OREANDA-NEWS. August 26, 2010. Sberbank has posted its condensed interim consolidated IFRS financial statements (hereafter “the Financial statements”) as of 30 June 2010 and for 1H 2010 (hereafter “the Reporting period”) including an Ernst & Young report on review, reported the press-centre of Sberbank.

Highlights of Sberbank Group’s financial performance as of 30.06.2010 and for 1H 2010 (Download the presentation):

Net profit for 1H 2010 totaled RUB 64.3 bn, or RUB 2.95 per ordinary share, compared to RUB 6.0 bn or RUB 0.25 per ordinary share for 1H 2009

Total comprehensive income for 1H 2010 totaled RUB 87.7 bn compared to RUB 10.9 bn for 1H 2009

Operating income before provision charge for loan impairment for 1H 2010 totaled RUB 319.3 bn compared to RUB 308.3 bn for 1H 2009 thus showing a 3.6% growth

The Group’s profitability is returning to normal: return on equity reached 15.6%

Cost to income ratio remains strong at 40.2% 

Provision charge for loan impairment decreased in 1H 2010 by 42.4% year-on year as a result of a slower growth of overdue loans and the resumption of economic growth in Russia

Strong capital adequacy: the Group’s total capital ratio under Basel 1 is 17.3% as of 30 June 2010, well above the 8% minimum requirement. The Group’s core capital ratio is 11.7% as of 30 June 2010. CBR N1 capital adequacy ratio - 18.8%

Sberbank Group’s (hereafter “the Group”) Financial statements show Operating income before provision charge for loan impairment for 1H 2010 at RUB 319.3 bn compared to RUB 308.3 bn for 1H 2009, a 3.6% increase year-on-year. Growth of operating income was mainly driven by increase in fee and commission income as a result of expanding operations with customers.

Interest income decreased by 0.9% year-on-year, totaling RUB 399.7 bn, mainly as a result of decline in average yields on corporate loans due to market trends. At the same time average yields on retail loans stabilized at 14.9%.

Interest expenses decreased by 1.9% year-on-year and totaled RUB 155.7 bn. The largest component of interest expenses was interest paid on retail deposits which are the core of the Group’s funding. The cost of both retail and corporate deposits decreases following market trends and bank pricing policy.

Net interest income for 1H 2010 totaled RUB 244.0 bn, a 0.2% decrease year-on-year. This decrease reflects the general market trend toward reduction of interest rates on interest-earning assets and high competition for good borrowers. Net interest income remains the main component of the Group’s operating income.

The Group’s fee and commission income totaled RUB 59.6 bn for 1H 2010, resulting in a 24.4% 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.

Net gains on operations with securities reached RUB 9.3 bn for 1H 2010 compared to RUB 3.2 bn for 1H 2009 showing 2.9 times growth year-on-year.

Net gains from operations with foreign currency and foreign exchange derivatives totaled RUB 7.1 bn for 1H 2010 which is 23.7% lower than for 1H 2009. The decline is due to exceptionally high volumes and margins of foreign exchange operations with customers in 1Q 2009, the period of high volatility of foreign exchange rates.

Provision charge for loan impairment for 1H 2010 totaled RUB 110.3 bn, a 42.4% decrease year-on-year. This represents continuation of the trend towards the decrease of outlays on loan impairment provisions which began in 4Q 2009 as a result of slower growth of overdue loans on the back of economic recovery in Russia. At the same time, higher growth of balances of provisions for loan impairment compared to the growth of non-performing loans in 1H 2010 goes in line with the Group’s conservative provisioning policy.

The Group’s Operating expenses grew by 17.0% in the first half-year 2010 compared to the same period in 2009. The main driver of the growth is increase in staff costs which occurred as a result of implementation of the policy towards bringing compensation in line with current market conditions. The Bank further reduced its headcount by 2.3% from 249.8 thousands as of the 2009 year end to 244.0 thousands as of 30 June 2010. Other operating expenses increased by 10.9% compared to the first half-year 2009 on the back of implementation of the Group’s strategy, including new infrastructure projects, marketing and advertisement expenses.

The Group’s net profit totaled RUB 64.3 bn versus RUB 6.0 bn in 1H 2009. The major reason for the increase was higher operating income before provision for loan impairment and the decrease of provision charge for loan impairment.

Total comprehensive income of the Group for 1H 2010 totaled RUB 87.7 bn compared to RUB 10.9 bn for the same period in 2009, which represents an eight-fold growth. Alongside the net profit growth, RUB 26.8 bn gains on marking to market investment securities available for sale is the most impartant component of other comprehensive income. A year ago these gains comprised RUB 6.0 bn.

As of 30 June 2010 the Group’s total assets reached RUB 7,579.4 bn, showing a 6.7% growth for the reporting period.

Loan portfolio after provisioning for impairment decreased by 2.2% for 1H 2010. Starting from 2Q 2010 there was growing demand for both corporate and retail loans. Thus,  gross corporate loans grew by 0.2% in 2Q 2010 and reached RUB 4,224.1 bn as of 30 June 2010. Loan portfolio outstanding to individuals before provision for loan impairment grew by 4.6% up to RUB 1,212.1 bn for the same period.

The Group’s non-performing loans (NPL) grew from RUB 464.2 bn as of 31 December 2009 to RUB 495.6 bn as of 30 June 2010. The proportion of non-performing loans in the total loan portfolio (the NPL ratio) reached 9.1% as of 30 June 2010 compared to 8.5% at the beginning of the year. As of 30 June 2010 the NPL coverage ratio (total provisions for loan impairment to non-performing loans) was 1.4, the level which the Group considers sufficient. Provisions for loan impairment grew by 16.8% reaching RUB 677.1 bn as of 30 June 2010. The ratio of provision for loan impairment to total gross loans reached 12.5% compared to 10.7% at the beginning of the year.

Securities portfolio grew by 68.0% in 1H 2010 reaching RUB 1,788.1 bn as of 30 June 2010. As of 30 June 2010 the Bank of Russia bonds and federal government bonds dominated the securities portfolio with a 63.2% share. The proportion of corporate bonds in the total securities portfolio decreased from 25.4% as at the beginning of the year to 17.9% as of 30 June 2010. In absolute terms the portfolio of corporate bonds amounted to RUB 319.6 bn as of 30 June 2010, having grown 18.1% from the beginning of the year, mainly through purchases of corporate bonds issued by Russian companies, which the Group considers to be another form of corporate lending.

As of 30 June 2010, the Group’s total liabilities amounted to RUB 6,712.5 bn, a 6.1% increase as compared to the beginning of the year.  The Group’s liabilities’ structure remained stable throughout the H1 2010. Retail deposits totalling RUB 4,175.6 bn as at 30 June 2010, are the core source of the Group’s funding. They increased by 10.3% growth compared to the beginning of the year.

The Group’s shareholders’ equity amounted to RUB 866.9 bn as of 30 June 2010, an 11.3% increase for the first half of 2010. As of 30 June 2010 the Group’s total capital adequacy ratio (Tier 1 and Tier 2) calculated according to Basel 1 Accord was at 17.3%, well above the 8% minimum requirement; the Tier 1 ratio was 11.7%. In the 2Q 2010 the Group paid back part of the subordinated loan of RUB 200 bn received from the Bank of Russia in December 2008.