OREANDA-NEWS. July 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.

Income Statement Highlights for 6 Months 2009 (as compared to 6 Months 2008)

Operating income before provisions grew by 34.1% y-o-y

Net interest income increased by 45.7% y-o-y

Net fee and commission income rose by 10.1% y-o-y

Operating expenses decreased by 5.4% y-o-y

Provision charge was 10 times higher y-o-y

Profit before tax amounted to RUB7.1 bn vs. RUB91.6 bn for 6 months of 2008

Net profit totaled RUB5.3 bn vs. RUB66.6 bn for 6 months of 2008

In spite of the economic challenges, Sberbank keeps on generating income and reducing operating expenses.  For 6M09, operating income before provisions grew 34.1% y-o-y to RUB284.5 bn. The growth was mainly driven by net interest income, which was up 45.7% y-o-y to RUB215.9 bn. 

Interest income increased 45.3% y-o-y to RUB374.0 bn, with the growth rate exceeding that in interest expense. The increase in interest income was led by income from corporate lending activities (up 60.4% y-o-y), while growth of the interest income in the retail segment was less pronounced (up 14.6% y-o-y) due to the retail lending market squeeze.

Interest expense grew 44.7% y-o-y to RUB158.1 bn on the back of larger deposit volumes and an increase in funding costs in the crisis environment. The funds raised from the Central Bank of Russia (CBR) for liquidity purposes at the end of 2008 were another reason for the growth in interest expense. At the same time, a reduction in the CBR borrowing led to a 24% decrease in the related funding costs in 2Q09 vs. 1Q09.

Net fee and commission income increased 10.1% y-o-y to RUB63.3 bn, which was largely due to commissions generated on lending to corporate clients, settlement and current account transactions, operations with banking cards, trading with foreign currencies and precious metals, lock box rents. Slowdown in demand for retail loans reduced fee and commission income on lending to individual. Furthermore, fee and commission income declined on cash and settlement accounts, budget accounts, currency control operations, custody and agent services.

Strict cost control allowed the Bank to reduce operating expenses for 6M09 by 5.4% y-o-y to RUB96.3 bn which coupled with growth in operating income before provisions. The Bank managed to reduce its operating expenses mainly through a 3.5% headcount reduction, thus pursuing an organizational structure optimization, and restrained growth in general and administrative expenses.

Given that the Bank adheres to its conservative principles in credit risk management, loan impairment provisions to overdue loans stood at 2.5 as of 1 July 2009. For 6M09, the Bank allocated RUB181.2 bn in provisions, including provisions for loan impairment of RUB169.5 bn. Provisions were charged from the Bank’s operating income and did not affect the regulatory capital.  

As a result of a significant increase in provisioning, Sberbank’s profit before tax for 6M09 declined to RUB7.1 bn from RUB91.6 bn in 6M08. Net profit came at RUB5.3 bn vs. RUB66.6 bn for 6M08, with RUB0.3 bn earned in 1Q09 and RUB5.0 bn in 2Q09.

The Bank’s balance shrank by 2.1% ytd to RUB6,579 bn, which was mainly the result of corporate accounts outflow and reduced CBR funding. 

Sberbank continued active lending to the real sector of the economy, granting more than RUB1,850 bn in loans to Russian companies over the past 6 months. Corporate loan portfolio grew by 6.6% to RUB4,246 bn. The Bank lent to all loan applicants who met the risk requirements assigned by the Bank’s lending policy.

Retail loans continued to contract on the back of sluggish consumer demand. Retail loan portfolio shrank 6.6% ytd to RUB1,174 bn, albeit the pace of retail loan book contraction slowed to 2.9% in 2Q09 from 3.8% in 1Q09. In June, the portfolio decreased by 0.5% m-o-m.

With prudent credit risk management, the Bank sustains a decent quality of its loan portfolio, which is the Bank’s priority at present. Overdue loans comprised 2.8% of corporate and retail loan portfolio as of 1 July 2009 (vs. the sector average of 4.6% as of 1 June 2009).

The Bank’s securities portfolio increased by 12.4% ytd to RUB551 bn, mainly due to the Bank’s purchases of corporate bonds as a form of lending to Russian companies. Corporate bonds investment grew RUB59.1 bn (or 70%) ytd, including RUB34.5 bn in 2Q09. The share of corporate interest-bearing securities increased from 17% to 26%, while the government and sub-federal bonds decreased from 80% to 69% of total.

Retail deposits continued growing, up 6.8% ytd to RUB3,335 bn. Retail deposit inflows accelerated to 4.4% in 2Q09 from 2.3% in 1Q09. This helped to offset outflows from corporate accounts, which shrank 9.0% ytd to RUB1,638 bn, including a 4.2% reduction in 2Q09. 

Sberbank’s regulatory capital (under CBR regulation No. 215-P) was down 1.3% m-o-m in June and totaled RUB1,340 bn as of 1 July 2009. The decrease was attributable to dividend payments of RUB11 bn for 2008 approved by AGM;

contribution of RUB6 bn to Sberbank Capital LLC charter capital. 

The Bank’s regulatory capital grew by 15.8% ytd. The capital adequacy ratio stood at 22.7% as of 1 July 2009.