REANDA-NEWS. June 24, 2009. Please note that the numbers are calculated in accordance with Sberbank’s internal methodology approved in March 2009 as a part of internal accounting optimization and convergence with IFRS accounting principles.  Also note that the numbers as of 1 January 2009 include the effect of subsequent events, reported the press-centre of Sberbank.

June 23, 2009
Income Statement Highlights for 5 Months 2009 (as compared to 5 Months 2008)
Operating income before provisions grew by 31.8% y-o-y
Net interest income increased by 46.7% y-o-y
Net fee and commission income rose by 10.0% y-o-y
Operating expenses decreased by 8.8% y-o-y
Provision charge was 9 times higher y-o-y
Profit before tax amounted to RUB5.4 bn vs. RUB77.2 bn for 5 months of 2008
Net profit totaled RUB4.0 bn vs. RUB56.4 bn for 5 months of 2008 

In spite of the continued economic challenge, Sberbank’s operating income before provisions grew 31.8% y-o-y to RUB232.7 bn. The main driver for this growth was net interest income, which was up by 46.7% y-o-y to RUB178.3 bn. 

Interest income increased by 47.0% y-o-y to RUB310.7 bn mainly due to growth in the corporate segment driven by loan book expansion and an increase in lending rates. The incremental interest income amounted to RUB99.3 bn, which was 2.3 times the incremental interest expense.

Interest expense grew by 47.4% y-o-y to RUB132.4 bn on the back of inflows from corporate and individual customers as well as increased costs of funds raised from other banks, including those raised from CBR for liquidity purposes.

Given the Bank keeps on streamlining and expanding its product offerings, its net fee and commission income increased 10% y-o-y to RUB51.5 bn. The moderate growth was largely due to reduced number of new agreements signed in the retail segment on weaker consumer demand for loans. In the meantime, fees and commission income was robust on operations with corporate clients, including settlement transactions, trading with foreign currencies and precious metals.
 
Net gain from trading operations decreased from RUB5.1 bn to RUB0.8 bn owning to revaluation on conversion operations and trading in precious metals as a result of dollar devaluation.

With strict cost control in focus, the Bank reduced operating expenses for 5M09 by 8.8% y-o-y to RUB75.7 bn which coupled with growth in operating income before provisions. The Bank seeks further optimization and cost-cutting through implementation of its bank-wide Development Strategy. For 5M09, the headcount was reduced by 2.8%. Cost to income ratio stood at 32.5% (vs. 47.0% for 5M08), which is further evidence of the Bank’s effective policy.

The Bank adheres to its conservative principles, creating relevant provisions to meet existing risks. For 5M09, the Bank allocated RUB151.6 bn in provisions which was 9 times that of 5M08. Provisions for loan impairment amounted to RUB133.5 bn, reflecting increased credit risks in the challenging economic environment. Provisions were charged from the Bank’s operating income. As of 1 June 2009, the coverage ratio printed at 2.6.

As a result of a significant increase in provisioning, Sberbank’s profit before tax for 5M09 declined to RUB5.4 bn from RUB77.2 bn in 5M08. Net profit came at RUB4.0 bn vs. RUB56.4 bn for 5M08. However, the positive 5M09 bottom line for 5M09 supported by net profit growth over the past two months look encouraging given the current economic challenges.

Assets shrank by 2.3% ytd to RUB6,569 bn.

A significant part of cash and amounts placed with other banks was channeled in loans to companies of the real economy. Over the past 5 months, the Bank granted more than RUB1,600 bn in corporate loans. Corporate loan book expanded by 8.7% ytd to RUB4,327 bn. The Bank lent to all loan applicants who met the risk requirements assigned by the Bank’s internal lending policy. Risk management and sustainability of the adequate credit quality of the loan portfolio are the Bank’s predominant tasks at present.

Retail loans continued to contract on the back of subdued consumer demand. Retail loan book decreased by 6.1% ytd to RUB1,180 bn.

Loan portfolio quality remains decent. Overdue loans incurred minor changes in May and stood at 2.6% of the total loan portfolio - corporate and retail - as of 1 June 2009. This is still below the sector average (4.2% as of 1 May 2009). In the meantime, the Bank’s reserves as a percentage of the total loan portfolio exceed the sector average.

The Bank’s securities portfolio increased by 5.4% ytd to RUB517 bn, supported by the Bank’s purchases of corporate bonds as a form of lending to Russian companies. The share of corporate interest-bearing securities increased from 17% to 25%, while the government securities decreased from 64% to 54% of total.  

Retail deposits continued growing, up 4.4% ytd to RUB3,261 bn. Corporate accounts added RUB56 bn in May and stood at RUB1,700 bn.

Customer deposit inflows allowed the Bank to waiver borrowing from the CBR. As of 1 June 2009, the Bank repaid all the short-term CBR funds, retaining only the long-term subordinated debt raised at the end of 2008, which amounts to RUB500 bn.

Sberbank’s regulatory capital (under CBR regulation No. 215-P) was down 0.1% m-o-m in May and totaled RUB1,357 bn as of 1 June 2009. The decrease was attributable to lower ruble value of the dollar-denominated subordinated loan, which is a component of the regulatory capital.

The Bank’s regulatory capital grew by 17.3% ytd, which was mainly due to a transfer of the audited 2008 net profit from supplementary to core capital and an increase in supplementary capital caused by a positive property revaluation as of 1 January 2009.

The capital adequacy ratio stood at 22.6% as of 1 June 2009.