26 428.6

     27 477.4

6.2%

2.1%

Operational risk

      3 486.8

       3 339.9

       3 339.9

4.4%

4.4%

Market risk

      1 084.6

       1 023.3

          975.8

6.0%

11.1%

Ratios

 

 

 

 

 

Common equity Tier 1 capital adequacy ratio

13.41%

13.53%

11.85%

--

--

Total capital adequacy ratio

13.59%

13.88%

12.43%

--

--

Leverage ratio

13.7%

13.0%

11.3%

--

--

 

The Group’s total capital under Basel III reached RUB4 435.7 bn as of 31/12/2019, up by 3.8% as compared to previous quarter.

The Group’s risk-weighted assets were up by 6.0% to RUB32 634.1 in 4Q 2019 due to growth of operational risk by 4.4% on the back of calculation period shift as well as increase in credit risk by 6.2%. The credit risk growth was influenced by introduction macro-prudential add-ons for some loan segments. Nevertheless, in 1Q 2020 the Group got the approval from the Bank of Russia of application for IRB implementation, which will have positive impact on risk-weighted assets density.

The Group’s leverage ratio increased by 70 bp to 13.7% in 4Q 2019.

Common equity Tier 1 capital adequacy ratio and total capital adequacy ratio showed a slight decrease in 4Q by 12 bp to 13.41% and by 29 bp to 13.59% respectively on the back of the Group’s risk-weighted assets growth.

 

 

 

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

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

3 Including corresponding line from discontinued operations, that, effective May 2018, Denizbank is classified as

4 Other non-interest income / (expense) includes: Net gains from non-derivative financial instruments at fair value through profit or loss excluding revaluation of loans at FV through P&L due to change in credit quality; Net gains from financial instruments at fair value through other comprehensive income; Net gains / (losses) from derivatives, trading in foreign currencies, foreign exchange and precious metals accounts translation; Net gains/ losses on initial recognition of financial instruments and on loans restructuring; Net losses from revaluation of office premises; Impairment of non-financial assets; Net recovery of / (charge for) other provisions; Revenue of non-banking business activities; Cost of sales and other expenses of non-banking business activities; Net premiums from insurance and pension fund operations; Net claims related to insurance and pension fund operations; Income from operating lease of equipment; Expenses related to equipment leased out; Other net operating income

5 Net interest margin was recalculated as working assets adjusted for the amount of provisions, created against Stage 3 loans

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

7 Starting from 1Q19 the FX-component is excluded from provision charge / recovery for FX-denominated loans at amortized cost as well as from revaluation of FX-denominated loans at fair value.

 

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