Sberbank has published its condensed interim consolidated IFRS financial statements. Net profit for 1Q 2010 totaled RUB 43.5 bn or RUB 2.01 per ordinary share, compared to RUB 0.6 bn or RUB 0.03 per ordinary share for 1Q 2009.
Financial highlights for 1Q 2010:
- Net profit for 1Q 2010 totaled RUB 43.5 bn or RUB 2.01 per ordinary share, compared to RUB 0.6 bn or RUB 0.03 per ordinary share for 1Q 2009.
- The Group's profitability is recovering: return on equitytotaled 21.3%.
- Sound indicators of financial performance:
- Operating income before provision for loan impairment increased by 17.8%.
- Net interest income grew by 11.9%.
- Net fee and commission income grew by 15.8%.
- Cost to income ratio remains strong: in 1Q 2010, the Group’s cost to income ratio decreased to 36.2% compared to 36.8% for 1Q 2009.
- Declining trend in provisioning for loan impairment due to decelerating growth of overdue loans backed by indications of economic recovery: provision charge for loan impairment for 1Q 2010 amounted to RUB 54.3 bn, a 40.1% decrease compared to RUB 90.7 bn for 1Q 2009 and a 38.0% decrease compared to RUB 87.6 bn for 4Q 2009.
- Growing securities portfolio: low demand for loans accompanied by strong growth of customer deposits gave rise to the increase of investments in securities.
- Strong capital adequacy: the Group’s total capital ratio under Basel 1 is 18.9% as of 31 March 2010, well above the 8% minimum requirement.
Sberbank Group’s Financial statements show Operating income (before provision charge for loan impairment) of RUB 169.8 bn for 1Q 2010 compared to RUB 144.2 bn for 1Q 2009, a 17.8% increase year-on-year. Growth of operating income was mainly driven by increase in net interest income and commission income as a result of expanding operations with customers and increase of investments in debt securities.
Interest income grew by 6.5% year-on-year, totaling RUB 207.8 bn. The increase was attributable primarily to income from debt securities. The Group expanded its operations with bonds from the start of 2009. At the same time the declining loan yields resulted in lower interest income on loans, which remains the core component of the Group’s interest income.
Interest expenses decreased by 1.1% year-on-year and totaled RUB 78.7 bn. The largest component of interest expenses was interest paid on retail deposits which are the core of the Group’s funding. At the same time interest expenses on corporate deposits decreased by 28.6% year-on-year on the back of lower market interest rates.
Net interest income for 1Q 2010 reached RUB 129.2 bn, a 11.9% growth year-on-year. At the same time declining yields on earning assets (11.8% in the 1Q 2010 compared to 12.1% in the 4Q 2009) led to slower growth of net interest income in 1Q 2010. Net interest decreased in 1Q 2010 to 7.3% compared to 7.4% in 1Q 2009. This reflects the general market trend toward reduction of interest rates and high competition for good borrowers.
The Group’s net fee and commission income totaled RUB 25.6 bn for 1Q 2010, resulting in a 15.8% growth year-on-year. Almost all kinds of fee-generating operations contributed to this growth, with cash and settlement transactions with clients remaining the principal ones.
Due to an upturn in the financial markets the Group received gains on operations with securities in the amount of RUB 11.5 bn for 1Q 2010 compared to trading losses of RUB 4.4 bn for 1Q 2009, making it a considerable contribution to the Group’s operating income. At the same time gains on operations with securities decreased almost by half compared to 4Q 2009 as a result of much lower sales volumes of investment securities available for sale in 1Q 2010. Further RUB 34.2 bn worth of gains on marking to market the investment securities available for sale were posted in Other comprehensive income in 1Q 2010, while negative revaluation of investment securities available for sale in 1Q 2009 reached RUB 11.1 bn.
Net gains from operations with foreign currency and foreign exchange derivatives totaled RUB 2.1 bn for 1Q 2010 which is 75,3% lower than for 1Q 2009. The decline is due to exceptionally high volumes of foreign exchange transactions with customers in 1Q 2009, the period of high foreign exchange rates volatility.
