SBNC Sberbank Russia PJSC Sponsored ADR

Sberbank reports 2Q 2020 Net Profit of RUB166.7 bn under International Financial Reporting Standards (IFRS)

Sberbank (SBER)
Sberbank reports 2Q 2020 Net Profit of RUB166.7 bn under International Financial Reporting Standards (IFRS)

30-Jul-2020 / 10:14 MSK
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.

Sberbank reports 2Q 2020 Net Profit of RUB166.7 bn under International Financial Reporting Standards (IFRS)

Moscow, July 30, 2020  - Sberbank (hereafter "the Group") has released its  (hereafter "the Financial Statements") as at and for the 6 months ended 30 June 2020, with report on review by AO PricewaterhouseCoopers Audit.

Alexandra Buriko, CFO, stated:
"Solid capital and liquidity position, high penetration of digital services and a balanced risk-management approach enable us to properly address current challenges and support business and community in the period of pandemic and lockdown. Unprecedented volumes of restructuring and anti-crisis financing processed in the shortest possible timeframe along with the launch of cost-optimization were the main priorities for the Bank in the past quarter. Sberbank earned RUB166.7 bn in net profit and delivered 14.2% ROE in 2Q 2020, despite the drop in business activity and elevated provision charge. As the economy gradually restores, we become cautiously optimistic for the second half of 2020."

2Q 2020 Financial and Operational Highlights:
  • The Group net profit reached RUB166.7 bn (-33.4% y/y);
  • The Group earnings per ordinary share (EPS) came in at RUB7.78, down by 27.3% y/y;
  • The Group return on equity (ROE) reached 14.2% and the Group return on assets (ROA) was 2.1%;
  • The Group gross loans1 increased by 1.6% excluding the FX revaluation effect to RUB22.9 trn. Retail loan portfolio was up by 0.9% to RUB8.3 trn. Corporate loan portfolio expanded by 1.8% excluding the effect of FX revaluation to RUB14.6 trn;
  • Active retail client base exceeded 96.9 mln;
  • Number of monthly active users (MAU) of mobile App Sberbank Online was up by 2.8 mln to 60 mln, and number of daily active users (DAU) increased by 2.4 to 27.2 mln; DAU/MAU exceeded 45%;
  • Active corporate client base exceeded 2.6 mln, while MAU in digital channels kept at 2.2 mln users;
  • As of the end of 2Q 2020, over 11 mln clients were using Sber ID, a unified login that provides access to more than 45 ecosystem partners, while 'Sbasibo' bonuses can be used to pay for services of 8 ecosystem companies.

Statement of Profit or Loss Results Highlights
 
RUB bn, unless stated otherwise 2Q 2Q 1Q 2Q 2Q 6M 6M 6M
2020 2019 2020 2020/ 2020/ 2020 2019 2020/
      2Q 1Q     6M
      2019, 2020,     2019,
      % change % change     % change
Net interest income 398.5 353.1 371.9 12.9% 7.2% 770.4 690.6 11.6%
Net fee and commission income 120.0 116.7 126.4 2.8% -5.1% 246.4 219.6 12.2%
Other non-interest income / (expense) 3 -3.6 17.0 10.3 -121.2% -135.0% 6.7 52.5 -87.2%
Operating income before provisions 2 514.9 486.8 508.6 5.8% 1.2% 1 023.5 962.7 6.3%
Net charge related to change in asset quality:  -132.9 -8.8 -167.1 1410.2% -20.5% -300.0 -54.3 452.5%
     Net credit loss allowance charge for debt financial assets -126.5 -9.2 -138.0 1275.0% -8.3% -264.5 -26.5 898.1%
     Negative revaluation of loans at fair value due to change in credit quality -6.4 0.4 -29.1 -1700.0% -78.0% -35.5 -27.8 27.7%
Net loss allowance / provision for credit related commitments -0.7 -2.4 -14.6 -70.8% -95.2% -15.3 1.9 -905.3%
Staff and administrative expenses -172.4 -168.5 -169.2 2.3% 1.9% -341.6 -319.2 7.0%
Net profit  from continuing operations 166.7 245.9 120.5 -32.2% 38.3% 287.2 472.0 -39.2%
Profit / (Loss) from discontinued operations 0.0 4.4 0.0 -100.0% NA 0.0 4.9 -100.0%
Net profit 166.7 250.3 120.5 -33.4% 38.3% 287.2 476.9 -39.8%
Earnings per ordinary share  from continuing operations. RUB 7.78 10.70 5.60 -27.3% 38.9% 13.38 21.23 -37.0%
Total comprehensive income  from continuing operations attributable to the shareholders of the Bank 229.5 281.1 121.1 -18.4% 89.5% 350.6 502.3 -30.2%
Ratios based on continuing operations
Return on equitybased on profit from continuing operations 14.2% 24.9% 10.6% -- -- 12.4% 23.7% --
Return on assets based on profit from continuing operations 2.1% 3.4% 1.5% -- -- 1.8% 3.3% --
Net interest margin 5.61% 5.41% 5.49% -- -- 5.56% 5.34% --
Cost of risk (amortized cost loans)  224 bp  15 bp  251 bp  --  --  238 bp  30 bp --
Cost of risk (amortized cost and FV loans)  225 bp  14 bp  292 bp  --  --  258 bp  55 bp --
Cost-to-income ratio 2 33.5% 34.6% 33.3% -- -- 33.4% 33.2% --



