Sberbank (SBER) Sberbank: Sberbank reports 1Q 2020 net profit of RUB120.5 bn under international 30-Apr-2020 / 10:10 MSK Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
Sberbank reports 1Q 2020 net profit of RUB120.5 bn under international Financial Reporting Standards (IFRS) Moscow, April 30, 2020 - Sberbank (hereafter "the Group") has released its interim consolidated IFRS financial statements (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:The Group net profit reached RUB120.5 bn (-46.8% y/y); The Group earnings per ordinary share (EPS) came in at RUB5.6, down by 46.9% y/y; The Group return on equity (ROE) reached 10.6% and the Group return on assets (ROA) was 1.5%; The Group gross loans1 increased by 6.5% for the quarter to RUB23.2 trn. Retail loan portfolio was up by 3.9% to RUB8.2 trn. Corporate loan portfolio expanded by 8.0% to RUB15.0 trn; Active retail client base exceeded 96.3 mln; Number of monthly active users (MAU) of mobile App Sberbank Online was up by 2.5 mln to over 57.2 mln, and number of daily active users (DAU) totaled 24.8 mln; DAU/MAU was above 43%; Active corporate client base increased by 37K and exceeded 2.6 mln. MAU in digital channels was up to 2.2 mln users; As of the end of 1Q 2020, over 9 mln clients were using Sberbank ID, a unified login that provides access to more than 45 Ecosystem partners, inc. Delivery Club, Okko, Citimobil and other companies.Statement of Profit or Loss Results Highlights | RUB bn, unless stated otherwise | 1Q 2020 | 1Q 2019 | 4Q 2019 | 1Q 2020/1Q 2019, % change | | Net interest income | 371.9 | 337.5 | 371.0 | 10.2% | | Net fee and commission income | 126.4 | 102.9 | 148.3 | 22.8% | | Other non-interest income / (expense) 3 | 10.3 | 35.5 | 28.7 | -71.0% | | Operating income before provisions 2 | 508.6 | 475.9 | 548.0 | 6.9% | | Net charge related to change in asset quality: | -167.1 | -45.5 | -41.2 | 267.3% | | Net credit loss allowance charge for debt financial assets | -138.0 | -17.3 | -35.5 | 697.7% | | Negative revaluation of loans at fair value due to change in credit quality | -29.1 | -28.2 | -5.7 | 3.2% | | Net loss allowance / provision for credit related commitments | -14.6 | 4.3 | -6.9 | -439.5% | | Staff and administrative expenses | -169.2 | -150.7 | -238.0 | 12.3% | | Net profit from continuing operations | 120.5 | 226.1 | 212.0 | -46.7% | | Profit / (Loss) from discontinued operations | 0.0 | 0.5 | 0.0 | -100.0% | | Net profit | 120.5 | 226.6 | 212.0 | -46.8% | | Earnings per ordinary share from continuing operations, RUB | 5.60 | 10.53 | 9.86 | -46.8% | | Total comprehensive income from continuing operations attributable to the shareholders of the Bank | 121.1 | 203.8 | 234.4 | -40.6% | | Ratios based on continuing operations | | Return on equitybased on profit from continuing operations | 10.6% | 22.9% | 19.4% | -- | | Return on assets based on profit from continuing operations | 1.5% | 3.1% | 2.8% | -- | | Net interest margin | 5.49% | 5.27% | 5.52% | -- | | Cost of risk (amortized cost loans) | 251 bp | 44 bp | 72 bp | -- | | Cost of risk (amortized cost and FV loans) | 292 bp | 96 bp | 80 bp | -- | | Cost-to-income ratio 2 | 33.3% | 31.7% | 43.4% | -- |
Balance Sheet Results Highlights | RUB bn, unless stated otherwise | 31.03.2020 | 31.12.2019 | 31.03.2020/31.12.2019, % change | | Gross total loans1: | 23,166.0 | 21,749.4 | 6.5% | | Corporate loans 1 | 14,972.0 | 13,865.4 | 8.0% | | Retail loans 1 | 8,194.0 | 7,884.0 | 3.9% | | Securities portfolio | 4,671.2 | 4 369.7 | 6.9% | | Assets | 32,068.9 | 29,958.9 | 7.0% | | Total deposits: | 23,061.8 | 21,574.4 | 6.9% | | Retail deposits | 14,669.9 | 14,209.6 | 3.2% | | Corporate deposits | 8,391.9 | 7,364.8 | 13.9% | | Book value per share4, RUB | 203.2 | 198.3 | 2.5% | | Ratios | | Net Loans / Deposits ratio (LDR) | 93.5% | 94.4% | -- | | Stage 3 + POCI loans / total gross loans at amortized cost | 7.4% | 7.5% | -- | | Provision coverage of Stage 3 + POCI loans | 98.2% | 89.3% | -- |