Provision charge for loan impairment for 1Q 2010 totaled RUB 54.3 bn, a 40.1% decrease year-on-year. The declining trend commencing in 4Q 2009 is due to slower growth of overdue loans backed by indications of economic recovery. Higher growth of provisions for loan impairment compared to growth of non-performing loans in 1Q 2010 goes in line with conservative provisioning policy of the Group.
The Group’s Operating expenses grew by 15.6% year-on-year primarily driven by increase in staff costs while due to a continuing staff optimization program the Bank further reduced its actual headcount from 249.8 thousands as of the 2009 year end to 245.6 thousands as of the end of the first quarter 2010. Despite the increase in operating expenses, faster growth of operating income before provision charge for loan impairment brought about a reduction of cost to income ratio from 36.8% for 1Q2009 to 36.2% for 1Q2010.
The Group’s net profit totaled RUB 43.5 bn versus RUB 0.6 bn in 1Q 2009. The major reason for the increase was higher operating income before provision for loan impairment for 17.8% year-on-year and a reduction in provision charge for loan impairment for 40.1% in 1Q 2010 compared to 1Q 2009.
As of 31 March 2010, the Group’s total assets reached RUB 7,300.9 bn, showing a 2.8% growth for the reporting period.
Despite unstable economic environment the Group continued to increase its lending business although as a result of repayments of loans by large borrowers and lower demand for loans from both corporate customers and individuals, the amount of loans before provision for loan impairment decreased by 1.3% to RUB 5,373.9 bn as of 31 March 2010, with decline for loans to corporate customers being 1.2% and loans to individuals - 1.6%.
The Group’s non-performing loans (NPL) grew from RUB 464.2 bn as of 31 December 2009 to RUB 479.4 bn as of 31 March 2010. The proportion of non-performing loans in the total loan portfolio (the NPL ratio) reached 8.9% as of 31 March 2010 compared to 8.5% at the beginning of the year. As of 31 March 2010 the NPL coverage ratio (total provisions for loan impairment to non-performing loans) was 1.3 which the Group considers to be comfortable. Provisions for loan impairment grew by 8.8% reaching RUB 630.7 bn as of 31 March 2010 which is a lower growth rate compared to previous quarters. The ratio of provision for loan impairment to total gross loans reached 11.7% compared to 10.7% at the beginning of the year.
Securities portfolio grew by 49.4% in 1Q 2010 reaching RUB 1,589.6 bn as of 31 March 2010. As of 31 March 2010 federal government bonds and the Bank of Russia bonds dominated the securities portfolio with a 61.5% share. The share of corporate bonds decreased from 25.4% as at the beginning of the year to 20.4% as of 31 March 2010. In absolute terms the portfolio of corporate bonds was steadily increasing in 1Q 2010 and amounted to RUB 323.5 bn as of 31 March 2010, growing by RUB 52.8 bn from the beginning of the year, mainly through acquisition of corporate bonds issued by Russian companies, which is another form of corporate lending.
As of 31 March 2010, the Group’s total liabilities amounted to RUB 6,449.5 bn, a 2.0% increase as compared to 31 December 2009. The Group’s liabilities’ structure remains stable year-on-year with retail deposits being the core source of the Group’s funding standing at RUB 3,887.6 bn as at 31 March 2010, a 2.6% growth compared to the beginning of the year.
The Group’s shareholders’ equity amounted to RUB 851.3 bn as of 31 March 2010, a 9.3% increase for the first quarter. As of 31 March 2010 the Group’s total capital adequacy ratio (Tier 1 and Tier 2) calculated according to Basel 1 Accord was at 18.9%, well above the 8% minimum requirement; the Tier 1 ratio was 11.9%. In the 2Q 2010 the Group paid back one of the tranches of subordinated loan for RUB 200 billon received from the Bank of Russia in December 2008.
SberbankDate: 07.06.2010