Balance Sheet Highlights
 
RUB bn. unless stated otherwise 30.06.2020 31.03.2020 31.12.2019 30.06.2020/ 30.06.2020/
31.03.2020. 31.12.2019.
% change % change
Gross total loans1:      22 852.1      23 166.0      21 749.4 -1.4% 5.1%
Corporate loans 1      14 582.1      14 972.0      13 865.4 -2.6% 5.2%
Retail loans 1       8 270.0       8 194.0       7 884.0 0.9% 4.9%
Securities portfolio       4 845.0       4 671.2       4 369.7 3.7% 10.9%
Assets 3      32 383.4      32 068.9      29 958.9 1.0% 8.1%
Total deposits:      23 312.4      23 061.8      21 574.4 1.1% 8.1%
Retail deposits     15 108.2     14 669.9     14 209.6 3.0% 6.3%
Corporate deposits       8 204.2       8 391.9       7 364.8 -2.2% 11.4%
Book value per share6. RUB          213.4          203.2          198.3 5.0% 7.6%
Ratios          
Net Loans / Deposits ratio (LDR) 90.9% 93.5% 94.4% -- --
Stage 3 + POCI loans / total gross loans at amortized cost 7.5% 7.4% 7.5% -- --
Provision coverage of Stage 3 + POCI loans 102.0% 98.2% 89.3% -- --

