Sberbank reports 2Q 2017 Net Profit of RUB185.6 bn, or RUB8.36 per ordinary share, under International Financial Reporting Standards (IFRS)

Aug 23, 2017

Sberbank (hereafter ”the Group”) has released its interim condensed consolidated IFRS financial statements (hereafter “the Financial Statements”) as at and for the 6 months ended 30 June 2017, with review report by AO PricewaterhouseCoopers Audit.

Alexander Morozov, Deputy Chairman of the Executive Board, CFO, commented: “In 2Q 2017 we posted a healthy ROE of 24.8% which was the result of several positive trends including accelerating loan growth, resilient margin, rebounding fee and commission income and steadily improving efficiency. These improvements across the P&L resulted in our 6M 2017 EPS growing 33.5% compared to 6M 2016. The results of 2Q 2017 allow us to maintain adequate capital levels for future growth despite significant dividend payments made and upcoming regulatory changes affecting capital adequacy ratios.”

The 2Q 2017 Financial Highlights:

·         The Group net profit reached RUB185.6 bn

·         The Group earnings per ordinary share (EPS) came at RUB8.36, up by 26.3% compared to 2Q 2016

·         The Group annualized return on equity (ROE) reached 24.8%, up from 22.8% in 2Q 2016

·         The Group gross loan portfolio increased by 4.7% during the quarter to RUB19.0 trn, with corporate loans up by 5.4% to RUB13.8 trn, and retail loans – by 3.1% to RUB5.2 trn

·         The Group operating expenses decreased by 4.5% relative to 2Q 2016

·         The Group Cost-to-Income ratio improved to 33.5% from 38.5% in 2Q 2016

·         The Group paid dividends during the quarter in the amount of RUB134.4 bn; the Group capital position came down during the quarter with core capital adequacy ratio under Basel I at 12.7%, and total capital adequacy ratio at 16.0%

Selected Financial Results

RUB bn, unless stated otherwise

2Q

2017

1Q 2017

2Q 2016

2Q17/

1Q17

% change  

2Q17/

2Q16

% change

6M 2017

6M

2016

6M17/

6M16

% change

 

Net interest income

357.6

336.6

339.3

6.2%

5.4%

694.2

664.8

4.4%

Net fee and commission income

94.9

80.4

85.9

18.0%

10.5%

175.3

163.1

7.5%

Other non-interest income[1]

28.9

5.5

17.6

425.5%

64.2%

34.4

(7.5)

na

Total revenues

481.4

422.5

442.8

13.9%

8.7%

903.9

820.4

10.2%

Net provision charge for impairment of debt financial assets

(89.1)

(67.3)

(96.5)

32.4%

(7.7%)

(156.4)

(180.4)

(13.3%)

Operating expenses

(161.2)

(147.3)

(168.8)

9.4%

(4.5%)

(308.5)

(312.6)

(1.3%)

Net profit

185.6

166.6

145.4

11.4%

27.6%

352.2

263.1

33.9%

Earnings per ordinary share, RUB

8.36

7.79

6.62

7.3%

26.3%

16.15

12.10

33.5%

Total comprehensive income

217.7

138.2

149.3

57.5%

45.8%

355.9

273.8

30.0%

Book value per share*, RUB

134.6

131.0

115.3

2.7%

16.7%

134.6

115.3

16.7%

Ratios

 

 

 

 

 

 

Return on equity

24.8%

23.1%

22.8%

 

 

23.9%

21.1%

 

Return on assets

2.9%

2.7%

2.2%

 

 

2.8%

2.0%

 

Net interest margin

6.0%

5.8%

5.6%

 

 

5.9%

5.5%

 

Cost of risk

191 bp

146 bp

202 bp

 

 

169 bp

186 bp

 

Cost-to-income ratio

33.5%

34.7%

38.5%

 

 

34.0%

37.7%

 

              

* Total equity / total numbers of shares outstanding (ordinary + preferred). Unaudited

Net interest income reached RUB357.6 bn in 2Q 2017, up by 5.4% from the year-ago period:

  • Interest income (down 3.9% to RUB576.4 bn compared to 2Q 2016) dynamics were explained by declining interest rate environment, while interest expenses including deposit insurance expenses decreased by 15.9% from 2Q 2016 to RUB218.8 bn;
  • The cost of liabilities decreased by 20 basis points to 4.2% in 2Q 2017 relative to 1Q 2017, driven by retail term deposits, cost of which came down by 30 basis points to 5.3%, while yield on working assets remained unchanged during the quarter at 9.7% despite the declining interest rates.

The Group 2Q 2017 net fee and commission income came at RUB94.9 bn, up by 10.5% from the year-ago period. The main drivers of this growth as compared to the same period a year ago were banking cards operations that increased by 24.1% in 2Q 2017 from 2Q 2016.

