SBER.L Regulatory News (SBER)

Sberbank releases Financial Highlights for 1Q 2017 (under RAS; non-consolidated)

Please note that the numbers are calculated in accordance with Sberbank's internal methodology. There were some amendments to the methodology from January 1, 2017 and the numbers for 2016 were restated in accordance with the new methodology for comparability purposes.

April 7, 2017

Key highlights for March, 2017:

- In March 2017, the Bank posted RUB50.4 bn in net profit.

- Overdue loans were reduced by RUB7.5 bn during the month;

- Core Equity Tier 1 and Tier 1 capital ratios increased by 0.7 p.p. to 11.2% on the back of the audited result for 2016.

Deputy Chairman of Sberbank Alexander Morozov stated:

'Despite the ongoing market volatility and occasionally unfavorable environment, we see a revival in loan demand and a pickup in lending, driven by the mortgage segment. New issuance of retail loans amounted to more than RUB150 bn, more than half of which were mortgages. Lending revival could be a trigger for business growth and beneficial for the profitability of the Bank.' Comments for 1Q 2017:Net interest income increased by 4.0% compared to 1Q 2016 and came at RUB281.1 bn. A decrease in interest rates on deposits and accounts along with lower balance of funds raised from legal entities had a positive impact on net interest income..

Net fee and commission income was up by 14.2% to RUB76.6 bn, mainly driven by bank card operations, including acquiring, and income from bank insurance.

Securities trading posted a solid gain of USD9.7 bn in March, largely due to a one-off sale of MasterCard shares. This supported operating income before provisions, which was up by 16.9%.

Operating expense came at RUB112.8 bn, up by 16.3% year on year which owed to two factors: methodology change in costs accounting effective in 2017 (a switch to accrual method to spread costs more evenly throughout the year) and wage indexation in 2Q-3Q 2016. Cost-to-Income ratio for 1Q2017 improved to 30.3%.

Total provision charges amounted to RUB23.8 bn in March. The Bank formed sufficient loan-loss provisions for a large borrower - international retailer. The amount of provisions in March and in 1Q 2017 was also affected by ruble appreciation and consequent recovery of FX loan-loss provisions. Provision charges amounted to RUB48.8 bn in 1Q 2017, decreasing 2.2-folds year on year due to portfolio quality stabilization. Overdue loans are covered by loan-loss provisions by 2.6 times.

Net profit before income tax came at RUB210.9 bn. Net profit totaled RUB155.0 bn, including RUB50.4 bn for March. High effective tax rate for 1Q 2017 is caused by the advance payment system and will normalize in 2Q.

Total assets in March decreased by 1.2% to RUB21.3 trln mainly as a result of revaluation of the foreign currency denominated assets on the back of Ruble appreciation. This also influenced the dynamics within the corporate loan portfolio that came down by 1.7% to RUB10.9 trln. Corporate loan issues in March exceeded RUB820 bn, or RUB1.8 trln from the beginning of the year.

The Bank lent over RUB150 bn to retail clients in March, which was close to pre-crisis volumes of 2014. Total retail loan portfolio increased by 0.7%, or by RUB31 bn, during the month. The major driver of growth was mortgage loans, the share of which of total retail loans came at 57.5%.

The Bank reduced the volume of overdue loans by RUB7.5 bn in March by means of regular recovery processes with both corporate and retail clients. The share of overdue loans of total loans came down by 2bp to 2.61% in March, which is substantially lower than the banking sector's average (6.7% as of March 1, 2017).

Securities portfolio was down by 2.5% in March as a result of redemptions of the OFZ bonds as well as negative revaluation of foreign currency denominated portfolio, as well repayments and redemptions of FX denominated Eurobonds. The portfolio ending balance was RUB2.05 trln as of April 1, 2017.

Retail deposits and accounts in March decreased by RU57 bn, or by 0.5%. Corporate deposits and accounts were down by RUB144 bn, or by 2.8%. The main reason for the balances contraction was Ruble appreciation. In real terms, a decrease in retail deposits and accounts was meager - less than 0.1%. Total deposits and accounts ending balance was RUB16.4 trln as of April 1, 2017.

In March, the Bank repaid its earlier issued bonds in the amount of USD1.25 bn as per maturity schedule. Repayments over during 1Q 2017 took the share of international borrowings from 4.0% to 3.0% of the Bank's liabilities.

Core Tier 1 and Tier 1 capital (equal since Sberbank does not have instruments of additional capital) reached RUB2,473 bn as of April 1, 2017 under preliminary calculations. The increase in Core Tier 1 and Tier 1 capital in March was attributed to the inclusion of 4Q2016 net profit after audit of the Bank 2016 net profit.

Total capital amounted to RUB3,308 bn as of April 1, 2017, up mainly due to earned net profit.

Risk-weighted assets decreased by RUB364 bn in March mainly due to corporate loans to reach RUB22.2 trln.

Capital adequacy ratios as of April 1, 2017 under preliminary calculations were:

- N1.1 - 11.2% (minimum adequacy level, required by the Central Bank of Russia at 4.5%)

- N1.2 - 11.2% (minimum adequacy level, required by the Central Bank of Russia at 6.0%)

- N1.0 - 14.9% (minimum adequacy level, required by the Central Bank of Russia at 8.0%).

Sberbank 1Q 2017 Financial Highlights (under RAS, non-consolidated)