OREANDA-NEWS. April 18, 2011. Please note that the numbers are calculated in accordance with Sberbank’s internal methodology. The methodology has seen some changes in 2011 and the numbers for 2010 have been recalculated for comparability purposes. Also note that the numbers as of 1 January 2011 exclude the effect of events occurring after the balance sheet date, reported the press-centre of Sberbank.

Income Statement Highlights for 1Q 2011 (as compared to 1Q 2010)

Net interest income decreased by 3.4% y-o-y

Net fee and commission income rose by 3.7% y-o-y

Total provision charge amounted to RUB3.9 bn vs. RUB55.0 bn for 1Q 2010

Operating income before total provisions increased by 6.1% y-o-y

Operating income after total provisions grew 1.7-fold y-o-y

Operating expenses increased by 25.7% y-o-y
 
Profit before tax amounted to RUB93.6 bn vs. RUB45.4 bn for 1Q 2010

Net profit totaled RUB83.9 bn vs. RUB43.2 bn for 1Q 2010

Net interest income fell 3.4% in 1Q 2011, mainly due to lower income from corporate lending (-17.9%) on the back of declining market rates. A sustainable loan portfolio expansion, with the intra-day balance up by RUB0.6 trln in 1Q 2011 as compared to 1Q 2010, was insufficient to compensate for lower rates.

Interest income was supported by

Income from retail lending (+17.5%) owing largely to portfolio growth;

Lower interest expense due to lower funding costs on corporate accounts and amounts due to other banks.

Interest expense on bond portfolio increased 2.4-fold to RUB2.0 bn due to international borrowings raised within the MTN-program in 2010. However, costs related to international borrowings remain insignificant – 3.0% of total interest expense.

Net fee and commission income grew 3.7%, with the largest contribution from banking cards and agent commissions on selling insurance contracts. Net gain from trading on financial markets amounted to RUB2.9 bn in 1Q 2011 which compares favorably to net loss for the same period a year ago. The dynamics of trading income is influenced by specifics of Russian accounting for derivatives.

Operating income before total provisions increased 6.1%. Operating expenses rose by 25.7% mainly led by an increase in staff costs in line with planned wage adjustments as well as general and administrative expenses related to the business expansion. Furthermore, strong inflows to retail deposits (the average outstanding balance was almost RUB1 trln higher compared to 1Q 2010) entailed an increase in mandatory fee payments to the state-deposit insurance system. Cost to income ratio stood at 37.5%.

One of the changes in the Bank’s internal accounting methodology from 1 January 2011 is the introduction of “Total provisions” item which incorporates provisions for loan impairment and provisions for impairment of other assets with charges related to assignment sales. For 1Q 2011, the Bank allocated RUB3.9 bn into total provisions vs. RUB55 bn for the same period a year ago. The Bank wrote back provision for impairment of loans and other assets in the amount of RUB0.4 bn as compared to RUB8.1 bn set aside in provision for the same period a year ago. Furthermore, losses from assignment sales were sharply low, amounting to RUB4.3 bn in 1Q 2011 vs. RUB46.9 bn in 1Q 2010.

Operating income after total provisions grew 1.7 times y-o-y. Profit before tax totaled RUB93.6 bn and net profit came in at RUB83.9 bn, or 1.9 times higher than a year ago.

The Bank’s assets increased by RUB22 bn to RUB8,569 bn in 1Q 2011. The balance sheet was significantly affected by negative foreign currency revaluation as a result of ruble strengthening versus US dollar and euro.

In March, assets grew by RUB20 bn driven by loan portfolio expansion. Corporate loan book added RUB20 bn in March to RUB4,868 bn. The Bank provided Russian companies more than RUB400 bn loans in March and about RUB1 trln year-to-date. Retail loan portfolio expanded by RUB22 bn in March to RUB1,336 bn, with more than RUB80 bn loans issued in March and over RUB200 bn year- to-date.

The quality of the loan portfolio improved further: The overdue loans as percentage of the total book decreased from 5.04% at the beginning of the year to 4.83%. The Bank retains high coverage ratio. As of 1 April 2011, loan-loss provisions amounted to RUB663 bn, or 2.2 times overdue loans.

Investment portfolio decreased by RUB16 bn in March to RUB1,752 bn, as the Bank sold some of its CBR bond holdings. The CBR bonds of more than RUB65 bn were partially replaced by corporate and federal bonds. As a result, the share of government bonds fell to 64% and corporate bonds now account for 23% of the portfolio.

Inflows to retail deposits continued, with the balance increasing by RUB29 bn in March to RUB4,843 bn. This fully offset the RUB30 bn outflow from corporate accounts and deposits. Settlement accounts saw the main outflows while term deposits increased.

Regulatory capital (under CBR regulation No. 215-P) increased by RUB55 bn in March to RUB1,328 bn, which was due to a transfer of 2010 net profit audited by CJSC “Ernst & Young Vneshaudit” from supplementary to core capital. This entailed a transfer into supplementary capital of a part of 2011 net profit which was initially excluded from regulatory capital as the supplementary exceeded the core capital. The regulatory capital increased RUB76 bn or 6.1% year-to-date.

Capital adequacy ratio stood at 18.5% as of 1 April 2011.