Sberbank has published Consolidated Financial Statements in accordance with International financial reporting standards (IFRS) for 9m 2009
Sberbank has posted its condensed interim consolidated IFRS financial statements (hereafter “the Financial statements”) as of 30 September 2009 and for 9m 2009 (hereafter ‘the Reporting period”) including an Ernst &Young review report.
Highlights of Sberbank Group’s financial performance as of 30.09.2009 and for 9 months 2009 (Download the presentation):
- Operating income before provision charge for loan impairment increased by 48.7%
- Net interest income grew 40.4%
- Net commission income grew 19.6%
- Staff costs decreased by 5.5%
- Provision charge for loan impairment increased 8.3-fold
- Group’s balance sheet remains highly liquid: 16.9% of Group’s total assets are liquid assets, that have remaining expected maturity «on demand and less than 1 month»
- Strong Group’s capital adequacy ratio under Basel 1: 18.8% calculated as of 30 September 2009, well above minimum requirement of 8%
- Gross loan portfolio growth by 4.8% compared to beginning of 2009
- Increase in retail accounts and deposits, which reached RUB 3 418.8 bn, a 9.9% growth compared to the beginning of the year
Sberbank Group’s (hereafter “the Group”) Financial statements shows operating income before provision charge for loan impairment of RUB 476.4 bn for 9 months 2009 compared to RUB 320.4 bn for 9 months 2008, a 48.7% growth year-on-year. Solid growth of operating income as in previous periods was driven by increase in interest income from lending operations, growth of commission income following expansion of client’s operation and increase in income from foreign exchange operations.
Interest income grew 38.3% year-on-year, totaling RUB 610.5 bn. Increase of interest income was attributable to interest income generated by corporate loan portfolio and interest income on operations with securities. Increase of interest income on operations with securities primarily explained by growth of corporate bonds portfolio. The Bank extended operations with corporate bonds since beginning of 2009.
Interest expenses grew 35.2% year-on-year and comprised RUB 234.8 bn. Growth in interest expenses was followed by increase in cost of funding and further contributed by subordinated borrowing from the Central Bank of Russia (CBR) in forth quarter 2008 totaling RUB 500 bn. At the same time in the third quarter 2009 interest expenses decreased by 3.8% compared to the second quarter, primarily due to reduction in cost of corporate deposits. Primary component of interest expenses traditionally was interest paid on deposits of individuals which are the main source of the Group’s funding.
Net interest income reached RUB 375.7 bn for 9 months 2009, a 40.4% growth year-on-year. Growth in interest income is attributable to the increase of profitability and volumes of lending operations. For example, the spread between interest income on earning assets and cost of funds increased by 0.4 percentage points for 9 months 2009.
The Group’s fee and commission income totaled RUB 71.9 bn, resulting in a 19.6% growth year-on-year. Commission income growth was contributed by all kinds of fee-generating operations, where cash and settlement transactions with clients remained the key one.
Recovery on the financial markets which commenced in the second quarter 2009 resulted in gains on revaluation and trading operations with securities in the amount of RUB 8.2 bn for 9 months 2009 compared to trading losses of RUB 16.3 bn for 9 months 2008.
Net gains from operations with foreign currencies and foreign currency derivatives made a considerable input to operating income of the Group for the Reporting period, totaling RUB 13.9 bn which is 2.7 times increase year-on-year.
Due to economic instability and vulnerability the Group continued steadily increase of its provision for loan impairment in the third quarter 2009 thus maintaining its conservative provisioning policy. Charge of provision for loan impairment totaled RUB 301.3 bn for 9 months 2009, 8.3 times increase year-on-year, been the main factor influenced net profit for the 9 months 2009. The growth in charge of provision for loan impairment in the third quarter stood at 6.5% compared to the second quarter 2009.
