OREANDA-NEWS. April 09, 2014. Please note that the numbers are calculated in accordance with Sberbank`s internal methodology. Also note that the effect of subsequent events is included in the numbers as of January 1, 2014.

Income Statement Highlights for 1Q 2014 (as compared to 1Q 2013):

Net interest income increased by 26.3% y-o-y

Net fee and commission income grew by 26.7% y-o-y

Noncredit commission income grew by 29.4% y-o-y

Operating income before total provisions increased by 25.5% y-o-y

Total provision charge was RUB70.3 bn vs. RUB25.4 bn charge in 1Q 2013

Operating expenses were up by 14.9% y-o-y

Profit before tax amounted to RUB121.5 bn vs. RUB121.1 bn for 1Q 2013

Net profit amounted to RUB99.3 bn vs. RUB97.4 bn for Q1 2013

Net interest income came at RUB205.8 bn, up by 26.3% compared to 1Q 2013:

Interest income increased by RUB68.8 bn driven by total loan portfolio growth.

Interest expenses grew by RUB26.0 bn, due to customer deposits growth.

Net fee and commission income amounted to RUB58.8 bn; up by 26.7% y-o-y compared to 1Q 2013. Noncredit commission income provides such high growth rates, up by 29.4%, mostly driven by bank cards and acquiring. Cash settlements also contribute significantly.

Net income from trading operations amounted to RUB4.0 bn vs. RUB7.2 bn for 1Q 2013. The dynamics is mostly associated with a reduction of income on the securities market due to the general market situation. Net income on conversion operations increased 2 times, amounted to RUB11.9 bn.

Operating income before provisions that comes from core operations of the Bank, increased by more than a quarter and amounted to RUB276.7 bn.

Operating expenses increased by 14.9%. C/I ratio for 1Q 2014 was 30.7% vs. 33.6% a year earlier. The improvement in C/I ratio is maintained by the Bank’s cost optimization program.

Total provision charges amounted to RUB70.3 bn vs. RUB25.4 bn charge a year earlier. The growth in provision charges can be explained by the growth of the total loan portfolio, as well as significant Ruble depreciation against major foreign currencies in 1Q 2014 that caused a significant increase in provisions for foreign currency loans. The Bank continues to practice a conservative approach in loan-loss provisioning based on requirements of the Central Bank of Russia. Coverage ratio remained strong: loan-loss provisions are 2.1 times the overdue loans.

Profit before tax for 1Q 2014 totaled to RUB121.5 bn and net profit amounted to RUB99.3 bn. Both figures exceeded results for the same period of 2013.

Assets increased by RUB200 bn in March, or 1.2%, and exceeded RUB17 trn. The main growth drivers were loans, particularly corporate. The assets growth YTD reached 4.7%; the positive reevaluation due to Ruble devaluation against prime foreign currencies (+3.0 RUB / USD and +4.1 RUB / EUR during the quarter) supported growth of balance sheet items with FX component.

The Bank lent over RUB770 bn to corporate clients in March, exceeding the average monthly lending volume in 2013 by a quarter. Corporate loan portfolio increased by 1.8% to RUB9.2 trn: new demand significantly exceeded redemptions.

More than RUB170 bn were lent to retail clients in March. Retail loan portfolio increased by RUB67.5 bn, or 2.0% in March, to reach RUB3.45 trn, driven by mortgages.

The Bank retains quality of its loan portfolio at a good level: overdue loans were 2.4% as of April 1, 2014.

Securities portfolio decreased by RUB78 bn, or 3.9%, in March mainly due to redemptions of OFZ bonds and repayments of corporate bonds.

The clients’ funds remain the core source of funding for the Bank’s operations: the deposits and accounts increased by RUB476 bn, or 4.3% YTD, the portfolio exceeding RUB11.6 trn as of April 1, 2014. The growth was driven by corporate current accounts, and fully netted the outflow of retail funds in 1Q2014.

The 2013 net profit audit by Ernst & Young Vneshaudit allowed reclassifying 2H2013 net profit from Tier 2 to Tier 1 capital. Consequently, Core Tier 1 and Tier 1 capital growth (equal since Sberbank does not have instruments of additional capital) reached RUB180 bn. The Core Tier 1 and Tier 1 capital1 as of April 1, 2014 amounted to RUB1,564 bn under preliminary calculations. Total capital amounted to RUB2,182 bn on the same date. Total capital increased by RUB29 bn in March as a result of net profit contribution.

Capital adequacy ratios under preliminary calculations as of April 1, 2014 were:

N1.1 – 9.3% (minimum adequacy level, required by the Central Bank of Russia at 5.0%)

N1.2 – 9.3% (minimum required level at 5.5%)

N1.0 – 12.9% (minimum required level with Deposit Insurance Regulation at 10.0%).

Sberbank 1Q 2014 Financial Highlights (under RAS, unconsolidated)

1 Effective from January 1, 2014 are changes to capital level calculation under CBR regulation No 395-P and instruction No 139-I.