Sberbank releases Financial Highlights for 9M 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.

October 07, 2019

Key highlights for September 2019:

• In September the Bank earned RUB72.1 bn.
• Net interest income increased by 1.5% compared to September 2018.
• The Bank issued RUB1.15 trn and RUB310 bln of loans to corporate and retail clients respectively which was a maximum monthly amount issued this year.
• Retail loan portfolio grew by 1.7% and corporate loan portfolio was up by 0.7% adjusted for FX revaluation.
• Deposits and accounts of corporate and retail clients adjusted for FX revaluation added 1.3% and 0.5% respectively.

Deputy Chairman of Sberbank Alexander Morozov stated:

"Return on equity for the first 9 months of the year totaled 22.0% driven by acceleration of business expansion both on the assets and on the liabilities side, supported by net interest and fee and commission income growth. The performance was in line with our expectations."

Comments for 9M 2019:

Net interest income totaled RUB929.2 bn. As compared to 9M 2018, the dynamics was affected by increased cost of client funding at the end of 2018 and the beginning of the current year. Meanwhile, monthly dynamics of net interest income was positive due to the gradual decrease in clients' funding costs. Net interest income in September increased by 1.5% compared to September 2018 and by 2.6% compared to August 2019.

Fee and commission income growth accelerated to 13.7% driven mainly by transactional business. Net fee and commission income for 9M 2019 amounted to RUB334.5 bn. Growth rate remains affected by specifics of accounting for the loyalty program costs given that the Bank started accruing these expenses evenly from the beginning of the year as part of RAS convergence with IFRS. The impact will largely be absorbed by the year end.

Operating expenses increased by 8.6%. As compared to 9M 2018, OpEx dynamics was affected by annual wage increase effective in July as well as VAT rate increase from January 1, 2019 and staff reshuffling from Sberbank Technologies JSC to Sberbank PJSC over the second half of 2018. Cost-to-income ratio for 9M 2019 came at 31.3%.

Total provision charges for loans amounted to RUB13.4 bn in September. Meanwhile, the RUB3.3 bln total income from provision release including revaluation of loans at fair value was driven by ruble strengthening and revaluation of FX loan loss reserves.

Total provision charges including revaluation of loans at fair value were RUB88.9 bn year to date. Lower charges in 2019 were caused by the opposite directions of the FX rate dynamics for comparable periods as well as restructuring of the Agrokor debt completed in June 2019. As of October 1, loan-loss provisions were 2.8 times that of the overdue loans.

Negative result in net gain from FX revaluation and trading operations in September was fully driven by reclassification of a number of loans at amortized cost to loans at fair value as well as ruble strengthening without affecting the Bank's financial result.

Net profit before tax grew by 10.8% to RUB834.0 bn as compared to 9M 2018. Net profit increased by 8.6% to RUB665.4 bn.

Total assets increased by 0.4% in September. The dynamics of balance sheet items in September was affected by ruble strengthening. Asset growth adjusted for currency revaluation was 1.2%.

The volume of loan issuances continued to grow in September. The Bank lent RUB1.15 trn to corporate clients in September, which was a maximum monthly amount issued this year, and RUB7.8 trn year to date. Portfolio growth adjusted for currency revaluation came at 0.7% or RUB96 bn in September.

Loan issuances to retail clients in September totaled more than RUB310 bn, which was also the largest monthly volume this year. Retail loan issuances were RUB2.4 trn year to date. Retail loan portfolio expanded by 1.7% in September to RUB7.0 trn or more than 35% of the total loans.

Overdue loans decreased by RUB3.2 bn in September led by corporate segment. The share of overdue loans improved by 0.03 pp to 2.21%.

Securities portfolio decreased by 6.4% in September on repayment of CBR bonds and came at RUB3.2 trn as of October 1.

Deposits and accounts of corporate and retail clients increased by 1.3% and 0.5% respectively in September excluding foreign currency revaluation effect. The total amount of client funds totaled RUB20.2 trn for 9 months 2019.

In September the bank issued two-year exchange-traded bonds in the amount of RUB 25 bln.

Core Tier 1 and Tier 1 capital increased in September by RUB15 bln driven by decrease of deductions for claims with deferred payments. Total capital grew by RUB54 bln and was mainly supported by earnings, while its growth slowed due to additional formation of a prudential reserve.

Risk-weighted assets increased by RUB177 bn in September, mainly driven by retail loan portfolio expansion.

* preliminary calculations