Sberbank reports 2017 Net Profit of RUB748.7 bn, or RUB34.58 per ordinary share, under International Financial Reporting Standards (IFRS)

28.02.18, Moscow

Moscow, February 28, 2018 – 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 2017, with audit report by AO PricewaterhouseCoopers Audit.

 

The 2017 Financial Highlights:

  • The Group net profit reached RUB748.7 bn, up by 38.2% compared to 2016.
  • The Group earnings per share (EPS) came at RUB34.58, up by 38.3% compared to 2016.
  • The Group annualized return on equity (ROE) reached 24.2% p.a., compared to 20.8% a year ago.
  • The Group annualized return on assets (ROA) reached 2.9%, up from 2.1% a year ago.
  • Net fee and commission income grew 12.9% y/y to RUB394.2 bn, driven by operations with bank cards.
  • The Group gross loan portfolio increased by 6.6% in 2017 to RUB19.9 trn, with retail loans growing by 13.6% to RUB5.7 trn, led by mortgages portfolio growth of 16.0% for the year.
  • The Group’s common equity Tier 1 capital adequacy ratio under Basel III standard reached 11.4% by the end of the year, up 120 basis points.

 

The Q4 2017 Financial Highlights:

  • Sberbank’s net profit reached RUB172.4 bn, or RUB8.1 per ordinary share, for the quarter, up by 21.6% compared to Q4 2016.
  • The quarterly cost of risk (CoR) came at 149 basis points, up by 29 bps compared to Q3 2017. CoR of the corporate portfolio increased by 44 bps to 184 basis points compared to Q3 2017, while CoR of the retail portfolio decreased by 10 bps to 58 basis points as compared to Q3 2017.  
  • Client deposits increased by 3.4% to RUB19.8 trn in Q4 2017 compared to Q3 2017. Retail deposits grew by 4.9%, while corporate deposits were up by 0.5% during the quarter.

Selected Financial Results


RUB bn, unless stated otherwise

4Q 2017

3Q 2017

4Q 2016

4Q17/
3Q17,
% change

4Q17/
4Q16,
% change

12M 2017

12M 2016

12M17/
12M16,
% change

Net interest income

382.9

375.0

355.2

2.1%

7.8%

1,452.1

1,362.8

6.6%

Net fee and commission income

118.0

100.9

97.4

16.9%

21.1%

394.2

349.1

12.9%

Other non-interest income

0.5

22.1

(10.5)

-97.7%

--

57.0

(14.4)

--

Total revenues

501.4

498.0

442.1

0.7%

13.4%

1,903.3

1,697.5

12.1%

Net provision charge for impairment of debt financial assets

(72.7)

(58.2)

(60.3)

24.9%

20.6%

(287.3)

(342.4)

-16.1%

Operating expenses

(203.9)

(160.4)

(202.0)

27.1%

0.9%

(672.8)

(677.6)

-0.7%

Net profit

172.4

224.1

141.8

-23.1%

21.6%

748.7

541.9

38.2%

Earnings per ordinary share, RUB

8.10

10.33

6.54

-21.6%

23.9%

34.58

25.00

38.3%

Total comprehensive income

168.6

226.0

88.0

-25.4%

91.6%

750.5

492.4

52.4%

Book value per share*, RUB

159.2

144.6

130.7

10.1%

21.8%

159.2

130.7

21.8%

Ratios

 

 

 

 

 

Return on equity

20.6%

28.4 %

20.4%

-7.8 pp

0.2 pp

24.2%

20.8%

3.4 pp

Return on assets

2.6%

3.4 %

2.2%

-0.8 pp

0.4 pp

2.9%

2.1%

0.8 pp

Net interest margin

6.1%

6.1 %

6.1%

unch

unch

6.0%

5.7%

0.3 pp

Cost of risk

149 bp

120 bp

122 bp

29 bp

27 bp

151 bp

177 bp

-26 bp

Cost-to-income ratio

40.6%

32.0 %

45.9%

8.6 pp

-5.3 pp

35.2%

39.7%

-4.5 pp

*Total equity / Total number of ordinary shares outstanding
Net interest income was RUB382.9 bn in Q4 2017, up by 7.8% y/y:

  • Interest income (up 0.5% to RUB598.3 bn compared to Q4 2016) was supported by solid lending volumes.
  • Interest expenses including deposit insurance expenses for Q4 2017 decreased by 10.3% from Q4 2016 to RUB215.4 bn.

During the quarter, yield on working assets decreased by 10 bps to 9.6% from Q3 2017, while the annualized yield on working assets was down 30 basis points to 9.7% from 2016, mostly affected by declining corporate yields that were down by 70 basis points during the year to 9.1% (or 20 bps in Q4 2017 as compared to Q3 2017).
Cost of liabilities decreased by 20 basis points to 3.9% in Q4 2017 compared to Q3 2017, driven mainly by corporate term deposits, cost of which came down by 50 basis points to 3.4%. Annualized cost of liabilities declined by 60 basis points to 4.1% as compared to 2016, due to declining cost of both corporate and retail term deposits (-60 bps to 3.7% and -80 bps to 5.2%, respectively).
The Group Q4 2017 net fee and commission income came at RUB118.0 bn, up by 21.1% from the year-ago period. The main drivers of this growth were operations with bank cards, which, net of applicable costs, increased by 32.8% in 4Q 2017 y/y.
Net provision chargefor loan impairment for Q4 2017 totaled RUB73.2 bn compared to RUB57.7 bn for Q4 2016. This translated into the cost of risk of 149 basis points for the quarter (vs 122 basis points a year ago).
In Q4 2017, cost of risk was affected by methodology changes to the probability of default (PD) model and the loss given default (LGD) model on corporate loans to residents as a result additional accumulated track record of defaulted loans’ recoveries as well as incorporation of PD model for project finance companies and non-resident customers. The net one-off effect in Q4 2017 amounted to additional provision charge of RUB32.3 bn.
The Group operating expenses for Q4 2017 came at RUB203.9 bn, up by just 0.9% from the same period a year ago, as a result of cost discipline across major lines.
As previously communicated, effective January 1, 2017 the Group (1) reconsidered useful life for some fixed assets to bring it in line with actual that translated into lower depreciation expense, and (2) classified costs related to text-messaging notifications to fee and commission expenses as compared to operating expenses in previous periods. Should the Bank not apply these amendments, operating expenses for the full year would have increased in-line with inflation.
Net fee and commission income coverage of operating expenses improved to 58% in Q4 2017 from 48% in Q4 2016.
Selected Balance Sheet Results


