Sberbank releases 1Q 2010 Financial Highlights (under RAS; non-consolidated)

Apr 15, 2010

Please note that the numbers are calculated in accordance with Sberbank’s internal methodology pursuing internal accounting optimization and convergence with IFRS. The numbers as of 1 January 2010 exclude the effect of events occurring after the balance sheet date.

15 April 2010

Income Statement Highlights for 1Q 2010 (as compared to 1Q 2009)

  • Net interest income increased by 16.8% y-o-y
  • Net fee and commission income rose by 12.4% y-o-y
  • Provision charge amounted to RUB8.1 bn vs. RUB92.2 bn for 1Q 2009
  • Operating income before provisions decreased by 28.7% y-o-y
  • Operating income after provisions grew 1.9-fold y-o-y
  • Operating expenses increased by 9.4% y-o-y
  • Profit before tax increased 7.0-fold to RUB45.4 bn vs. RUB6.4 bn for 1Q 2009
  • Net profit totaled RUB43.2 bn vs. RUB0.3 bn for 1Q 2009 

Net interest income increased by 16.8%, with the interest income growth accompanied by the decline in interest expense.

  • Interest income grew 8.3% y-o-y or RUB15.1 bn. Interest income from corporate lending increased by RUB2.9 bn, interest income from investments in securities rose by RUB14 bn on the back of expanding securities portfolio. Interest income from retail lending shrank by RUB1.9 bn due to subdued consumer demand for loans.
  • Interest expense fell 2.9% y-o-y or RUB2.3 bn, led by lower costs on corporate accounts and amounts due to other banks.

Net fee and commission income rose 12.4% y-o-y, with growth stemming from all commission operations and services except for customer cash transactions and operations with foreign currency and precious metals.

In spite of growth in net interest income and net fee and commission income, operating income before provisions fell by 28.7% or RUB40.3 bn y-o-y. This was attributable to reduced gains from conversion operations related to specifics of recognizing and measuring financial instruments under RAS as well as expenses incurred from the sale of assets at fair value to the Bank’s subsidiary.

In March 2010, the Bank sold a number of assets at fair value to its 100%-subsidiary in order to manage the recovery of distressed assets more efficiently. The asset sales entailed changes in the structure of the Bank’s income statement and balance sheet, specifically, the size of the loan portfolio, provision charge, operating income before provisions, cost to income ratio but the bottom line was unaffected. The transaction will not impact on the Bank’s financial statements under IFRS.

The Bank kept on creating provisions to manage its credit risks, allocating RUB8.1 bn in provisions for 1Q 2010. In 1Q 2009, when the crisis was in full swing, provisions amounted to RUB92 bn. The pronounced reduction in provisioning expense led to a 1.9-fold y-o-y increase in the operating income after provisions in 1Q 2010.

Operating expense increased by 9.4% y-o-y. The cost to income ratio adjusted for the one-off from the asset sale at fair value stood at 33.6%.

Operating income after provisions lifted net profit to RUB43.2 bn in 1Q 2010, which significantly exceeded the result of 1Q 2009 and hit a record high for the first quarter.

For 1Q 2010, assets increased by 2.2% ytd to RUB7,270 bn.

The Bank extended lending to the ‘real economy’– providing about RUB800 bn in loans to Russian companies in 1Q 2010, with about RUB600 bn loans granted in the regions. However, prepayments by large borrowers and the sale of some corporate loans to the Bank’s subsidiary offset new loan issues, leading to a 3.2% contraction of the corporate loan book to RUB4,113 bn in 1Q 2010.

Retail loan portfolio shrank by 1.6% ytd to RUB1,151 bn in 1Q 2010, with the m-o-m portfolio contraction slowing: -1.5% in January, -0.4% in February, +0.3% in March.

The Bank increased investments in the securities portfolio given abundant inflows to customer accounts. The securities portfolio grew 1.5-fold to RUB1,549 bn mainly due to investments in government bonds (OFZ) and CBR bonds (OBR), which were up RUB417 bn, as well as purchases of sub-federal and corporate bonds. This led to respective shifts in the portfolio structure with the share of state and sub-federal bonds increasing from 70% to 77% and the share of corporate bonds down from 28% to 21%. Expansion of the securities’ portfolio helped the Bank to diversify its asset base and revenue streams.

As of 1 April 2010, overdue loans represented 5.1% of the Bank’s loan portfolio. The Bank continues to adhere to its conservative credit risk management. Loan-loss provisions increased to RUB599 bn, thus resulting in a 2.2-times coverage of overdues.

Asset expansion was primarily financed by customer deposits and accounts. Retail deposits added 2.7% ytd to RUB3,878 bn in 1Q 2010. Corporate accounts and deposits shrank marginally by 0.2% ytd to RUB1,721 bn, with term deposits falling 8.7% ytd and current accounts increasing 6.5% ytd.

Regulatory capital (under CBR regulation No. 215-P) amounted to RUB 1,302 bn and capital adequacy ratio stood at 21% as of 1 April 2010, according to preliminary estimates.

Sberbank’s Financial Highlights for 1Q 2010  (in accordance with RAS; non-consolidated)