Sberbank reports 1Q 2021 Net Profit of RUB304.5 bn under International Financial Reporting Standards (IFRS)

Apr 29, 2021

Moscow, April 29, 2021  – Sberbank (hereafter ”the Group” or “Sber”) has released its interim condensed IFRS financial statements (hereafter “the Financial Statements”) as at and for the 3 months ended 31 March 2021, with report on review by AO PricewaterhouseCoopers Audit.

Alexandra Buriko, CFO, stated:

“In the first quarter of 2021, the business progressed better than expected: Sber increased the retail loan book to 9.7 trillion Rubles, the transactional business expanded despite the high base of last year, and the revenue of the non-financial business quadrupled. Moreover, the stabilization of the loan portfolio asset quality allowed significant reduction of the credit risk cost. As a result, Sber earned 304.5 billion Rubles net profit for the quarter.

The improving customer experience, expansion of the digital services, and integration of a wide range of offerings, fortified by the technological transformation, have allowed to surpass the milestone of 100 million active retail customers.

A strong start in 2021 gives us the ground to raise our forecast for the Return on Equity to exceed 20% in the current year.”

1Q 2021 Financial and Operational Highlights:

  • The Group net profit reached RUB304.5 bn (+152.7% y/y);
  • The Group earnings per ordinary share (EPS) came in at RUB14.19 (+153.4 y/y);
  • The Group return on equity (ROE)1 reached 24.3%, and return on assets (ROA)2 was 3.3%;
  • Active retail client base exceeded 100 mn;
  • Number of monthly active users (MAU) of mobile App Sberbank Online was up by 1.7 mn to 67.2 mn, and the number of daily active users (DAU) increased by 800 ths to 33.2 mn;
  • Active corporate client base exceeded 2.8 mn, while MAU in digital channels exceeded 2.4 mn users;
  • The number of SberPrime subscribers was almost 1 mn;
  • The number of monthly active users (MAU) of the voice assistant Salut was over 2 mn;
  • Over 19 mn clients were using Sber ID, a unified login that gives access to more than 100 services of Sber ecosystem and partners;
  • The number of the participants of the loyalty program Spasibo exceeded 47 mn clients;
  • The Group gross loans3 were RUB25.5 trn, up by 2% in 1Q21. The retail loan portfolio was up by 3.9% to RUB9.7 trn, while the corporate loan portfolio amounted to RUB15.8 trn, up by 0.8%;
  • Sber approved the ESG Risk Management Policy as part of Sber ESG transformation, and introduced sustainability development factors in the management KPIs and in the loan underwriting process.

Statement of Profit or Loss Results Highlights

RUB bn, unless stated otherwise

1Q

2021

1Q

2020

4Q

2020

1Q2021/

1Q2020

% change

1Q2021/

4Q2020

% change

Net interest income

421.5

371.9

426.5

13.3%

-1.2%

Net fee and commission income

134.3

126.4

158.5

6.3%

-15.3%

Other non-interest income / (expense) 5

33.4

9.1

-9.2

267.0%

-463.0%

Operating income before provisions 6

589.2

507.4

575.8

16.1%

2.3%

Net charge related to change in asset quality: 

-25.5

-167.1

-108.1

-84.7%

-76.4%

     Net credit loss allowance charge for debt financial assets

-44.2

-138.0

-84.2

-68.0%

-47.5%

     Positive / (negative) revaluation of loans at fair value due to change in credit quality

18.7

-29.1

-23.9

-164.3%

-178.2%

Net loss allowance / provision for credit related commitments

-6.5

-14.6

16.1

-55.5%

-140.4%

Staff and administrative expenses

-179.9

-168.0

-241.4

7.1%

-25.5%

Net profit  from continuing operations

304.8

120.5

199.0

152.9%

53.2%

Profit / (Loss) from discontinued operations

-0.3

0.0

2.7

--

--

Net profit

304.5

120.5

201.7

152.7%

51.0%

Earnings per ordinary share from continuing operations. RUB

14.20

5.60

9.02

153.6%

57.4%

Earnings per ordinary share. RUB

14.19

5.60

9.15

153.4%

55.1%

Total comprehensive income 

230.0

121.5

211.9

89.3%

8.5%

Return on equity 1

24.3%

10.6%

16.6%

--

--

Return on assets 2

3.3%

1.5%

2.2%

--

--

Net interest margin

5.18%

5.49%

5.34%

--

--

Cost of risk (amortized cost loans)

 74 bp

 251 bp

 139 bp

 --

 --

Cost of risk (amortized cost and FV loans)

 41 bp

 292 bp

 171 bp

 --

 --

Cost-to-income ratio – banking business 6

29.3%

30.7%

--

--

--

Balance Sheet Highlights

RUB bn. unless stated otherwise

31.03.2020

31.12.2020

31.03.2020/

31.12.2020

% change

Gross total loans 3:

25 498.6

25 008.6

2.0%

Corporate loans 3

15 823.8

15 700.4

0.8%

Retail loans 3

9 674.8

9 308.2

3.9%

Securities portfolio

6 617.4

6 557.4

0.9%

Assets

37 500.4

36 016.0

4.1%

Total deposits:

26 997.6

25 765.7

4.8%

Retail deposits

16 508.1

16 641.0

-0.8%

Corporate deposits

10 489.5

9 124.7

15.0%

Book value per share 7. RUB

232.6

223.4

4.1%

Ratios

Net Loans / Deposits ratio (LDR)

88.4%

90.8%

--

Stage 3 + POCI loans / total gross loans at amortized cost

6.8%

6.6%

--

Provision coverage of Stage 3 + POCI loans

98.9%

102.8%

--

Net interest income increased by 13.3% y/y in 1Q 2021 to RUB421.5 bn.

