Sberbank releases 9M 2010 Financial Highlights (under RAS; non-consolidated)
Please note that the numbers are calculated in accordance with Sberbank’s internal methodology.
15 October 2010
Income Statement Highlights for 9M 2010 (as compared to 9M 2009)
- Net interest income increased by 0.4% y-o-y
- Net fee and commission income rose by 14.2% y-o-y
- Provision charge amounted to RUB105.7 bn vs. RUB281.5 bn for 9M 2009
- Operating income before provisions decreased by 7.5% y-o-y
- Operating income after provisions grew 1.9 times y-o-y
- Operating expenses were up by 15.7% y-o-y
- Profit before tax amounted to RUB131.3 bn vs. RUB11.9 bn for 9M 2009
- Net profit totaled RUB106.8 bn vs. RUB9.1 bn for 9M 2009
Net interest income edged up by 0.4% y-o-y for 9M 2010.
Interest income declined by 1.4% y-o-y as income from corporate lending contracted on the back of falling market rates and a bulk of early repayments seen in the second half of 2009 and 1H 2010. In the meantime, interest income on securities more than doubled supported by expanding portfolio. Positive contribution also stemmed from retail lending which started recovering from 2Q 2010.
Interest expense fell by 3.9% y-o-y, thus outpacing the decline in interest income. This was a function of lower cost of corporate funds and reduced amounts due to the CBR and other banks. Hence, the impact of higher expense on retail funds due to continued deposit inflows was fully offset.
Net fee and commission income grew 14.2% y-o-y. This growth stemmed from almost all fee-generating services, with corporate lending, credit cards and settlement operations being the main contributors.
In spite of growing core income, operating income before provisions fell by 7.5% y-o-y which was the result of costs incurred from the sale of assets at fair value to the Bank’s subsidiary in March 2010 (see ‘Sberbank releases 1Q 2010 Financial Highlights’).
Operating expenses were up 15.7% y-o-y driven by
- higher staff costs as salaries were adjusted up to market level varying across divisions and regions under the 2010 plan;
- accelerating SG&A costs along with business development;
- increased charges to state deposit insurance system due to retail deposit inflows
Cost to income ratio, adjusted for the effect of the asset sale at fair value in March 2010, stood at 38.5%.
The Bank continued creating provisions in line with its current risk exposure. The Bank channeled RUB105.7 bn into provisions for 9 months of 2010, which contrasted favorably with RUB281.5 bn allocated for the same period a year ago.
Operating income after provisions exceeded that of 9 month of 2009 by more than 1.9 times. Profit before tax totaled RUB131.3 bn and net profit came in at RUB106.8 bn. Both numbers increased more than ten-fold y-o-y.
For 9M 2010, assets increased by 12.1% to RUB7,966 bn, with more than a third of this growth seen in September.
Asset growth stemmed largely from lending to the ‘real economy’. In September, corporate loan book increased by 5.5% or RUB233 bn m-o-m to more than RUB4.5trln. The Bank provided about RUB3 trln loans to Russian companies for 9M 2010, including RUB500 bn in September.
Retail lending is gaining momentum. In September, retail loan portfolio increased by 1.2% or RUB15 bn ytd to RUB1,246 bn.
The Bank pays close attention to quality of its loan portfolio and problem debt management. As of 1 October, overdue loans represented 5.7% of the loan portfolio, down 0.16 pp m-o-m.
The Bank keeps to its conservative credit risk management and creates provisions in excess of overdue loans. As of 1 October, loan-loss provisions amounted to RUB682 bn, covering the overdue loans by more than twice.
The Bank channels excess liquidity into investment securities, thus diversifying its asset base and revenue sources. The securities portfolio is largely exposed to low-risk and liquid government bonds. In September, the portfolio was reduced by RUB60 bn of CBR bonds (OBR) which had been used to fund lending expansion. For 9M 2010, securities portfolio increased 1.7-fold to RUB1.75 trln, 70% of which is comprised of government bonds.
Customer fund inflows proved sustainable in September, thus remaining the Bank’s key source of funding. Retail deposits increased m-o-m by almost RUB59 bn or by 1.4%, while corporate accounts added RUB154 bn or 8.8%. Furthermore, the Bank issued LPNs of USD1 bn in September to meet increasing credit demand from Russian borrowers. Overall, the Bank raised USD2.5 bn on the international capital markets in 3Q 2010.
Regulatory capital (under CBR regulation No. 215-P) increased by RUB18 bn in September to RUB1,182 bn due to net profit. The Bank’s regulatory capital declined from the start of the year after repayment of a RUB200 bn tranche of the RUB500 bn subordinated loan to the Central Bank of Russia in May 2010.
Capital adequacy ratio stood at 18% as of 1 October 2010.
Sberbank’s Financial Highlights for 9M 2010 (in accordance with RAS; non-consolidated)