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. Retail loan portfolio increased by 3.9% in 1Q 2020 to RUB8.2 trn. The share of retail lending in the total loan portfolio was down by 0.9 pp to 35.4% due to the ruble devaluation. Consumer loan portfolio was up by 6.6% in 1Q 2020 as a result of high demand and greater affordability of loans after the key rate was cut in the middle of the reporting quarter. Consumer lending was also supported by fast-growing online sales, which increased by 13 pp to 68% of all consumer loan issuances. Mortgage portfolio grew by 2.5% in 1Q 2020. Mortgage lending in Sberbank is supported by increasing popularity of DomClick digital platform, which has a database of 2.14 mn property sale-purchase/rent listings. DomClick monthly active audience increased by 25% to 5.4 mln users. Both mortgage and consumer lending in 1Q 2020 benefited from a spike in activity in March. Corporate loan portfolio1 grew by 8.0% in 1Q 2020 to RUB15.0 trn, which was largely due to record loan origination in March as well as revaluation of the FX-portfolio driven by weaker ruble. The yields on retail and corporate loans were down by 40 bp to 12.1% and by 60 bp to 7.2% in 1Q 2020, respectively, on the back of consecutive interest rate cuts. Interest expense, including deposit insurance expenses, was down by 12.9% y/y in 1Q 2020 to RUB211.5 bn due to lower market rates. Retail deposits grew by 3.2% in 1Q 2020 to RUB14.7 trn. The average cost of retail term deposits was down by 40 bp for the quarter to 4.7%. Corporate deposits increased by 13.9% in 1Q 2020 to RUB8.4 trn. The average cost of term deposits decreased by 90 bp in 1Q 2020 to 3.5%. The outstanding balance of current/settlement accounts increased by 6.6% in 1Q 2020, with their share in total deposits staying above 30%. Sberbank Group issued exchange-traded bonds in the nominal amount of RUB35 bn, and the outstanding balance of exchange-traded bonds portfolio totaled RUB445.5 bn.The share of foreign funding in the Group's total liabilities changed marginally (up to 1.2%), which owed to weaker ruble.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 2020.6The 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) | Under Basel III | 31.03.2020 | 31.12.2019 | 31.03.2020 / | | RUB bn, unless stated otherwise | 31.12.2019, % change | | Total Tier 1 capital | 4,489.1 | 4,375.4 | 2.6% | | Total capital | 4,648.5 | 4,433.5 | 4.8% | | Risk-weighted assets | 33,719.4 | 32,634.1 | 3.3% | | Credit risk | 29,308.4 | 28,062.7 | 4.4% | | Operational risk | 3 486.8 | 3,486.8 | 0.0% | | Market risk | 924.2 | 1,084.6 | -14.8% | | Ratios | | | | | Common equity Tier 1 capital adequacy ratio | 13.31% | 13.41% | -- | | Total capital adequacy ratio | 13.79% | 13.59% | -- | | Leverage ratio | 13.1% | 13.7% | -- |
The Group's total capital under Basel III reached RUB4,648.5 bn as of 31/03/2020, up by 4.8% as compared to the previous quarter.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 value2 Operating income before provisions for debt financial assets, credit related commitments and revaluation of loans at fair value due to change in credit quality3 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; Other net operating (expense) / income4 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.DISCLAIMERThis document has been prepared by Sberbank of Russia (the "Bank") and has not been independently verified. 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