Interest income was up by 5.8% y/y in 1Q 2021 to RUB617 bn on the back of strong retail lending dynamics.

  • Retail loan portfolio expanded by 3.9% in 1Q 2021 and the balance came in at RUB9.7 trn. The yield on retail loans declined by 50 bp to 11.1%, both from the replacements with loans at lower rates, and growing share of mortgages in total retail portfolio to 56.4%.
    • The mortgage portfolio grew by 4.5% in 1Q 2021, benefiting from robust demand for both the state and the bank’s own subsidized mortgage programs which accounted for over 30% of new loan origination.
    • The Sber housing platform DomClick enhanced the mortgage lending; the monthly audience increased by 1.2x to over 14 mn users.  
    • The models for assessing credit risk of mortgage products were refined using a new generation of AI, which improved the accuracy of assessing the creditworthiness of clients, and led to portfolio growth while maintaining stable asset quality.
    • Consumer loan portfolio increased by 3.4% in 1Q 2021, boosted by higher demand on the back of favorable market rates and seasonal promos. The share of consumer lending in digital channels remains high, accounting for 68% for 1Q 2021.
    • Corporate loan portfolio grew by 0.8% in 1Q 2021 to RUB15.8 trn. Adjusted for the impact of the FX revaluation4, the portfolio was up by 0.2%, primarily from lending in Ruble.  The yield on corporate loans was up by 10 bp to 6.4% for the quarter.

Interest expense, including deposit insurance expenses, decreased by 7.6% y/y in 1Q 2021 to RUB195.5 bn on the back of the reduction in deposit insurance contribution, as well as lower cost of funding as compared to a year ago.

  • Retail funding decreased by 0.8% in 1Q 2021 to RUB16.5 trn. The ending balance on current accounts remains stable. The cost of retail funding was unchanged at 3.7%.
    • The share of retail current account balances in total retail funding was almost 38% thanks to growing volumes on the escrow accounts and increased cashless transactions.
  • Corporate funding was up by 15% in 1Q 2021 to RUB10.5 trn, to an extent, from short-term liquidity management.  The cost of corporate funding remained unchanged during the quarter at 2.7%.

Net LDR ratio equaled 88.4% in 1Q 2021, down by 2.3 pp compared to 4Q 2020.

Securities portfolio grew by 0.9% in 1Q 2021 and amounted to RUB6.6 trn, mainly from purchases of the OFZ bonds.

The Group net fee and commission income increased by 6.3% y/y in 1Q 2021 to RUB134.3 bn on the back of high comparison base of 1Q 2020, and were driven mainly by high transactional activity. 

  • Net income from bank cards grew by 10.8% y/y, driven by recovery in acquiring turnover.
  • Transport acquiring is now available in 142 Russian cities.

The combined operating income before provisions of the segment Wealth management and brokerage reached RUB16.3 bn, up by 17.3% in 1Q 2021. Assets under management increased by 3% to RUB1.8 trn. The share of sales of the Wealth management products in digital channels increased by 1.5x to 28%.

  • Net assets under custody on retail brokerage accounts were almost RUB 2 trn by the end of 1Q 2021.
  • A new product, Responsible Investments, with a focus on stocks of Russian companies that comply with the principles of sustainable development, has become available to retail investors.

The combined operating income the segment Risk insurance was RUB18.7 bn, down by 5.1%. The decline in the segment income was the result of an active flow of customers to online channels in 2020 against the backdrop of a pandemic. Rapid sales growth in digital channels has partially offset their decline in physical network.

The revenues8 of the segment Non-financial business increased 4x y/y to RUB33.6 bn for 1Q 2021.

  • SberMarket GMV increased 6.5x y/y to RUB9.9 bn in 1Q 2021. The number of orders for the quarter exceeded 3.5 mn, almost 10x greater than a year-ago.
  • In April 2021, Sber acquired an 85% stake in the marketplace goods.ru, that was rebranded into SberMegaMarket. It would become the core multi-category

e-commerce platform for Sber, and already presents 16 main categories and 2.5 mn SKUs.

  • In February 2021, Sber completed the acquisition of a 45% stake in one of the leading Russian online pharma delivery services, EApteka, that was rebranded into SberEApteka.

