OREANDA-NEWS. March 31, 2014. Sberbank (hereafter the Group) has released its consolidated IFRS financial statements (hereafter the Financial Statements) as at 31 December 2013 and for the year ended 31 December 2013, with an independent audit report by Ernst & Young Vneshaudit.

Net profit for the year ended 31 December 2013 reached RUB 362.0 bn (or RUB 16.78 per ordinary share) compared to RUB 347.9 bn (or RUB 16.03 per ordinary share) for 2012.

Net interest income increased by 22.3% for 2013 to RUB 862.2 bn, compared to RUB 704.8 bn for 2012. Excluding the effect of DenizBank acquisition in 3Q 2012, the Groups Net interest income increased for 2013 by 16.8% year-on-year.

Net interest margin for 2013 declined by 20 basis points as compared to 2012 but remained strong at 5.9%.

Net fee and commission income increased by 29.4% for 2013 to RUB 220.3 bn, compared to RUB 170.3 bn for 2012. Excluding the effect of DenizBank acquisition in 3Q 2012, the Groups net fee and commission income increased for 2013 by 24.1% year-on-year.

The Groups operating income before provisions for loan impairment increased by 19.9% to RUB 1,103.8 bn as compared to RUB 920.8 bn for 2012 and was driven mainly by growth of net interest income, net fee and commission income and supported by DenizBank acquisition. Excluding the effect of DenizBank acquisition in 3Q 2012, the Groups operating income before provisions for loan impairment increased for 2013 by 13.5% year-on-year.

Operating expenses increased by 14.0% year-on-year, slower than operating income. As a result, Cost to Income ratio improved to46.6% versus 49.0% for 2012. Excluding the effect of DenizBank acquisition in 3Q 2012, the Groups operating expenses increased for 2013 by 8.0% year-on-year and Cost to Income ratio would have been 46.8%.

Net provision charge for loan impairment amounted to RUB133.5bn, translating to Cost of risk of 110 basis points for 2013.

Statement of financial position highlights:

As of 31 December, 2013, the Groups total assets reached RUB 18,210.3 bn showing a 20.6% growth compared to 2012 year end, the main driver of the growth being an increase in loans to customers.

For 2013, net loans and advances to customers increased by 23.2% to RUB 12,933.7 bn compared to RUB 10,499.3 bn at 2012 year end.

In 2013, the proportion of non-performing loans in Groups total gross loans decreased to 2.9% as of 31 December 2013 (31 December 2012: 3.2%).

Customer deposits increased by 18.5% to RUB 12,064.2 bn compared to RUB 10,179.3 bn at 2012 year end.

The Groups Equity increased for 2013 by 15.9% to RUB 1,881.4 bn, with net profit being the major driver.

The total capital adequacy ratio decreased by 30 basis points to 13.4% as at 31 December 2013. The core capital adequacy ratio improved by 20 basis points up to 10.6%.

Financial and Operating Review:

Interest income for 2013 increased by 27.8% year-on-year to RUB 1,478.6 bn. The increase is attributable to a significant expansion in volumes of both corporate and retail loans in 2013.

Interest expenses for 2013 increased by 37.1% year-on-year to RUB 587.8 bn. The largest component of interest expenses was related to retail deposits, which are the core source of funds for the Group. Cost of retail deposits demonstrated growth in 1H2013 with subsequent reduction in 4Q2013, as a result the average cost of retail deposits increased for 2013 and reached 5.5% compared to 5.0% for 2012, as customers were able to add funds to the earlier opened deposits with high interest rates. At the same time the average cost of corporate term deposits decreased from 5.4% to 5.1% for 2013.

Net interest income for 2013 totaled RUB 862.2 bn, a 22.3% increase year-on-year. The increase is driven by growth of interest earning assets in 2013, primarily loans, and DenizBank acquisition. Net interest income remains the main component of the Groups operating income accounting for 78.1% of total operating income before provision charges for loan impairment.

