Sberbank reports 1Q 2018 Net Profit of RUB212.1 bn, or RUB9.84 per ordinary share, under International Financial Reporting Standards (IFRS)

May 30, 2018

Moscow, May 30, 2018 – Sberbank (hereafter ”the Group”) has released its interim condensed consolidated IFRS financial statements (hereafter “the Financial Statements”) as at and for the 3 months ended 31 March 2018, with report on review by AO PricewaterhouseCoopers Audit.

Alexander Morozov, Deputy Chairman of the Executive Board, CFO, commented: “In 1Q 2018 we posted a healthy ROE of 24.2%, achieved mainly on the back of dynamic retail loan growth and strong fee and commission income formation that set positive momentum to reach financial targets for the year.”

The 1Q 2018 Financial Highlights:

  • The Group net profit reached RUB212.1 bn
  • The Group earnings per ordinary share (EPS) came at RUB9.84, up by 26.3% compared to 1Q 2017
  • The Group annualized return on equity (ROE) reached 24.2%, up from 23.1% in 1Q 2017
  • The Group annualized return on assets (ROA) reached 3.1%, up from 2.7% in 1Q 2017
  • Net fee and commission income grew 21.4% y/y to RUB101.5 bn, driven by operations with bank cards
  • The quarterly cost of risk (CoR), annualized, came at 105 basis points, down by 44 bps compared to 4Q 2017. Effective 1Q 2018 the Group started reporting financial results in accordance with IFRS 9 standard
  • The Group Cost-to-Income ratio improved to 33.6% from 34.7% in 1Q 2017
  • The Group gross loan portfolio (includes loans at amortized cost and at fair value) increased by 1.1% during 1Q 2018 to RUB20.1 trn, with retail loans growing by 3.5% to RUB6.0 trn, led by mortgage portfolio growth of 4.8% and consumer unsecured portfolio growth of 3.6% for the quarter
  • The Group’s common equity Tier 1 capital adequacy ratio under Basel III standard reached 12.2% by the end of the quarter, up 100 basis points as compared to 1/01/2018

 

Selected Financial Results


RUB bn, unless stated otherwise

1Q 2018

1Q 2017

4Q 2017

1Q18/
1Q17,
% change

1Q18/
4Q17, 
% change

Net interest income

358.6

336.6

382.9

6.5%

(6.3%)

Net fee and commission income

101.5

83.6

118.0

21.4%

(14.0%)

Other non-interest income / (expense)1

10.8

2.2

0.5

390.9%

2060.0%

Total revenues

470.9

422.4

501.4

11.5%

(6.1%)

Net credit loss allowance charge for debt financial assets

(49.1)

(67.4)

(72.7)

(27.2%)

(32.5%)

Staff and administrative expenses

(157.4)

(147.1)

(203.9)

7.0%

(22.8%)

Net profit

212.1

166.6

172.4

27.3%

23.0%

Earnings per ordinary share, RUB

9.84

7.79

8.10

26.3%

21.5%

Total comprehensive income

213.2

138.2

168.6

54.3%

26.5%

Book value per share*, RUB

158.5

130.9

151.9

21.1%

4.3%

Ratios

 

 

 

 

 

Return on equity

24.2%

23.1%

20.6%

 

 

Return on assets

3.1%

2.7%

2.6%

 

 

Net interest margin

5.6%

5.8%

6.1%

 

 

Cost of risk

105 bp

146 bp

149 bp

 

 

Cost-to-income ratio

33.6%

34.7%

40.6%

 

 

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

Net interest income was RUB358.6 bn in 1Q 2018, up by 6.5% y/y:

  • Total interest income (up 1.7% to RUB575.1 bn compared to 1Q 2017) was influenced by strong loan portfolio growth on year-on-year basis on the back of declining interest rate environment in Russia;
  • Total interest expense with deposit insurance expenses for 1Q 2018 decreased by 5.5% from 1Q 2017 to RUB216.5 bn due to funding base repricing.

During the quarter, yield on working assets decreased by 60 basis points to 9.0% from 4Q 2017, affected by both declining corporate yields that were down by 50 basis points to 8.4% in 1Q 2018 as compared to 4Q 2017, and declining retail yields that were down by 90 basis points to 13.2% in 1Q 2018 as compared to 4Q 2017.

Cost of liabilities remained unchanged during the quarter at 3.9% as compared to 4Q 2017 due to proactive measures to front-load repricing of the deposit base that was carried out in 2017.

The Group 1Q 2018 net fee and commission income came at RUB101.5 bn, up by 21.4% from the year-ago period. The main drivers of this growth were operations with bank cards, which, net of applicable costs, increased by 33.3% in 1Q 2018 y/y.

