OREANDA-NEWS. September 17, 2010.

Income Statement Highlights for 8M 2010 (as compared to 8M 2009)

Net interest income increased by 1.0% y-o-y

Net fee and commission income rose by 14.3% y-o-y

Provision charge amounted to RUB90.5 bn vs. RUB250.9 bn for 8M 2009

Operating income before provisions decreased by 9.5% y-o-y

Operating income after provisions grew 1.9 times y-o-y

Operating expenses were up by 16.6% y-o-y

Profit before tax amounted to RUB111.6 bn vs. RUB9.9 bn for 8M 2009

Net profit totaled RUB88.5 bn vs. RUB7.4 bn for 8M 2009 

The Bank sustained growth in core income in 8 months of 2010. Net interest income increased by 1.0% y-o-y. Net fee and commission grew 14.3% y-o-y. Despite the growth in core income, operating income before provisions fell by 9.5% y-o-y which was the result of 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 wages planned for 2010 is aimed at adjusting them to the market levels and varies across divisions and regions. Cost to income ratio, adjusted for the effect of the asset sale at fair value in March, stood at 38.7%.

The Bank continued creating adequate provisions to meet existing risks. The Bank channeled RUB90.5 bn into provisions for 8 months of 2010, which contrasted favorably with RUB250.9 bn allocated for the same period a year ago.

Operating income after provisions exceeded that of 8 month of 2009 by more than 1.9 times. Profit before tax totaled RUB111.6 bn and net profit came in at RUB88.5 bn. Both numbers increased more than ten times y-o-y.

For 8M 2010, assets increased by 7.7% ytd to RUB7,657 bn.

The Bank kept on lending to the ‘real economy’ and provided over RUB2.4 trln loans to Russian companies ytd. In August, corporate loan book increased by 2.3% or RUB96.0 bn m-o-m to RUB4.3trln. Corporate lending has been growing since May 2010.

Retail loan portfolio increased by 5.2% or RUB61.0 bn ytd to RUB1,231 bn. Growth in retail lending has been sustained across all regions since April 2010. In August, retail loans expanded by 1.2 % or RUB14.0 bn.

Overdue loans held stable m-o-m at 5.8% of the loan portfolio. The Bank keeps to its conservative credit risk management. Loan-loss provisions amounted to RUB671 bn as of 1 September, which equals the level of the beginning of the year, with a coverage ratio of more than 2.0. 

The Bank channels excess liquidity into investment securities. The securities portfolio increased 1.7-fold ytd to above RUB1,8 trln mainly due to purchases of government bonds (71% of the portfolio). Expansion of the securities portfolio helped the Bank to diversify its asset base and revenue streams.

Continued inflows of customer funds remain the Bank’s key source of funding. Retail deposits increased by 13.1% or almost RUB0.5 trln ytd, with RUB47 bn or 1.1% added in August. Corporate accounts and deposits increased by RUB2 bn or 0.1% in August. Sustainable deposit growth provides the Bank with sufficient funding without involvement in pricing competition with other Russian banks. Furthermore, in July-August, the Bank issued LPNs of USD1.5 bn to meet increasing credit demand from Russian borrowers.

Regulatory capital (under CBR regulation No. 215-P) increased by RUB10 bn in August to RUB1,163 bn supported by net profit. The Bank’s regulatory capital declined from the start of the year after repayment of a RUB200 bn tranche of the RUB500 bn subordinated loan to the Central Bank of Russia in May 2010.

Capital adequacy ratio stood at 18% as of 1 September 2010.