The Groups net fee and commission income for 2013 totaled RUB 220.3 bn, a 29.4% increase year-on-year. Income from operations with bankcards was the key driver of the growth, expanding by 47.6% year-on-year. Customer cash and settlement transactions also remained an important source of fee and commission income, their share in fee and commission income being 44.8% for 2013.

Other operating income, which includes amongst others net gains from operations with securities, foreign exchange, derivatives and precious metals and other items, equaled to 1.9% of Operating income before provisions and decreased by 53.4% year-on-year. The main driver of the decrease is a reduction of profit from non-financial business activities by 89.7% year on year following the disposal of significant non-financial operations at the end of 2012 beginning 2013.

Total operating income before provisions for loan impairment for 2013 reached RUB 1,103.8 bn compared to RUB 920.8 bn for 2012, a 19.9% increase year-on-year. The growth was driven primarily by the expansion of the Groups core banking business, as net interest income and net fee and commission income jointly amounted to over 98.1% of total operating income.

Net provision charge for loan impairment for 2013 totaled RUB 133.5 bn compared to RUB 21.5 bn for 2012 translating into Cost of risk of 110 basis points. This represents a gradual reversion to a normalized level of the cost of risk as post-crisis asset quality recovery cycle comes to an end.

The Group's operating expenses for 2013 increased by 14.0% year-on-year to RUB 514.6 bn. The main driver of this growth was the acquisition of DenizBank which accounts for 44.0% of the increase. Since operating income growth outpaced the growth of operating expenses, the Group's cost to income ratio for 2013 decreased to 46.6% versus 49.0% for 2012.

The Groups net profit for 2013 reached RUB 362.0 bn versus RUB 347.9 bn for 2012, a 4.1% increase year-on-year. Slow growth of net profit for 2013 as compared to 2012 is explained by a significant increase in cost of risk.

As of 31 December 2013, the Groups total assets reached RUB 18,210.3 bn, a 20.6% increase since 31 December 2012.

In 2013, the Groups gross loan portfolio before provision for loan impairment increased by 22.4%. Gross loans to corporate clients resumed growth after the 1st quarter of 2013 and increased by 19.1% to RUB 9,796.0 bn; loans to individuals increased by 32.1% to RUB 3,748.0 bn.

The proportion 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) decreased in 2013 to 2.9% as at 31 December 2013 compared to 3.2% at the beginning of 2013. The decrease is explained by the fast growth of the Groups loan portfolio in 2013. The NPL coverage ratio (total provisions for loan impairment to non-performing loans) decreased in 2013 to 1.5 as compared to 1.6 at 31 December 2012. Provisions for loan impairment increased in 2013 by 8.0% reaching RUB 610.3 bn. As of 31 December 2013, the proportion of provisions for loan impairment to total gross loans was 4.5% compared with 5.1% at the beginning of the 2013.

As at 31 December 2013, the Groups total liabilities amounted to RUB 16,328.9 bn, a 21.2% increase for the year. Retail deposits, totaling RUB 8,435.8 bn as at 31 December 2013, increased by 20.8%; they remain the core source of the Groups funding, accounting for 51.7% of the Groups total liabilities. Corporate deposits also increased and amounted to RUB 3,628.4 bn as at 31 December 2013 showing a 13.5% growth for the year, while their share in total liabilities amounted to 22.2%.

As at 31 December 2013, the Groups amounts due to bankstotaled 2,111.3 bn, a 45.4% growth since the beginning of 2013. The growth is explained by a 51.4% increase in borrowings under sale and repurchase agreements.

The Groups equity amounted to RUB 1,881.4 bn as at 31 December 2013, a 15.9% increase for 2013. As at 31 December 2013, the Groups total capital adequacy ratio as per Basel 1 stood at 13.4%, well above the 8% minimum requirement, and the Tier 1 ratio was 10.6%. The increase in Tier 1 ratio since the beginning of 2013 was primarily driven by the growth of Tier 1 capital mostly due to retained earnings increasing faster than RWA.