RUB bn, unless stated otherwise

31/12/17

30/09/17

31/12/16

12M-9M 2017

12M17-12M16

Total gross loans

19,891.2

19,498.0

18,664.7

2.0%

6.6%

Corporate loans

14,174.6

14,074.1

13,633.0

0.7%

4.0%

Retail loans

5,716.6

5,423.9

5,031.7

5.4%

13.6%

Restructured loans

1,182.0

1,188.1

1,209.1

-0.5%

-2.2%

Securities portfolio

3,289.4

3,164.9

2,717.5

3.9%

21.0%

Assets

27,112.2

26,220.2

25,368.5

3.4%

6.9%

Total deposits

19,814.2

19,161.5

18,684.8

3.4%

6.0%

Retail deposits

13,420.3

12,798.9

12,449.6

4.9%

7.8%

Corporate deposits

6,393.9

6,362.6

6,235.2

0.5%

2.5%

Ratios

 

 

 

 

 

Net loans-to-deposits ratio

91.6%

92.4%

90.6%

-0.8 pp

1.0 pp

NPL ratio

4.2%

4.6%

4.4%

-0.4 pp

-0.2 pp

NPL coverage ratio

167.8%

157.2%

157.3%

10.6 pp

10.5 pp

Restructured-to-gross loans

5.9%

6.1%

6.5%

-0.2 pp

-0.6 pp

Total provision coverage of total NPLs + restructured non-NPLs

83.1%

80.6%

74.6%

2.5 pp

8.5 pp

Total loans, gross, increased by 2.0% to RUB19,891.2 bn in Q4 2017 as compared to Q3 2017. The increase was due to growth in retail loans (up 5.4% q/q), which was led by robust mortgage portfolio growth (up 7.3% q/q). Corporate loan portfolio increased by 0.7% as compared to Q3 2017, marked by refinancing activity.

Client deposits portfolio increased by 3.4% in Q4 2017, with strong inflows of funds to corporate and retail deposits (+0.5% q/q and +4.9% q/q, respectively).

Total NPL portfolio came down by 5.8% to RUB836.4 bn during Q4 2017. The NPL ratio decreased to 4.2% in Q4 2017 as compared to 4.6% in Q3 2017, while the coverage level of the NPL portfolio by provisions improved to 167.8% during the quarter.

The share of restructured loans of the total loan portfolio declined to 5.9% in Q4 2017 as compared to 6.1% in Q3 2017, which serves as evidence of regular work with distressed assets. The total provision coverage of NPLs combined with restructured non-NPLs reached 83.1% in Q4 2017, up from 80.6% in Q3 2017.
Capital Adequacy Ratio


Under Basel III
RUB bn, unless stated otherwise

31/12/17

30/09/17

31/12/16

12M-9M 2017

12M17-12M16

Total Tier 1 capital

3,360.6

3,187.2

2,765.9

5.4%

21.5%

Total capital

3,820.3

3,662.7

3,241.8

4.3%

17.8%

Risk-weighted assets

29,496.8

28,862.9

27,028.3

2.2%

9.1%

Credit risk

25,245.7

25,246.9

23,443.0

~unch

7.7%

Operational risk

3,092.8

2,736.0

2,736.0

13.0%

13.0%

Market risk

1,158.3

880.0

849.3

31.6%

36.4%

Ratios

 

 

 

 

 

Common equity Tier 1 capital adequacy ratio

11.4%

11.0%

10.2%

0.4 pp

1.2 pp

Total capital adequacy ratio

13.0%

12.7%

12.0%

0.3 pp

1.0 pp

The Group total equity increased by 5.2% to RUB3.4 trn in Q4 2017 relative to Q3 2017 primarily as a result of retained net profit.

The Group’s total capital under Basel III standard increased by 4.3% to RUB3.8 trn in Q4 2017 mainly as a result of retained net profit.

The Group’s risk-weighted assets increased by 2.2% to RUB29.5 trn during Q4 2017, driven largely by operational risk component on the back of calculation period shift (i.e. inclusion of income for 2017 in the rolling 3-year calculation period).

Common equity Tier 1 capital adequacy ratio increased by 40 basis points to 11.4% during Q4 2017.
Total capital adequacy ratio (Basel III) increased by 30 basis points to 13.0% in Q4 2017 as compared to Q3 2017.


[1] Other non-interest income consists of Net gains from trading securities; Net gains from securities designated as at fair value through profit or loss; Net gains from investment securities available-for-sale; Impairment of investment securities available-for-sale; Net (losses) / gains from trading in foreign currencies, operations with foreign currency derivatives and foreign exchange translation; Net gains / (losses) from operations with precious metals, precious metals derivatives and precious metals accounts translation; Net gains from operations with other derivatives; Net losses from revaluation of office premises; Impairment of premises, equipment and intangible assets; Goodwill impairment; Losses on initial recognition of financial instruments and on loans restructuring; 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; Other net operating income.

[2] Non-performing loans more than 90 days overdue