OREANDA-NEWS. June 18, 2010. For 5m 2010, the Bank’s core revenue increased, with net interest income up 7.5% y-o-y and net fee  and commission growing 16.1% y-o-y. However, operating income before provisions fell by 13.8% y-o-y, which owed to a lower income from conversion operations related to specifics of booking derivative instruments under RAS and 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’), reported the press-centre of Sberbank.

Operating expenses grew 17.0% y-o-y mainly due to higher staff costs. The increase in staff salaries in line with the 2010 business plan is aimed at bringing them to market levels and varies across divisions and regions.

Cost to income ratio, adjusted for the effect of the asset sale at fair value in Mach, stood at 36.7%.

The Bank continued to build adequate provisions to meet existing risks. Provisions allocated for 5m 2010 amounted to RUB25.9 bn, which contrasts with RUB151.6 bn provisioned for the same period a year ago, when the crisis was more severe. Lower provisioning charge led to a 2.2-fold y-o-y increase in operating income after provisions and a robust bottom line for 5M 2010. Profit before tax totaled RUB86.4 bn and net profit came in at RUB58.1 bn. Both numbers were ten times y-o-y higher.

For 5M 2010, assets increased by 3.0% ytd to RUB7,321 bn.

The Bank kept on lending to the ‘real economy’ and extended credit to Russian companies by RUB1.3 trln ytd, with about RUB1.0 trln loans granted in the regions. However, prepayments by large borrowers and the sale of assets to the Bank’s subsidiary in March offset new loan issues, leading to a 4.1% contraction of the corporate loan book to RUB4,074 bn in 5M 2010.

Retail loan portfolio increased by RUB9.0 bn or 0.8% ytd. The positive trend in retail lending strengthened, with contraction seen in January-February followed by a marginal growth in March and a RUB16.5 bn increase in May. Growth was posted across all regional banks in April-May.

Customer funds kept flowing to deposits and accounts, thus remaining the Bank’s key source of funding. Retail deposits added 7.3% or RUB276 bn ytd. Corporate accounts and deposits increased by 1.5% or RUB26 bn ytd.

The Bank kept on investing its excess liquidity into marketable securities. The securities portfolio increased 1.5-fold ytd to RUB1,628 bn mainly led by investments in state bonds (up 1.8 times) as well as purchases of sub-federal and corporate bonds (+11.8%). Expansion of the securities’ portfolio helped the Bank to diversify its asset base and revenue streams.

As of 1 June 2010, overdues represented 5.7% of total loans. The Bank continues to adhere to its conservative credit risk management. Loan-loss provisions increased to RUB614 bn and exceeded overdues by 2.1 times. 

Regulatory capital (under CBR regulation No. 215-P) decreased 11.9% m-o-m to RUB 1,137 bn, which was mainly the result of a partial repayment  CBR subordinate loan in May in the amount of RUB200 bn.

Capital adequacy ratio stood at 19% as of 1 June 2010.