Sberbank releases 9M 2009 Financial Highlights (under RAS)
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. Also note that the numbers as of 1 January 2009 include the effect of subsequent events.
October 22nd, 2009
Income Statement Highlights for 9 months 2009 (as compared to 9 months 2008)
- Operating income before provisions grew by 33.1% y-o-y
- Net interest income increased by 41.3% y-o-y
- Net fee and commission income rose by 5.8% y-o-y
- Operating expenses decreased by 4.2% y-o-y
- Provision charge increased 7-fold y-o-y
- Profit before tax amounted to RUB11.9 bn vs. RUB134.8 bn for 9 months of 2008
- Net profit totaled RUB9.1 bn vs. RUB102.9 bn for 9 months of 2008
Despite the challenging economic environment, Sberbank keeps on generating income and reducing operating expenses. For 9M09, operating income before provisions grew 33.1% y-o-y to RUB445 bn. The growth was mainly led by net interest income, which was up 41.3% y-o-y to RUB334 bn.
Interest income increased 38.8% y-o-y to RUB567 bn, with the growth rate exceeding that in interest expense. The incremental interest income amounted to RUB159 bn, including RUB136 bn earned from corporate lending. In the meantime, contribution from interest income in the retail segment was less pronounced – RUB9.8 bn – due to the retail lending market squeeze.
Interest expense grew 35.5% y-o-y to RUB234 bn due to increased volumes of deposits and higher funding costs in response to the crisis. The funds raised from the Central Bank of Russia (CBR) at the end of 2008 to support liquidity were another reason for growing interest expense. The CBR-related funding costs peaked in 1Q09 and then fell by 24% q-o-q in 2Q09 and by 16.5% q-o-q in 3Q09 as the funds were being repaid.
Net fee and commission income increased 5.8% y-o-y to RUB99 bn, which was largely due to commissions generated on settlements, operations with foreign currencies and precious metals, operations with banking cards, current account transactions and lending to corporate clients. Subdued consumer demand for retail loans reduced fee and commission income on lending to individual. Furthermore, fee and commission income declined on bank guarantees, currency control operations, depositary and agent services.
With strict cost control in focus, the Bank reduced operating expenses for 9M09by 4.2% y-o-y to RUB151 bn which coupled with growth in operating income before provisions. Cost-cutting was mainly due to headcount reduction to streamline organizational structure and restrained growth in general and administrative expenses. Cost to income ratio stood at 34.0% for 9M09 (vs. 47.3% for 9M08), which is further evidence of the Bank’s efficiency.
Given that the Bank adheres to conservative credit risk management, loan impairment provisions to overdue loans stood at 2.4 as of October 1st, 2009. For 9M09, the Bank allocated RUB282 bn in provisions, including provisions for loan impairment of RUB263 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 9M09 declined to RUB11.9 bn from RUB134.8 bn in 9M08. Net profit came at RUB9.1 bn vs. RUB102.9 bn for 9M08.
The Bank’s assets increased by 0.01% ytd to RUB6,723 bn.
Sberbank kept on lending to the ‘real economy’ – providing about RUB3 trln in loans to Russian companies over the past 9 months. Corporate loan portfolio expanded by 9.4% ytd to RUB4,355 bn (starting from August 1st, 2009, Sberbank records assignments with deferred payments (hereinafter referred to as “assignments’’) as a part of its corporate loan portfolio according to the Bank’s internal accounting methodology). Restructured loans, which are loan agreements with initial loan terms revised in borrower’s favor, comprised 11.6% of the Bank’s corporate loan book. To encourage lending activity, the Bank has been lowering lending rates on loans in all currencies.
Retail loan portfolio shrank by 6.9% ytd to RUB1,170 bn on the back of subdued consumer demand for loans. However, signs of stabilization have been observed: the overall retail loan book contracted by an immaterial 0.3% q-o-q in 3Q09 vs. declines of 3.8% q-o-q and 2.9% q-o-q in 1Q09 and 2Q09, respectively. In September, retail lending increased in 10 out of 17 regional branches.
Prudent credit risk management enables the Bank to sustain high quality of its loan portfolio. As of October 1st, 2009, overdue loans represented 3.7% of the loan portfolio (both including and excluding assignments).
The Bank’s securities portfolio increased by 44.2% ytd to RUB707 bn, mainly due to the Bank’s purchases of corporate bonds which is a sort of corporate lending. The Bank spent RUB178 bn to buy corporate bonds ytd, including RUB22 bn in September. In September, Sberbank added to its portfolio bond issues from OAO Severstal, OAO Gazprom, OAO AK Transneft, JSFC Sistema, JSC VimpelCom, OJSC TNK-BP Holding, ‘ALROSA Co. Ltd’, OAO Lukoil, OAO AIZK, TGK -1 OAO, OAO MOEK, JSC VTB, etc. Active purchases of corporate bonds led to shifts in the portfolio structure with the share of corporate bonds rising from 17% at the start of the year to 37%, while government and sub-federal bonds decreasing from 80% to 61%.
The Bank remains conservative in terms of its cost of funding. For 9M09, retail deposits increased by RUB293 bn to RUB3,417 bn, thus fully offsetting the outflow of corporate funds. Corporate accounts decreased by RUB121 bn ytd to RUB1,680 bn.
Sberbank’s regulatory capital (under CBR regulation No. 215-P) declined by 0.2% m-o-m in September and totaled RUB1,335 bn as of October 1st, 2009. The Bank’s regulatory capital grew by 15.4% ytd. The capital adequacy ratio stood at 23% as of October 1st, 2009.
Sberbank’s Financial Highlights for 9M 2009 (in accordance with Russian accounting standards; non-consolidated)