Net provision charge for loan impairment for 2Q 2017 totaled RUB88.8 bn compared to RUB98.3 bn for 2Q 2016. This translated into the cost of risk of 191 basis points for the quarter versus 202 basis points a year ago.

  • The cost of risk for corporate loans amounted to 229 basis points in 2Q 2017;
  • The cost of risk for retail loans amounted to 90 basis points in 2Q 2017.

The Group operating expenses for 2Q 2017 decreased to RUB161.2 bn, down by 4.5% from the same period a year ago. Cost discipline was observed across most of the key components of the operating expenses, including administrative, operating leases, and repairs & maintenance of premises and equipment, while staff costs increased only by 0.5% in 2Q 2017 compared to 1Q 2017.

 

Selected Balance Sheet Results

RUB bn, unless stated otherwise

30/06/17

31/03/17

31/12/16

6M-3M 2017

% change

6M17-12M16

% change

Total gross loans, of which:

19 030.7

18 168.0

18 664.7

4.7%

2.0%

Corporate loans

13 827.3

13 122.4

13 633.0

5.4%

1.4%

Retail loans

5 203.4

5 045.6

5 031.7

3.1%

3.4%

     Restructured loans

1 286.0

1 230.4

1 209.1

4.5%

6.4%

Securities portfolio

3 124.1

2 737.5

2 717.5

14.1%

15.0%

Assets

25 754.7

24 655.4

25 368.5

4.5%

1.5%

Total customer deposits, of which:

18 914.1

18 043.0

18 684.8

4.8%

1.2%

Retail deposits

12 816.5

12 325.4

12 449.6

4.0%

2.9%

Corporate deposits

6 097.6

5 717.6

6 235.2

6.6%

(2.2%)

Ratios

 

 

 

 

 

Net loans-to-deposits ratio

91.0%

90.9%

90.6%

 

 

NPL ratio

4.6%

4.7%

4.4%

 

 

NPL coverage ratio

160%

157%

157%

 

 

Restructured-to-gross loans

6.8%

6.8%

6.5%

 

 

Total provision coverage of total NPLs + restructured non-NPLs

77.1%

75.3%

74.6%

 

 

Total gross loans increased by 4.7% to RUB19.0 trn in 2Q 2017 as compared to 1Q 2017, supported by both corporate loan portfolio increase (up by 5.4% during the quarter from corporate loan demand as well as revaluation of foreign currency denominated loans) and retail loan demand (consumer unsecured loan portfolio was up by 3.9%, while mortgages were up by 2.3% during the quarter).

Client deposits demonstrated an increase of 4.8% in 2Q 2017 as compared to 1Q 2017 driven by the inflow of both corporate and retail funds, up by 6.6% and 4.0% respectively during the quarter.

Total NPL[2] ratio came at 4.6% in 2Q 2017 as compared to 4.7% in 1Q 2017. The coverage level of the NPL portfolio increased to 160% of total NPLs during the quarter.

The share of restructured loan portfolio of total gross loan portfolio remained unchanged during the quarter at 6.8%; the quarterly increase in the ending balance of the portfolio was mainly explained by the Rouble devaluation. The provision coverage of total NPLs combined with restructured non-NPLs improved to 77.1% in 2Q 2017, up from 75.3% in 1Q 2017.

Selected Equity Position Results

Under Basel I

RUB bn, unless stated otherwise

30/06/17

31/03/17

31/12/16

6M-3M 2017

% change

6M17-12M16

% change

Total Tier 1 capital

2 959.1

2 903.2

2 732.7

1.9%

8.3%

Total capital

3 734.7

3 635.5

3 499.7

2.7%

6.7%

Risk-weighted assets

23 344.9

21 926.6

22 268.2

6.5%

4.8%

Equity

3 040.4

2 958.9

2 821.6

2.8%

7.8%

Ratios

 

 

 

 

 

Core capital adequacy ratio

12.7%

13.2%

12.3%

 

 

Total capital adequacy ratio

16.0%

16.6%

15.7%

 

 

         

The Group’s total capital increased by 2.7% to RUB3.7 trn in 2Q 2017 relative to 1Q 2017 primarily as a result of retained net profit. The Group paid dividends during the quarter in the amount of RUB134.4 bn.

The Group’s risk-weighted assets increased by 6.5% in 2Q 2017 from 1Q 2017 to RUB23.3 trn, driven by both loan demand and Rouble devaluation. The core capital adequacy ratio decreased by 50 basis points to 12.7% during 2Q 2017. The total capital adequacy ratio (Basel I) decreased by 60 basis points to 16.0% during 2Q 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 from operations with precious metals, precious metals derivatives and precious metals accounts translation; Net gains / (losses) from operations with other derivatives; Impairment of premises, equipment and intangible assets; Goodwill impairment; Net gains on initial recognition of financial instruments, loans restructuring and sale of loans; Net (charge for) / recovery of 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