Sberbank RAS 1M 2019: the Bank earned RUB73.7 bn in net profit

Sberbank releases Financial Highlights for January 2019 (under RAS; non-consolidated)

Please note that the numbers are calculated in accordance with Sberbank's internal methodology.

Also note that some changes became effective in the Russian accounting standards in 2019 as part of convergence with IFRS (including transition to IFRS 9).

The effect of subsequent events is excluded from the numbers as of January 1, 2019. February 7, 2019

Key highlights for January 2019:

• In January, the Bank earned RUB73.7 bn in net profit;
• The Bank issued the highest for January loan volume to retail clients - RUB220 bn;
• The Bank issued RUB670 bn of corporate loans.

Deputy Chairman of Sberbank Alexander Morozov stated:

'The seasonal slowdown and outflows of retail deposits that are typical for the New Year holidays were less this January. Retail outflows in real terms were lower than in January last year, while issuance of retail loans hit a record high. This forms a good ground for interest income growth during the year.'

Comments for January 2019:

Net interest income remained barely unchanged as compared to last January and amounted to RUB102 bn. The impact of business expansion was offset by higher cost of funding.

Net fee and commission income was up by 12.6% to RUB30 bn. The largest contributors to fee income growth were operations with bank cards, settlement transactions and bank guarantees.

Operating expenses increased by 7.7% as compared to January 2018, cost-to-income ratio reached 29.2%. OpEx dynamics in 1H2019 will remain affected by staff reshuffling from Sberbank Technologies JSC to Sberbank PJSC that took place in the second half of 2018.

Provision charges totaled RUB7.6 bn in January. The amount was inflated by revaluation of provisions on FX-part of the loan portfolio as a result of ruble appreciation. As of February 1, loan-loss provisions were 2.6 times the overdue loans.

Net profit before income tax came at RUB86.8 bn for 1M 2019, while net profit totaled RUB73.7 bn.

Total assets decreased by 1.1% in January to RUB26.7 trln, driven by FX revaluation. In real terms, total assets remained almost unchanged.

The Bank lent RUB670 bn to corporate clients in January. Corporate loan portfolio contracted by 0.5% in real terms to RUB13.3 trln. In the meantime, the ruble-denominated part of loan portfolio increased by 0.7%. 

The Bank lent RUB220 bn to retail clients in January - a record issuance for this month. Retail loan portfolio increased by 1.0% exceeding RUB6.2 trln.

Overdue loans added RUB73 bn in January. Key reasons were twofold: methodological change for overdues treatment under RAS (overdue assignments are now accounted for separately) and one-off overdue increase as part of approved restructuring procedure for a large international retailer. The share of overdue loans in total loan portfolio stood at 2.5% in January, which is substantially lower than the banking sector's average (7.5% excl. Sberbank as of January 1, 2019).

Securities portfolio decreased in January by 4.3% to RUB2.8 trln, largely due to repayment of CBR bonds and Eurobonds of Russian Federation denominated in US dollars.

Retail deposits and accounts decreased by RUB326 bn or 2.5% in real terms in January, reflecting seasonal outflows from bank cards balances within New Year holidays which were albeit lower as compared to January 2018. The outflows from retail accounts were fully offset by inflows to corporate accounts: RUB440 bn or 6.3% in real terms. As a result, total client deposits and accounts balance increased by 0.6% in real terms.

The Bank reduced cash balances by RUB93 bn or 13.9%, as soon as the New Year holidays were over.

Core Tier 1 and Tier 1 capital contracted by RUB72 bn in January due to regulatory exclusions from capital calculation* and amounted to RUB3.096 bn. Core Tier 1 and Tier 1 exclude net profit for the second half of 2018 from capital calculation as long as it remains unaudited.

Total capital was down by RUB73 bn to RUB4.188 bn, as a function of the regulatory exclusions, earned net profit for the period and amortized amount of the CBR sub-debt recognized in capital calculation.

Risk-weighted assets declined by RUB437 bn, mainly due to revaluation of FX-denominated balance sheet lines and settlements with the international payment systems.

Capital adequacy ratios remained virtually unchanged.

*exclusions from capital calculation due to changes in regulation No 646-P of the Central Bank of Russia "Methodology of equity (capital) calculation for credit institutions ("Basel III")" effective from January 1, 2019. These exclusions from capital calculation are irrelevant under IFRS. 

** preliminary calculations