Administrative and operating expenses of the Group decreased by 1.8% year-on-year. Growth in operating expenses (excluding staff costs) has resulted from implementation of the Group’s Strategy for the period up to 2014 that includes investments into infrastructure. Continued program on optimization personnel quantity including temporal restriction for employee hiring as well as a result of the natural staff retirement the Group managed to decrease staff costs by 5.5% for 9 months 2009 compared to 9 months 2008. The overall reduction in administrative and operating expenses for the Reporting period complemented by the growth of operating income before provision charge for loan impairment resulted in considerable reduction of cost to income ratio to 34.2% compared to 51.7% for 9 months 2008.
Net profit of the Group earned for 9 months 2009 totaled RUB 10.3 bn versus RUB 90.2 bn for 9 months 2008. The major driver for decline in net profit for 9 months 2009, as was mentioned above, was a considerable increase in provision charge for loan impairment.
As of 30 September 2009, the Group’s total assets reached RUB 6 707.8 bn, showing a slight decrease of 0.4% for the 9 months 2009. The change in assets’ structure was influenced by the reduction in cash and cash equivalents for the benefit of investment securities available for sale (mainly due to increase in corporate bonds).
Despite the deteriorated economic environment, the Group continued to increase its overall lending volumes during 9 months 2009. Thus gross loan portfolio grew by 4.8% to RUB 5 532.9 bn and was as mainly driven by growth in the corporate segment. Corporate loan portfolio increased by 8.4% to RUB 4 356.9 bn, while portfolio structure remained unchanged. At the same time, loans to individuals decreased by 6.7% to RUB 1 175.9 bn due to reduction in demand for consumer loans from individuals. Decrease of consumer loans portfolio slowed down considerably in the third quarter 2009 and totaled only 0.4% compared to a 6.4% decrease for the first half 2009.
As a result of deteriorated economic environment both in Russia and globally non-performing loans (NPL) grew from RUB 94.7 bn as at 31 December 2008 to RUB 436.7 bn as at 30 September 2009. The proportion of non-performing loans in the total loan portfolio (NPL ratio) reached 7.9% as at 30 September 2009 compared to 1.8% as at the beginning of the year. At the same time growth of non-performing loans reduced twice in the third quarter 2009 and totaled 1.5 pp compared to 2.9 pp in the second quarter 2009. At the same time NPL coverage ratio (loan loss provisions to non-performing loans) stood at the acceptable level of 1.1 as at 30 September 2009. Provision for loan impairment continued to grow in the third quarter 2009 and as at 30 September 2009 it reached RUB 493.8 bn, a 2.4 times growth from the beginning of the year. PLI coverage ratio reached 8.9% compared to 3.8% as of the beginning of the Reporting period.
Securities portfolio grew by 42.6% for 9 months 2009 reaching RUB 704.1 bn. During the Reporting period the Group continued to increase its portfolio of investment securities available for sale, mainly through acquisition of corporate bonds issued by Russian companies, which is seen as one of the forms of corporate lending. For 9 months 2009 corporate bonds portfolio increased by 175.9% while the proportion of OFZ in securities portfolio decrease from 53.5% to 34.5%.
As at 30 September 2009, the Group’s total liabilities amounted to RUB 5 937.5 bn, a 0.8% decrease as compared to 31 December 2008. This decrease was mainly contributed by reduction of corporate customer deposits and repayment of funds received from the Bank of Russia. At the same time outflow of corporate deposits ceased in the third quarter 2009 and demonstrated reasonable growth for this period of 2.9%. Decline in corporate customer accounts was offset by increase in retail accounts and deposits, which reached RUB 3 418.8 bn (a 9.9% growth compared to 31 December 2008). Retail deposits remain the core source of the Group’s funding.
The Group’s shareholders’ equity grew to RUB 770.2 bn as of 30 September 2009 with 2.7% increase compared to 31 December 2008. Capital adequacy ratio (Tier 1 and Tier 2) calculated according to the Basel 1 Accord was well above the minimum requirements (8%) and stood at 18.8% as at 30 September 2009. Tier 1 ratio comprised 11.8%.