OREANDA-NEWS. June 4, 2012. Sberbank Group (hereafter the Group) has released its condensed interim consolidated IFRS financial statements (hereafter the Financial Statements) as at 31 March 2012 and for 3 months ended 31 March 2012, with an independent rewiew report by Ernst & Young Vneshaudit (Download the Presentation).

Income Statement highlights:

Net profit for 3 months ended 31 March 2012 reached RUB 92.2 bn (or RUB 4.28 per ordinary share), showing a 6% increase on RUB 86.8 bn (or RUB 4.02 per ordinary share) for the same period of 2011.

In 2012, the Groups revenues continued to come mostly from core banking operations, with net interest income and net fee and commission income accounting for 92.5% of total operating income before provision for loan impairment for 1Q 2012.

The Groups net interest margin in 1Q 2012 was 6.0%, the same level as in 1Q 2011.

Despite higher operating expenses in 1Q 2012, the Cost to Income ratio stays at an adequate level of 46.3% versus 43.3% in 1Q 2011.

The Groups loan portfolio quality remains stable. For 1Q 2012 the Group showed a net recovery of provisions of RUB 3.2 bn. The non-performing loan ratio improved slightly from 4.9% as of 31 December 2011 to 4.8%, while the non-performing loan coverage ratio remained strong at 1.5 times as of 31 March 2012.

Return on equity remained high at 27.9% in 1Q 2012 versus 33.6% in 1Q 2011.

Statement of financial position highlights:

The Group continues to enjoy solid retail loan growth with retail gross loan portfolio up 14.0% for 3 months 2012.

Customer deposits increased by 4.1% in 1Q 2012, with corporate deposits being the main driver for increase showing an 8.4% growth

The Groups Equity increased in 1Q 2012 by 8.6% to RUB 1,377.3, with profit for the period being the major driver for the increase.

Financial and Operating Review:

Interest income increased in 1Q 2012 by 26.2% year-on-year to RUB 249.7 bn. The increase was driven by the expansion of interest earning assets and higher proportion in them of assets with higher yields, primarily loans.

Interest expenses increased in 1Q 2012 by 29.3% year-on-year to RUB 93.4 bn. The largest component of interest expenses was interest on retail deposits which are a core source of funds for the Group. The cost of retail and corporate deposits increased in 1Q 2012 as a result of rising interest rates in the market.

Net interest income for 1Q 2012 totalled RUB 156.3 bn, a 24.9% increase year-on-year. This increase reflects growth of interest earning assets and change in their structure despite rising costs of funding. Net interest income remains the main component of the Groups operating income accounting for 75.3% of total operating income before provision charges for loan impairment.

The Groups net fee and commission income totalled RUB 35.8 bn in 1Q 2012, a 20.5% increase year-on-year. This growth was supported by a variety of fee-generating operations, but particularly by the expansion of operations with bank cards.

Other operating income, which includes amongst others net gains from operations with securities, foreign exchange, derivatives and precious metals and other items, comprised 7.5% of Operating income before provisions. These items in aggregate increased by 52.9% from RUB 10.2 bn in 1Q 2011 to RUB 15.6 bn in 1Q 2012.

Total operating income before provision for loan impairment for 1Q 2012 reached RUB 207.7 bn compared with RUB 165.0 bn for 1Q 2011, a 25.9% increase year-on-year. The growth of operating income was primarily driven by strong increase of net interest income, well supported by net fee commission income and other operating income.

Net recovery of previously recorded provision for loan impairment for 1Q 2012 totalled RUB 3.2 bn compared with the recovery of RUB 14.2 bn in 1Q 2011 which was ensured by stable quality of the loan book.

The Group's operating expenses increased in 1Q 2012 by 34.6% year-on-year, with employee compensation growing slower than non-staff costs. The main drivers of cost growth in 1Q 2012 were continuing investments in personnel quality, IT, and branch network in accordance with the Group's transformation strategy. As a result, the Group's cost to income ratio reached 46.3% in 1Q 2012 versus 43.3% in 1Q 2011.

The Groups net profit in 1Q 2012 totalled RUB 92.2 bn versus RUB 86.8 bn in 1Q 2011, a 6.2% increase generated mostly as a result of higher operating income.

As of 31 March 2012, the Groups total assets reached RUB 11,641.9 bn, a 7.4% increase since 31 December 2011.

The customers loan portfolio after provisioning for loan impairment increased by 6.8% in 1Q 2012. Loans to individuals before provisions for loan impairment grew by 14.0% to RUB 2,058.1 bn as of 31 March 2012, while loans to legal entities before provisions as of the same date increased by 4.0% to RUB 6,838.5 bn. This increase in lending came as a result of stronger demand for retail loans in 1Q 2012 and the Groups continued focus on sales and marketing.

The Groups loan quality remained stable, with portion of non-performing loans (NPL), defined as loans for which payment of principal and/or interest is overdue by more than 90 days, in the total loan portfolio (the NPL ratio) further decreased to 4.8% as at 31 March 2012 compared with 4.9% at the beginning of the year. As at 31 March 2012, the NPL coverage ratio (total provisions for loan impairment to non-performing loans) was 1.5 times. Provisions for loan impairment decreased by 1.4% reaching RUB 652.9 bn as at 31 March 2012. The ratio of provisions for loan impairment to total gross loans reached 7.3% compared with 7.9% at the beginning of the year.

The Groups securities portfolio declined in 1Q 2012 by 1.7% to RUB 1,598.1 bn as at 31 March 2012. As at 31 March 2012, federal government bonds accounted for the largest part of the Groups securities portfolio with a 42.3% share. The proportion of corporate bonds in the total securities portfolio further increased from 31.7% at the beginning of the year to 33.9% at 31 March 2012.

As at 31 March 2012, the Groups total liabilities amounted to RUB 10,264.6 bn, a 7.3% increase since 31 December 2011.  The Groups liabilities structure remained largely stable throughout 1Q 2012. Retail deposits, totalling RUB 5,864.0 bn as at 31 March 2012, have remained the core source of the Groups funding, accounting for 57.1% of the Groups total liabilities, and increased by 2.4% compared with year-end 2011. Corporate deposits rose 8.4% to RUB 2,391.9 bn as at 31 March 2012 compared with year-end 2011, and accounted for 23.3% of total liabilities.

The Groups equity attributable to the Banks shareholders amounted to RUB 1,373.8 bn as at 31 March 2012, an 8.6% increase for 1Q 2012. As at 31 March 2012, the Groups total capital adequacy ratio (Tier 1 and Tier 2) calculated as per Basel 1 was 15.4%, well above the 8% minimum requirement, and the Tier 1 ratio was 11.8%.