Net provision chargefor debt financial assets for 1Q 2018 totaled RUB49.1 bn compared to RUB67.4 bn for 1Q 2017. This translated into the cost of risk of 105 basis points for the quarter (vs 146 basis points a year ago). CoR of the corporate portfolio decreased by 70 basis points to 114 basis points compared to 4Q 2017, while CoR of the retail portfolio increased by 27 basis points to 85 basis points as compared to 4Q 2017.

The Group operating  expenses (staff and administrative)for 1Q 2018 came at RUB157.4 bn, up by 7.0% from the same period a year ago, partially affected by temporary calendarization effect of employee compensation variable component, which should smoothen out toward the end of the year, as well as staff costs indexation in 2H 2017.

Net fee and commission income coverage of operating expenses improved to 64.5% in 1Q 2018 from 56.8% in 1Q 2017.  

 

Selected Balance Sheet Results


RUB bn, unless stated otherwise

31/03/18
IFRS 9

01/01/18
IFRS 9

31/12/17
IAS 39

31/03/18 vs. 1/01/18
 %

Total loans *

20 099.5

19 885.2

19 891.2

1.1%

Corporate loans *

14 145.6

14 130.7

14 174.6

0.1%

Retail loans *

5 953.9

5 754.5

5 716.6

3.5%

Restructured loans

1 273.6

1 208.8

1 182.0

5.4%

Securities portfolio

3 244.1

3 097.8

3 030.5

4.7%

Assets

27 267.0

27 027.2

27 112.2

0.9%

Total deposits:

19 761.8

19 814.2

19 814.2

(0.3%)

Retail deposits

13 316.5

13 420.3

13 420.3

(0.8%)

Corporate deposits

6 445.3

6 393.9

6 393.9

0.8%

Ratios

 

 

 

 

NPL ratio

4.2%

4.5%

4.2%

 

NPL coverage ratio

178.1%

171.3%

167.8%

 

Restructured-to-total loans

6.3%

6.1%

5.9%

 

combined loans at amortized cost and at fair value

Total loans (at amortized cost, gross, and at fair value) increased by 1.1% to RUB20.1 trn in 1Q 2018 as compared to 4Q 2017. The dynamics during the quarter were largely influenced by strong results in retail loan portfolio, led by robust mortgages growth and consumer unsecured lending (up 4.8% and 3.6% q/q respectively). Corporate loan portfolio (at amortized cost and at fair value combined) came slightly up by 0.1% to RUB14.1 trn, as compared to 4Q 2017.

Client deposits portfolio decreased slightly by 0.3% in 1Q 2018, with inflows of funds to corporate deposits (+0.8% q/q).

Total NPL portfolio (at amortized cost and fair value) came to RUB853.4 bn in 1Q 2018. The NPL ratio decreased from 4.5% as at 1/01/2018 to 4.2% as at 31/03/2018, while the coverage level of the NPL portfolio by provisions improved to 178.1% during the quarter.

Capital Adequacy Ratio


Under Basel III
RUB bn, unless stated otherwise

31/03/18
IFRS 9

01/01/18
IFRS 9

31/12/17
IAS 39

31/03/18 vs. 1/01/18
 %

Total Tier 1 capital

3 485.8

3 291.1

3 360.6

5.9%

Total capital

3 628.6

3 750.8

3 820.3

(3.3%)

Risk-weighted assets

28 581.7

29 369.0

29 496.8

(2.7%)

Credit risk

24 568.9

25 195.1

25 245.7

(2.5%)

Operational risk

3 092.8

3 092.8

3 092.8

Unch

Market risk

920.0

1 081.1

1 158.3

(14.9%)

Ratios

 

 

 

 

Common equity Tier 1 capital adequacy ratio

12.2%

11.2%

11.4%

 

Total capital adequacy ratio

12.7%

12.8%

13.0%

 

The Group total equity increased by 4.3% to RUB3.6 trn in 1Q 2018 relative to 4Q 2017 primarily as a result of retained net profit.

The Group’s total capital under Basel III standard decreased by 3.3% to RUB3.6 trn in 1Q 2018 mainly as a result of full exclusion of subordinated debt from the Central Bank of Russia in the amount of RUB 300 bn from Total capital as per Basel Committee requirements.

The Group’s risk-weighted assets decreased by 2.7% to RUB28.6 trn during 1Q 2018 mainly as a result of RWA optimization ongoing process.

Common equity Tier 1 capital adequacy ratio increased by 100 basis points to 12.2% at 31/03/2018 as compared to 1/01/2018. Total capital adequacy ratio (Basel III) decreased by 10 basis points to 12.7% at 31/03/2018 as compared to 1/01/2018.


1 Net gains from non-derivative financial instruments at fair value through profit or loss (2017: Net gains from trading securities and securities designated as at fair value through profit or loss); Net gains from financial instruments at fair value through other comprehensive income (2017: Net gains from investment securities available-for-sale); Net gains / (losses) from derivatives, trading in foreign currencies, foreign exchange and precious metals accounts translation; Impairment of non-financial assets; Net charge for other provisions; 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 income