OREANDA-NEWS. On July 14, 2009 Sberbank has posted its condensed interim consolidated IFRS financial statements for 1Q 2009 including an Ernst & Young review report, reported the press-centre of Sberbank.

Dynamics of key income statement indicators for 1Q 2009 compared to 1Q 2008:

Operating income before provisioning for loan impairment increased by 38.9%

Net interest income grew 37.2%

Net commission income grew 25.6%

Operating expenses decreased by 4.5%

Provisioning for loan impairment increased 12-fold

Net profit totaled RUB0.6 bn for 1Q 2009 against RUB31.1 bn for 1Q 2008

According to Sberbank Group’s (hereafter “the Group”) Financial statements, operating income before provisioning for loan impairment totaled RUB144.2 bn, a 38.9% growth year-on-year and a 11.7% growth compared to 4Q 2008. Growth in operations with clients led to higher interest income from lending operations, higher interest margin from operations with clients and commission income in 1Q 2009, which in turn were the main drivers of operating income growth in 1Q 2009, despite the deterioration of the economic environment compared to 1Q 2008.

Interest income grew 42.4% year-on-year and 9.2% against the 4Q 2008 result, totaling RUB195.1 bn. The increase of interest income in 1Q 2009 was mainly attributable to the rise in interest income from corporate lending operations due to a 6.2% corporate loan portfolio growth.
Interest expenses grew 50.8% year-on-year and 16.9% versus the 4Q 2008 figure, reaching RUB79.6 bn. The growth of interest expenses in 1Q 2009 was influenced by a rise in the cost of funds due to financial market volatility. The rise of interest expenses was also driven by larger borrowings from the interbank market, including the subordinated borrowing from the Central Bank of Russia (CBR) in 4Q 2008 totaling RUB500 bn. These borrowings compensated for the slower customer deposits growth in 1Q 2009. 

The Group’s fee and commission income reached RUB23.1 bn, a 25.5% growth year-on-year. Net fee and commission income totaled RUB22.1 bn, a 25.6% increase year-on-year. Commission income growth was driven by increase in almost all kinds of fee-generating operations, with cash and settlement transactions with clients being traditionally the main component.

Trading result on operations with securities in 1Q 2009 (minus RUB4.4 bn) resulted mostly from unrealized losses on revaluation of OFZ bonds (RUB7.7bn) due to fall in bonds’ prices on the back of an inactive market, while trading gains from operations with other securities totaled RUB3.3 bn. In 1Q 2009 the Group decreased trading loss on operations with securities in comparison with the 4Q 2008 result (trading loss totaled RUB21.1 bn) due to improved situation on the financial markets.

Net gains from operations with foreign currencies and foreign currency derivatives made a significant part of operating income of the Group in 1Q 2009, standing at RUB8.5 bn against RUB0.2 bn for 1Q 2008. In comparison with the 4Q 2008 result (RUB20.1 bn) net gains from operations with foreign currencies and foreign currency derivatives decreased as a result of lower volumes of foreign exchange operations in 1Q 2009.

In line with the deteriorating economic environment, the Group increased its loan loss provision to RUB90.7 bn in 1Q 2009, a 46.5% increase against the 4Q 2008 figure and 12.1 times increase year-on-year. The rise in provision was the main pressure on net profit in 1Q 2009.
Administrative and operating expenses continued to decrease in 1Q 2009, showing a reduction of  4.5% year-on-year (including a 7.4% staff costs decrease) to RUB53.1 bn (a 5.2% reduction versus the 4Q 2008 result including a 4.0% staff costs decrease).

The Group managed to reduce its operating expenses through a continued cost-cutting programme, further optimisation of the organisational structure and a reduction in employee numbers. Operating income growth and the reduction in operating expenses led to a decrease in the Group’s cost to income ratio to 36.8% for 1Q 2009 compared to 53.5% for 1Q 2008 and 49.3% for 2008. In 1Q 2009 the actual number of employees decreased by 4 thousand people from 269.1 thousand people as at 31 December 2008 to 265.1 thousand people as at 31 March 2009.

Net profit of the Group totaled RUB0.6 bn for 1Q 2009 against RUB31.1 bn for 1Q 2008. The reduction in the Group’s net profit was mostly influenced by an increase in provisioning for loan impairment, but the impact was partly mitigated by higher operating income.

As of 31 March 2009, the Group’s total assets reached RUB6,768 bn, which represents a 0.5% growth for the three months of 2009. The main driver for the growth in total assets was a corporate loan portfolio increase.

Despite the deteriorated economic environment, the Group continued to increase its overall lending volumes in 1Q 2009. Thus gross loan portfolio grew 3.9% to RUB5 484 bn. The increase in lending operations was mainly driven by growth in corporate segment. Corporate loan portfolio increased by 6.2% to RUB4 268 bn, with both commercial and specialised loans to legal entities increasing. At the same time, loans to individuals decreased by 3.6% to RUB 1 216 bn due to reduction in demand for consumer loans by individuals. 

The quality of the Group’s loan portfolio changed given the deteriorated economic environment both in Russia and globally: non-performing loans (NPL) totaled RUB190.7 bn at 31 March 2009. The proportion of non-performing loans in the total loan portfolio (NPL ratio) reached 3.48% at 31 March 2009. A rise in credit portfolio risks triggered an increase in provision for loan impairment to RUB290.9 bn at 31 March 2009, which is 43.8% higher than as of 31 December 2008. The ratio of provision for loan impairment to total loans increased from 3.8% at 31 December 2008 to 5.3% at 31 March 2009. Loan impairment provisions to non-performing loans (NPL coverage ratio) remained high, standing at 1.5 times at 31 March 2009.

The securities portfolio showed a slight growth of 1.7% in 1Q 2009. During 1Q 2009, the Group  increased its portfolio of investment securities available for sale and at the same time reduced its trading securities portfolio and portfolio of securities designated at fair value through profit or loss. This change was in line with the Group’s investment policy. For the last two quarters the corporate bonds portfolio more than doubled and reached RUB111 bn, which was one of the forms of corporate lending. Share of corporate bonds in securities portfolio reached 22.1% as at 31 March 2009 against 17.7% as at 31 December 2008.

At 31 March 2009, the Group’s total liabilities reached RUB6,027 bn, which represents a 0.7% growth for the first three months of 2009. The Group’s liabilities structure remained stable. Retail accounts and deposits traditionally dominated the Group’s liabilities (RUB3,185 bn at 31 March 2009), which grew 2.3% for the first three months of 2009. At the same time, corporate accounts and deposits (mostly current/settlement accounts) decreased by 4.8% during 1Q 2009 to RUB1,603 bn due to seasonal liquidity needs of corporate clients.
 
The Group’s shareholders equity decreased from RUB750.2 bn to RUB741 bn in 1Q 2009. This change was due to unrealized losses on revaluation of OFZ bonds in investment securities available for sale portfolio. The total capital adequacy ratio (Tier 1 and Tier 2) calculated according to the Basel 1 Accord was well above the Basel 1 requirements (8%) and stood at 18.0% at 31 March 2009. Tier 1 capital adequacy ratio stood at 11.7% at the same date.