Net interest income increased by 12.9% y/y in 2Q 2020 to RUB398.5 bn.
Interest income was down by 1.8% y/y in 2Q 2020 to RUB594.8 bn on the back of a gradual decline in yields following the market rates.
  • Growth in retail loan portfolio decelerated to 0.9% in 2Q 2020 and the balance came in at RUB8.3 trn due to the slowdown within the pandemic-related restrictions. The share of retail lending in the total loan portfolio was up by 0.9 pp to 36.2%. The yield on retail loans declined by 20 bp to 11.9%.
    • Mortgage portfolio grew by 1.9% in 2Q 2020, benefiting from robust demand for both state and bank's own subsidized mortgage programs. The share of subsidized lending accounted for about 30% of mortgage origination by the end of the quarter.
    • Consumer loan portfolio remained virtually unchanged for the quarter (-0.2%).
    • Corporate loan portfolio1 grew by 1.8% adjusted for the impact of FX revaluation in 2Q 2020 to RUB14.6 trn, and was down by 2.6% in nominal terms due to stronger ruble.  The yield on corporate loans was down by 10 bp for the quarter to 7.1%.
  • The bank has been actively participating in the state support programs for business and signed loan agreements for the amount of over RUB330 bn up until now.     
Interest expense, including deposit insurance expenses, decreased by 22.2% y/y in 2Q 2020 to RUB196.3 bn on the back of monetary easing as well as the deposit insurance rate reduction. Allocations for deposit insurance were down by 62% y/y to RUB8.2 bn in 2Q 2020, given that the reduced rate on deposit insurance is applicable retrospectively since the beginning of the year.
  • Retail funding increased by 3% in 2Q 2020 to RUB15.1 trn, supported among other factors by direct state payments, including support programs for families with kids. The average cost of retail funding decreased by 60 bp to 4.1%.
  • Corporate funding was down by 2.2% in 2Q 2020 to RUB8.2 trn, and grew by 2.0% adjusted for FX revaluation.  The average cost of corporate funding was down by 40 bp to 3.1%.
  • In 2Q 2020, Sberbank issued RUB20 bn of four-year exchange-traded bonds, and thus the outstanding balance of exchange-traded bonds totaled RUB465.5 bn.
Net LDR ratio equaled to 90.9% in 2Q 2020, down by 2.6 pp as compared to 1Q 2020.
Growth in the Group net fee and commission income slowed in 2Q 2020 to 2.8% y/y due to the lockdown constrains to RUB120.0 bn. 
  • Net income from bank cards was down by 6% y/y, as activity started to restore only in the final month of the quarter. In the meantime, the lockdown was a natural trigger for cashless penetration in client habits: almost 40% of Sberbank clients opted for purely cashless transactions in 2Q 2020.
  • Transport acquiring became available in 116 Russian cities.
  • Monthly audience of DomClick digital platform increased almost 1.5-times for the quarter to 7.5 mln users.  A remarkable growth in demand for non-financial services stemmed both from mortgage and non-mortgage clients: usage of online property title registration by clients without a mortgages showed a 5-fold increase on the primary market and grew 8 times on the secondary.
  • A gradual release of lockdown constraints encouraged transactional activity at the end of the quarter and supported growth in fees from cash and settlement transactions (+8.6% y/y).
According to management accounts, operating income of insurance, pension and asset management businesses increased by 2% y/y to RUB29 bn in 2Q2020. Total assets under management increased by 6% in 2Q 2020 to RUB1.59 trn.
The Group operating expenses (staff and administrative) were up by 2.3% y/y to RUB172.4 bn in 2Q 2020. The pandemic-related efficiency enhancement program facilitated the slowdown of the cost growth. Meanwhile the increase in staff expenses (+6.7% y/y) was related to payroll indexation in July last year as well as the ongoing IT transformation.
The Group Cost-to-Income ratio2 came in at 33.5% in 1Q 2020, down by 1.1 pp y/y.
Net credit loss allowance charge for loans at amortized costs amounted to RUB 123.1 bn in 2Q 2020. The Cost of Risk for loans at amortized cost was 224 bp. According to IFRS 9 part of the loan portfolio is accounted at fair value through profit or loss. Negative revaluation of these loans due to change in credit quality amounted to RUB6.4 bn in 2Q. The combined provision charge was RUB129.5 bn, while the combined Cost of Risk including negative revaluation of loans at fair value decreased by 67 bp to 225 bp in 2Q 2020.
In 2Q 2020, credit quality of the loan portfolio expectedly worsened, which was evidenced by the increase in Stage 2 loans mainly driven by corporate borrowers affected by COVID-19 related constraints. At the same time, the share of impaired loans, including the POCI loans, in total gross loan portfolio at amortized cost increased for the quarter by 0.1 pp to 7.5%.
By the end of 2Q 2020, total corporate exposure that had restructurings under state programs, Bank's own program's and individual decisions, exceeded RUB2 trn. Restructurings approved to retail clients amounted over RUB160 bn. The loss recognized on loan modification, according to the IFRS 9, amounted to RUB27.6 bn.  
Total provision coverage of Stage 3 and POCI loans was up by 3.8 pp compared to the previous quarter to 102.0% due to conservative risk-management approach in crisis environment.
Selected Capital Adequacy Results4
The data in the table is in accordance with standardized and IRB approaches applied to the corresponding assets groups.
Risk-weighted assets under IRB approach were assessed as of 30.06.2020 according to Basel 3.5 and those for the previous periods were assessed according to Basel III. 
Under Basel III 30.06.2020 31.03.2020 31.12.2019 30.06.2020 / 30.06.2020 /
RUB bn, unless stated otherwise  31.03.2020, % change 31.12.2019, % change
Total Tier 1 capital        4 721.2        4 489.1        4 375.4 5.2% 7.9%
Total capital        4 863.2        4 648.5        4 433.5 4.6% 9.7%
Risk-weighted assets      31 936.4       33 719.4       32 634.1 -5.3% -2.1%
Credit risk     27 538.6      29 308.4      28 062.7 -6.0% -1.9%
Operational risk       3 486.8        3 486.8        3 486.8 0.0% 0.0%
Market risk          911.0           924.2        1 084.6 -1.4% -16.0%
Ratios          
Common equity Tier 1 capital adequacy ratio 14.78% 13.31% 13.41% -- --
Total capital adequacy ratio 15.23% 13.79% 13.59% -- --
Leverage ratio 13.7% 13.1% 13.7% -- --

The Group's total capital reached RUB4,863.2 bn as of 30.06.2020, up by 4.6% as compared to the previous quarter, due to the retained earnings and a positive effect from the revaluation of securities portfolio.
The Group's risk-weighted assets contracted by 5.3% to RUB3,936.4 bn in 2Q 2020 due to a 6%-decrease in the credit risk component of the risk-weighted assets on the back of transition to Basel 3.5, cancellation of the macro add-on for mortgages issued before 01.04.2020 as well as negative FX revaluation of the loan portfolio. Risk-weighted assets density decreased from 98.7% to 92.9%. 
The Group's leverage ratio came in at 13.7% in 2Q 2020.
Common equity Tier 1 capital adequacy ratio increased by 147 bp to 14.78%, while total capital adequacy ratio improved by 144 bp to 15.23%.  
 
