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Sberbank (SBER)
Sberbank reports 1Q 2020 net profit of RUB120.5 bn under international Financial Reporting Standards (IFRS)Â
Moscow, April 30, 2020 - Sberbank (hereafter "the Group") has released its interim consolidated  (hereafter "the Financial Statements") as at and for the 3 months ended 31 March 2020, with report on review by AO PricewaterhouseCoopers Audit. Alexander Morozov, Deputy Chairman of the Executive Board commented: "Interest income and fees and commissions dynamics were in line with our expectations in 1Q 2020. Obviously, COVID-19 has disrupted our plans. With a high degree of uncertainty globally we have opted for significant provision builds which have put pressure on the Group financial result. Nevertheless, Sberbank earned RUB120.5 bn in net profit and delivered return on equity above 10%. We encounter this crisis well-prepared in terms of liquidity, capital adequacy and foremost, in terms of the experience of our team. The current crisis has once again proved our strategy with focus on the development of digital solutions and ecosystem services, the demand for which is progressing at an accelerated pace." 1Q 2020 Financial and Operational Highlights:
Statement of Profit or Loss Results Highlights Â
 Balance Sheet Results Highlights
Net interest income came in at RUB371.9 bn in 1Q 2020, up by 10.2% y/y. Interest income increased by 0.5% y/y in 1Q 2020 to RUB583.4 bn on the back of loan portfolio1 expansion by 11.2% y/y to RUB23.2 trn (or 6.7% y/y adjusted for FX-revaluation) and a gradual decline in yields.
Net LDR ratio equaled to 93.5%, down by 0.9 pp as compared to 4Q 2019.  The Group net fee and commission income grew by 22.8% y/y in 1Q 2020 to RUB126.4 bn. The ratio of net fee and commission income to operating expenses increased by 6.4 pp to 74.7%. Growth in fee and commission income was led by income from cash and settlement, client transactions with currency and securities as well as operations with banking cards. Popularity of cashless transactions is gathering pace, and over 20% of Sberbank clients opt for purely cashless transactions. To encourage further penetration in cashless universe, Sberbank rolled out across the country its new solution that allows to use smartphone as a cashless payment terminal. The ease of upload and use of this inexpensive solution renders acquiring more affordable for small and micro businesses. Transport acquiring became available in 110 Russian cities. Sberbank brokerage services are growing at an accelerated pace. Number of brokerage accounts opened with Sberbank in 1Q increased by 300K to 1.56 million. Trading turnover increased by 88% as compared to 4Q 2019. According to management accounts, operating income of insurance, pension and asset management businesses amounted to RUB29 bn in 1Q2020. Wealth management combined assets increased by 3% year-to-date to RUB1.5 trn. The Group operating expenses (staff and administrative) were up by 12.3% y/y to RUB169.2 bn in 1Q 2020. Growth was largely due to development of digital services of Sberbank ecosystem and their integration in the sales network as well as annual alignment of payroll with inflation executed in 3Q 2019. On top of that, ruble devaluation led higher FX-denominated expenses. The Group Cost-to-Income ratio2 came in at 33.5% in 1Q 2020, up by 1.8 pp y/y. Net credit loss allowance charge for loans at amortized costs amounted to RUB 134.6 bn in 1Q 2020 (the Cost of Risk for loans at amortized cost was 251 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 RUB29.1 bn for the quarter. The combined provision charge amounted to RUB163.7 bn, while the combined Cost of Risk was up to 292 bp. This is mainly due to macro corrections in accordance with IFRS9 to reflect the worsening macro outlook as a result of the global distress from COVID-19 and falling oil prices. The impact of macro corrections totaled RUB44.3 bn. Net charge for other provisions and allowances mainly against off-balance sheet credit commitments (letters of credit, guarantees) amounted to RUB24.5 bn in 1Q 2020 vs net recovery of RUB2.8 bn a year ago. The FX component shown as foreign exchange translation (losses) / gains amounted to RUB 81.8 bn in 1Q 2020.6 The loan portfolio quality remained relatively stable in 1Q 2020. The share of impaired loans, including the POCI loans, in total gross loan portfolio at amortized cost decreased by 0.1 pp to 7.4%. Total provision coverage of Stage 3 and POCI loans was up by 8.9 pp compared to the previous quarter to 98.2% in 1Q 2020 due to macro corrections. Selected Capital Adequacy Results4 (the data in the table is in accordance with standardized and IRB approaches applied to the corresponding assets groups)
The Group's risk-weighted assets were up by 3.3% to RUB33,719.4 bn in 1Q 2020 due to the increase in credit risk by 4.4% on the back of FX revaluation of the loan portfolio. In the meantime, the risk-weighted assets density decreased from 103.3% to 98.5% due to the implementation of new models for mortgage and consumer lending as well as the introduction of the specialized lending slotting criteria for project financing (SLSC) within the IRB framework. The Group's leverage ratio decreased by 60 bp to 13.1% in 1Q 2020. Common equity Tier 1 capital adequacy ratio decreased by 10 bp to 13.31%, while total capital adequacy ratio improved by 20 bp to 13.79%.  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 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; 4 Total equity attributable to shareholders of the Bank / Total numbers of shares outstanding (ordinary + preferred) 5 Starting from 1Q19 the FX-component is excluded from provision charge / recovery for FX-denominated loans at amortized cost as well as from revaluation of FX-denominated loans at fair value. 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. 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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.  |
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| ISIN: | US80585Y3080, RU0009029540, RU0009029557, US80585Y4070 |
| Category Code: | MSCM |
| TIDM: | SBER |
| LEI Code: | 549300WE6TAF5EEWQS81 |
| Sequence No.: | 61324 |
| EQS News ID: | 1033667 |
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| End of Announcement | EQS News Service |
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