The Group operating expenses were up by 7.1% y/y to RUB179.9 bn in 1Q 2021. The efficiency of the financial business improved significantly thanks to the technological transformation and growth of sales in digital channels, that led to the reduction of headcount in the financial segment. Overall, the Group total headcount was down by 7.4 ths employees to 278.2 ths for the quarter. At the same time, the number of employees engaged in the development of the non-financial services increased.

The Group Cost-to-Income ratio6 for the banking business was down by 1.4 pp y/y to 29.3% in 1Q 2021.

The combined provision charge including revaluation of loans at fair value amounted to RUB25.5 bn, while the combined Cost of Risk was 41 bp in 1Q 2021.

  • Net credit loss allowance charge for loans at amortized cost amounted to RUB 44.2 bn in 1Q 2021, and the Cost of Risk was 74 bp in 1Q 2021. The positive revaluation of loans at fair value due to change in credit quality, was RUB18.7 bn.

The credit quality of the loan portfolio remained merely unchanged in 1Q 2021. The share of Stage 3 and POCI loans in loans at amortized cost was 6.76%, up 15 bp, as compared to 4Q 2020.

Total provision coverage of impaired loans in 1Q 2021 was down by 3.9 pp to 98.9% as compared to 4Q 2020.

Selected Capital Adequacy Results

The data in the table is in accordance with standardized and IRB approaches applied to the corresponding assets groups.

Risk-weighted assets under a standardized approach as of 31.03.2021 and 31.12.2020 were assessed according to Basel 3.5.

Risk-weighted assets under an IRB approach as of 31.03.2021 and 31.12.2020 were assessed according to Basel 3.5.

Under Basel 3.5

RUB bn, unless stated otherwise 

31.03.2021

31.12.2020

31.03.2021 /

31.12.2020

% change

Common equity Tier 1 capital

4 922.1

4 719.9

4.3%

Tier 1 capital

5 072.1

4 869.9

4.2%

Total capital

5 261.4

5 008.9

5.0%

Risk-weighted assets

34 421.2

34 124.2

0.9%

Credit risk

29 425.8

29 253.9

0.6%

Operational risk

3 664.3

3 664.3

0.0%

Market risk

1 331.1

1 206.0

10.4%

Ratios

Common equity Tier 1 capital adequacy ratio

14.30%

13.83%

--

Tier 1 capital adequacy ratio

14.74%

14.27%

Total capital adequacy ratio

15.29%

14.68%

--

Leverage ratio

12.9%

12.9%

--

Common equity Tier 1 capital increased by 4.3% for 1Q 2021 to RUB4,992.1 bn from net profit earned for the reporting period.

The Group’s total capital increased by 5% for 1Q 2021 to RUB5,261.4 bn from growth of CET1 capital, as well as placement of subordinated bonds in the amount of RUB56 bn.

The Group’s risk-weighted assets were up by 0.9% to RUB34,421.2 bn in 1Q 2021 mostly due to the 0.6% increase in the credit risk component of the risk-weighted assets on the back of loan portfolio growth, and the 10.4% increase in the market risk from increased operations on the financial markets.

The risk-weighted assets density decreased from 90.3% to 87.6% for 1Q 2021 due to the application for the foreign Group subsidiaries of the macroprudential adjustments to the risk coefficients set up by their national regulators, as well as growth of assets with zero risk weight.

The Group’s leverage ratio was unchanged at 12.9% in 1Q 2021.

Common equity Tier 1 capital adequacy ratio increased by 47 bp to 14.3% in 1Q 2021, Tier 1 capital adequacy ratio was up by 47 bp to 14.74%, while total capital adequacy ratio increased by 61 bp to 15.29%.  

Excluding the subordinated loan agreement in the amount of RUB150.0 bn classified as equity financial instrument that was previously ceded by the Bank of Russia in favor of the Ministry of Finance

Based on profit from continuing operations

Before loan loss allowance and including loans at amortized cost and at fair value

Based on management accounts

Other non-interest income / (expense) includes: Net gains / (losses) from non-derivative financial instruments at fair value through profit or loss; Net gains from financial instruments at fair value through other comprehensive income; Net gains from derivatives, trading in foreign currencies, foreign exchange and precious metals accounts translation; Net losses arising on initial recognition and modification of financial instruments measured at amortized cost; Impairment of non-financial assets; Net charge for other provisions and allowances; Revenue of non-financial and other business activities; Cost of sales and other expenses of non-financial and other 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; Income from operating lease of equipment; Expenses related to equipment leased out; Net share of loss of associates and joint ventures; Other net operating income / (expenses)

Operating income before provisions for debt financial assets, credit related commitments and revaluation of loans at fair value due to change in credit quality 

Total equity attributable to shareholders of the Bank / Total numbers of shares outstanding (ordinary + preferred)

For the segment Non-financial business Revenues of the associates and joint ventures are disclosed proportionately to the ownership share of the Group in the reporting period.  For the companies of the Group Revenues are calculated on the 100% basis from the date of the control. The information does not include data on Yandex.Market and the financial results from the disposal of Yandex.Market

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