OREANDA-NEWS. September 08, 2014. Income Statement Highlights for January-August 2014 (as compared to January-August 2013):

Net interest income increased by 22.5% y-o-y

Net fee and commission income grew by 22.4% y-o-y

Noncredit commission income grew by 24.8% y-o-y

Operating income before total provisions increased by 23.7% y-o-y

Total provision charge was RUB189.2 bn vs. RUB74.1 bn charge in January-August 2013
Operating expenses were up by 11.2% y-o-y

Net profit before income tax amounted to RUB317.5 bn, up by 2.2% vs. January-August 2013. Net profit totaled RUB252.6 bn, or down by 0.5% vs. January-August 2013. Please note that comparison to Net profit for the same period of 2013 is incorrect due to adjustments that reflect new CBR regulation on deferred tax assets and liabilities that came into force in 2014. Excluding the effect of the one-off change in accounting, net profit would have amounted to RUB261.6 bn, up by 3.1% vs. RUB253.8 bn in January-August 2013.

Net interest income came at RUB565.9 bn, up by 22.5% compared to January-August 2013:

Interest income increased by RUB192.6 bn driven by both corporate and retail loan portfolio growth;

Interest expenses grew by RUB88.5 bn, due to customer deposits growth (both corporate and retail) and increase in CBR funding volumes and costs.

Net fee and commission income amounted to RUB170.2 bn; up by 22.4% y-o-y compared to January-August 2013. Noncredit commission income growth remains strong, up by 24.8%, mostly driven by bank cards and acquiring. Commission income from insurance, pension and investment products, bank guaranties and documentary operations becomes more significant.

Net income from trading operations amounted to RUB22.0 bn vs. RUB16.3 bn for January-August 2013. Revenues on conversion operations increased significantly (RUB32.8 bn vs. RUB10.0 bn), while there was a reduction of income on the securities market, as well as in July, due to the general market situation.

Operating income before provisions increased by 23.7% to reach RUB779.1 bn.

Operating expenses increased by 11.2%. C/I ratio for January-August 2014 decreased to 35.0% vs. 38.9% a year earlier. The general trend of C/I improvement y-o-y is achieved by the Bank’s cost optimization program. The Bank managed to maintain the trend when pre-provision operating income growth (23.7%) significantly outpaced operating expenses increase (11.2%).

Total provision charges amounted to RUB189.2 bn vs. RUB74.1 bn charge a year earlier. The Bank continues to practice a conservative approach in loan-loss provisioning based on requirements of the Central Bank of Russia. Coverage ratio remained strong: loan-loss provisions are 2.1 times the overdue loans.

Profit before tax for January-August 2014 totaled RUB317.5 bn. As of this year deferred tax liability was reflected in the Balance Sheet (please note Sberbank releases Financial Highlights for January-May 2014 (under RAS; non-consolidated).

Consequently, the net profit for January-August 2014 amounted to RUB252.6 bn. Excluding the effect of adjustments that reflect new regulation, the net profit for January-August 2014 would have increased by 3.1% vs. corresponded period a year earlier, totaled RUB261.6 bn.

In August assets increased by 0.8%, or RUB140 bn. The growth of the Balance Sheet in August, just like in July, was influenced by positive revaluation of FX component on ruble devaluation compared to key foreign currencies. Assets growth for January-August 2014 reached RUB1.2 trln, or 7.5%, mainly due to total loan portfolio growth.

The Bank lent over RUB460 bn to corporate clients in August. Total corporate loan issues for January-August 2014 reached RUB4.6 trln, or by 19% more than for the same period last year. Total corporate loan portfolio increased by RUB163 bn in August driven by both new loan demand as well as positive revaluation of previously issued FX loans. Total corporate loan portfolio for January-August 2014 increased by over RUB1 trln, or 12.0%, to exceed RUB9.6 trln.

The Bank lent about RUB180 bn to retail clients in August, of which about 43% were mortgages. Total retail loan issues for January-August 2014 reached over RUB1.3 trln, which exceeded the amount of issues for the same period last year (excluding the credit cards turnover) by more than a quarter. Total retail loan portfolio increased by RUB79 bn in August to exceed RUB3.86 trln. The increase of the retail loan portfolio for January-August 2014 amounted to RUB529 bn, or up 15.9%.

The Bank keeps the quality of its loan portfolio at a good level: overdue loans remained at 2.5% level (as of September 1, 2014) for the past 12 months.

Securities portfolio slightly decreased (by RUB7.0 bn, or 0.4%) in August due to redemptions of OFZ bonds as well as reduction of market values of the securities portfolio.

Corporate funding decreased by RUB111 bn in August mainly due to demand/current accounts. Retail deposits and accounts increased by RUB79 bn in August, mainly from ruble deposits. For the first time in 2014 their ending balance exceeded that from the beginning of the year.

The clients’ funds remain the core source of funding for the Bank’s operations and reached RUB11.5 trln, or 65% of the Bank’s liabilities, as of September 1, 2014.

Core Tier 1 and Tier 1 capital* (equal since Sberbank does not have instruments of additional capital) reached RUB1,460 bn as of September 1, 2014 under preliminary calculations. Total capital amounted to RUB2,209 bn on the same date. Key constituents to affect total capital in August were net profit contribution (+RUB31 bn) and revaluation of investments in subsidiaries (according to accounting methodology these investments lowered the capital by RUB29 bn). As a result, total capital increased by RUB4 bn in August.

Capital adequacy ratios under preliminary calculations as of September 1, 2014 were:

N1.1 – 8.0% (minimum adequacy level, required by the Central Bank of Russia at 5.0%)

N1.2 – 8.0% (minimum adequacy level, required by the Central Bank of Russia at 5.5%)

N1.0 – 12.0% (minimum adequacy level, required by the Central Bank of Russia at 10.0%, considering Deposit Insurance Regulation).

Sberbank 8M 2014 Financial Highlights (under RAS, non-consolidated)

* Effective from January 1, 2014 are changes to capital level calculation under CBR regulation No 395-P and instruction No 139-I.