1 Before loan loss allowance and including loans at amortized cost and at fair value
2 Operating income before provisions for debt financial assets, credit related commitments and revaluation of loans at fair value due to change in credit quality
3 Other non-interest income / (expense) includes: Net losses from non-derivative financial instruments at fair value through profit or loss (excluding revaluation of loans at fair value due to change in credit quality); Net gains from financial instruments at fair value through other comprehensive income; Net gains from derivatives, trading in foreign currencies, foreign exchange and precious metals accounts translation; Net  losses arising on initial recognition of financial instruments and loan modification; Impairment of non-financial assets; Net (charge for) / recovery of other provisions and allowances (excluding Net loss allowance / provisions for credit related commitments); Revenue of non-core business activities; Cost of sales and other expenses of non-core business activities; Net premiums from insurance and pension fund operations; Net claims, benefits, change in contract liabilities and acquisition costs on insurance and pension fund operations; Income from operating lease of equipment; Expenses related to equipment leased out; Other net operating (expense) / income
4 Total equity attributable to shareholders of the Bank / Total numbers of shares outstanding (ordinary + preferred)

 
DISCLAIMER
This document has been prepared by Sberbank of Russia (the "Bank") and has not been independently verified. This press release does not constitute or form part or all of, and should not be construed as, any offer of, or any invitation to sell or issue, or any solicitation of any offer to purchase, subscribe for, underwrite or otherwise acquire, or a recommendation regarding, any shares or other securities representing shares in, or any other securities of the Bank, or any member of the Bank's group, nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or any commitment whatsoever or any investment decision. The information in this press release is confidential and is being provided to you solely for your information and may not be reproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any purpose.
This press release doesn't constitute an offer of securities of the Bank for sale in the United States. The Securities may not be offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act of 1993 as amended.
This press release is only being distributed to and is only directed at (A) persons in member states of the European Economic  Area (other than the United Kingdom) who are "qualified investors" within the meaning of Article 2(1)(e) of Directive 2003/71/EC (as amended and together with any applicable implementing measures in that member state, the "Prospectus Directive") ("Qualified Investors"); (B) in the United Kingdom, Qualified Investors who are investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") and/or high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order; and (C) such other persons as to whom this press release may be lawfully distributed and directed under applicable laws (all such persons in (A) to (C) above together being referred to as "relevant persons").  The shares, or other securities representing shares, or any other securities of the Bank are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons.  Any person who is not a relevant person should not act or rely on this press release or any of its contents.
This press release does not constitute any offer of, or any invitation to sell or issue, or any solicitation of any offer to purchase, subscribe for, underwrite or otherwise acquire any securities of the Bank within the Russian Federation or in favor of the Russian entities or persons. Any foreign securities representing shares of the Bank may not be offered or sold within the Russian Federation, except as provided by the relevant Russian legislation.
The information in this press release or in oral statements of the management of the Bank may include forward-looking statements. Forward-looking statements include all matters that are not historical facts, statements regarding the Bank's intentions, beliefs or current expectations concerning, among other things, the Bank's results of operations, financial condition, liquidity, prospects, growth, targets, strategies, and the industry in which the Bank operates. By their nature, forward-looking statements involve risks and uncertainties, because they relate to events and depend on circumstances that may or may not occur in the future. The Bank cautions you that forward-looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which the Bank operates may differ materially from those made in or suggested by the forward looking statements contained in this press release or in oral statements of the management of the Bank. In addition, even if the Bank's results of operations, financial condition and liquidity and the development of the industry in which the Bank operates are consistent with forward-looking statements contained in this press release or made in oral statements, those results or developments may not be indicative of results or developments in future periods.
Sberbank assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason.
The information and opinions contained in this press release or in oral statements of the management of the Bank are provided as at the date of this press release or as at the other date if indicated and are subject to change without notice.
No reliance may be placed for any purpose whatsoever on the information contained in this press release or oral statements of the management of the Bank or on assumptions made as to its completeness.
No representation or warranty, express or implied, is given by the Bank, its subsidiaries or any of their respective advisers, officers, employees or agents, as to the accuracy of the information or opinions or for any loss howsoever arising, directly or indirectly, from any use of this press release or its contents.
This press release is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction.
By attending or reviewing this press release, you acknowledge and agree to be bound by the foregoing.

 
ISIN: US80585Y3080, RU0009029540, RU0009029557, US80585Y4070
Category Code: MSCM
TIDM: SBER
LEI Code: 549300WE6TAF5EEWQS81
Sequence No.: 78859
EQS News ID: 1105827

 
End of Announcement EQS News Service

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30/07/2020

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