Sberbank has published Consolidated Financial Statements in accordance with International financial reporting standards (IFRS) for 2009
Sberbank has posted its consolidated IFRS financial statements (hereafter “the Financial statements”) as of 31 December 2009 and for 12 months 2009 (hereafter “the Reporting period”) including independent auditor’s report by Ernst&Young.
Highlights of Sberbank Group’s financial performance as of 31.12.2009 and for 12 months 2009 (Download the presentation):
- Net profit for the year totaled RUB 24.4 bn or RUB 1.10 per ordinary share, compared to RUB 97.7 bn or RUB 4.50 per ordinary share in 2008
- Sound indicators of financial performance:
- Operating income before provision for loan impairment increased by 44.2%;
- Net interest income grew by 32.9%;
- Net commission income grew by 17.3%
- Effective cost control and cost management: in 2009, the Group’s cost to income ratio decreased to 35.4% compared to 49.3% for 2008
- Conservative approach to provisioning for loan impairment: provision charge for loan impairment for 2009 amounted to RUB 388.9 bn, or four times the amount for 2008
- Highly liquid balance sheet: 17.4% of the Group’s total assets have expected maturity of less than 1 month
- Retail accounts and deposits increased by 21.7% for 2009 to RUB 3,787.3 bn as of 31 December 2009
- Strong capital adequacy: the Group’s total capital ratio under Basel 1 is 18.1% as of 31 December 2009, well above the 8% minimum requirement
Sberbank Group’s (hereafter “the Group”) Financial statements show Operating income (before provision charge for loan impairment) of RUB 648.1 bn for 2009 compared to RUB 449.5 bn for 2008, a 44.2% increase year-on-year. Solid growth of operating income was driven by increase in interest income from lending operations, growth of commission income following expansion of client’s operations, and gains from operations with securities.
In 2009, interest income grew 31.5% year-on-year, totaling RUB 815.0 bn. The increase was attributable primarily to larger income from the corporate loan portfolio and from investments securities. Considerable growth of the Group’s corporate bond portfolio, which is regarded by the Group as an alternative to corporate lending, explains larger interest income on securities in 2009. The Group expanded its operations with corporate bonds from the start of 2009.
Interest expenses grew 29.1% year-on-year and amounted to RUB 312.2 bn. This growth was driven by the high interest rate environment that was predominant in the market during 2009. The largest component of interest expenses was interest paid on retail deposits which are the main source of the Group’s funding. The subordinated borrowing of RUB 500 bn made by the Group from the Central Bank of Russia (CBR) in the fourth quarter of 2008 contributed to growth of interest expenses.
Net interest income for 2009 reached RUB 502.7 bn, a 32.9% growth year-on-year. This growth is attributable primarily to the increase of yields and volumes of lending operations. Yield on lending operations began to decline in the second part of 2009, however, from 14.2% in June to 13.4% at the year end. This reflects the general market trend toward reduction of interest rates, mostly for corporate customers, and high competition for good borrowers.
The Group’s fee and commission income totaled RUB 105.7 bn for 2009, resulting in a 17.2% growth year-on-year. All kinds of fee-generating operations contributed to this growth, with cash and settlement transactions with clients remaining the principal ones.
An upturn in the financial markets since 2Q09 was instrumental in generating gains on operations with securities in the amount of RUB 36.5 bn for 2009 (compared to trading losses of RUB 37.3 bn for 2008); this made an important contribution to the Group’s operating income. Further RUB 32.6 bn worth of gains on marking to market the investment securities available for sale were posted in Other comprehensive income in 2009, while the loss on revaluation of investment securities available for sale in 2008 reached RUB 33.9 bn.
Net gains from operations with foreign exchange and foreign exchange derivatives added RUB 16.2 bn to the Group’s operating income for 2009. This was 35.7% lower than in 2008, the decline being due to negative result on foreign exchange SWAP deals used by the Group for liquidity management purposes.
Throughout 2009 the Group increased provisions for loan impairment, thus maintaining its conservative provisioning policy. Provision charge for loan impairment for 2009 totaled RUB 388.9 bn, a four-fold increase year-on-year. This was the primary reason for the decline of the Group’s net profit in 2009. Yet in 4Q09 the provision charge for loan impairment decreased by 20.2% compared to 3Q09.
The Group’s Operating expenses increased in 2009 by 3.4% year-on-year. Through a continuing staff optimization program the Group succeeded in reducing its actual headcount for the year from 269.1 thousands in 2008 to 249.8 thousands as of the 2009 year end; as a result personnel costs were cut by 3.3% in 2009 compared to 2008. Operating expenses other than staff costs increased primarily in virtue of implementation of the Group’s strategy. Despite the increase in operating expenses, faster growth of operating income before provision charge for loan impairment brought about a noticeable reduction of cost to income ratio from 49.3% in 2008 to 35.4% in 2009.
Net profit of the Group totaled RUB 24.4 bn versus RUB 97.7 bn for 2008. The major reason for the decline of the net profit was a very substantial increase of the provision charge for loan impairment in 2009.
As of 31 December 2009, the Group’s total assets reached RUB 7,105.1 bn, showing a 5.5% growth for the year.
Despite the deteriorating economic environment in 2009, the Group continued to increase its lending business. The gross loan portfolio expanded by 3.1% for the year to RUB 5,443.8 bn, making Sberbank one of very few Russian banks that actually increased their loan books in 2009. Corporate loan portfolio increased by 6.1% to RUB 4,266.3 bn, and was the principal source of growth of the Group’s total loan portfolio. Loans to individuals declined by 6.6% to RUB 1,177.5 bn in 2009 due to a much lower demand for consumer loans from individuals.
The Group’s non-performing loans (NPL) grew from RUB 94.7 bn as of 31 December 2008 to RUB 464.2 bn as of 31 December 2009. The proportion of non-performing loans in the total loan portfolio (the NPL ratio) reached 8.5% as of 31 December 2009 compared to 1.8% at the beginning of the year. The growth of non-performing loans decelerated in 4Q09 increasing by just 0.6 percentage points for the quarter. As of 31 December 2009 the NPL coverage ratio (total provisions for loan impairment to non-performing loans) was 1.2 which the Group considers to be acceptable. Provisions for loan impairment grew steadily throughout 2009 and reached RUB 579.8 bn as of 31 December 2009, a 2.9-fold growth from the beginning of the year. Total loan loss provisions to total gross loans reached 10.7% compared to 3.8% a year ago.
Securities portfolio grew 2.2 times in 2009 reaching RUB 1,064.1 bn. Throughout the year the Group expanded its portfolio of investment securities available for sale, mainly through acquisition of corporate bonds issued by Russian companies, which was perceived as another form of corporate lending. During 2009 the corporate bonds portfolio increased more than 3-fold while the proportion of OFZ in the securities portfolio decreased from 53.5% to 31.9%. In 4Q09 the Group purchased bonds of the Bank of Russia for the amount of RUB 221.1 bn.
As of 31 December 2009, the Group’s total liabilities amounted to RUB 6,326.1 bn, a 5.7% increase as compared to 31 December 2008. This increase was mainly due to growth in retail deposits, which totaled RUB 3,787.3 bn as of 31 December 2009, a 21.7% growth from the beginning of the year. Retail deposits remain the core source of the Group’s funding base.
The Group’s shareholders’ equity amounted to RUB 778.9 bn as of 31 December 2009, a 3.8% increase for the year. As of 31 December 2009 the Group’s total capital adequacy ratio (Tier 1 and Tier 2) calculated according to Basel 1 Accord was at 18.1%, well above the 8% minimum requirement; the Tier 1 ratio was 11.5%.