OREANDA-NEWS. July 16, 2010. Please note that the numbers are calculated in accordance with Sberbank’s internal methodology.

Income Statement Highlights for 6M 2010 (as compared to 6M 2009)
Net interest income increased by 5.3% y-o-y
Net fee and commission income rose by 17.7% y-o-y
Provision charge amounted to RUB52.2 bn vs. RUB181.2 bn for 6M 2009
Operating income before provisions decreased by 9.1% y-o-y
Operating income after provisions increased twice y-o-y
Operating expenses were up by 16.6% y-o-y
Profit before tax amounted to RUB94.8 bn vs. RUB7.1 bn for 6M 2009
Net profit totaled RUB60.7 bn vs. RUB5.3 bn for 6M 2009 

The Bank’s core income growth continued over 6 months of 2010.

Net interest income increased by 5.3% y-o-y due to growing interest income and a simultaneous decline in interest expense.

Interest income was up by 1.7% y-o-y, driven by a 2.3-fold increase in income on operations with securities as a result of growing investment portfolio. Most income came from corporate bonds, Federal bonds (OFZ) and bonds of the Bank of Russia (OBR). Income earned on investment securities fully offset declines in income on lending activities, primarily in the corporate segment which suffered from significant prepayments and decreasing lending yields on the back of falling market rates.

Interest expense fell by 3.2% y-o-y mainly due to lower costs of funding raised from other banks (-40.6% y-o-y) as the Bank forewent raising short-term funding from the Bank of Russia starting from 2Q 2009 and paid back RUB200 bn of the subordinated loan to the Bank of Russia in May 2010.

Net fee and commission grew 17.7% y-o-y. The growth was fairly broad based with income earned on corporate loans, credit cards and cash operations being the main contributors. Furthermore, agent commissions on selling loan insurance contracts, which is the Bank’s new type of service, proved to be an significant fee-income generating source. 

In spite of the core income growth, operating income before provisions fell by 9.1% y-o-y, which was due to 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 increased by 16.6% y-o-y mainly due to higher staff costs. The increase in salaries foreseen in 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 37.2%.

The Bank continued to create adequate provisions to meet existing risks. Provisions allocated for 6m 2010 amounted to RUB52.2 bn vs. RUB181.2 bn provisioned for the same period in 2009, in a more challenging crisis environment.

Operating income after provisions was twice that shown a year ago, which led to a robust bottom line. For 6m 2010, profit before tax totaled RUB94.8 bn and net profit came in at RUB60.7 bn. Both numbers were more than ten times y-o-y higher.

For 6M 2010, assets increased by 5.9% ytd to RUB7,526 bn.

The Bank kept on lending to the ‘real economy’, granting over RUB1.7 trln loans to Russian companies ytd. The volume of new credit granted in June hit a record this year and accounted for almost quarter of total. As a result, corporate loan book increased by 1.6% or RUB64.6 bn m-o-m to RUB4,138 bn. Growth continued for a second month in a row after a negative dynamics of January-April due to significant prepayments and the sale of asset to the Bank’s subsidiary in March.

Retail loan portfolio increased by 2.7% or RUB31.6 bn ytd to RUB1,201 bn. Retail lending has been gradually gaining momentum from March, with monthly growth rates increasing. Retail portfolio expanded by 1.9% or RUB22.6 bn in June.

Inflows of customer funds to deposits and accounts continued, remaining the Bank’s key source of funding. Retail deposits added 10.2% or RUB384 bn ytd. Corporate accounts and deposits increased by 4.2% or RUB73 bn ytd.

The Bank channels excess liquidity into investment securities. The securities portfolio increased 1.7-fold ytd to RUB1,746 bn mainly due to RUB578 bn investment in state bonds, which lifted the share of government and sub-federal bonds in the portfolio from 70% to 78%. Expansion of the securities’ portfolio helped the Bank to diversify its asset base and revenue streams.

Overdue loans were 5.7% of the portfolio, unchanged m-o-m. The Bank continues to adhere to its conservative credit risk management. Loan-loss provisions amounted to RUB640 bn, exceeding overdues by 2.1 times. 

Regulatory capital (under CBR regulation No. 215-P) remained merely unchanged at RUB1,136 bn. Capital adequacy ratio stood at 19% as of 1 July 2010.