SBERBANK OF RUSSIA Sberbank (hereafter "the Group") has released its interim condensed consolidated IFRS financial statements (hereafter "the Financial Statements") as at 30 June 2014 and for the six months ended 30 June 2014, with an independent review report by Ernst & Young Vneshaudit.
IncomeStatementhighlights:
- Net profit for the six months ended 30 June 2014 reached RUB 170.4 bn (or RUB 7.79 per ordinary share) compared to RUB 174.5 bn (or RUB 7.95 per ordinary share) in 1H 2013. The decline in net profit was mainly driven by provision charge for loan impairment.
- Net interest income increased by 20.7% in 1H 2014 to RUB 489.9 bn, compared to RUB 405.9 bn in 1H 2013.
- Net interest margin in 1H 2014 declined by 10 basis points to 5.7% as compared to 1H 2013.
- Net fee and commission income increased by 25.8% in 1H 2014 to RUB 122.7 bn, compared to RUB 97.5 bn in 1H 2013.
- The Group's operating income before provision charge for loan impairment increased by 20.5% to RUB 627.8 bn compared to RUB 520.9 bn in 1H 2013 and was driven by growth of net interest income and net fee and commission income.
- Operating expenses increased by 9.5% year-on-year, slower than operating income. As a result, Cost to Income ratio improved to41.7% versus 45.8% in 1H 2013.
- Net provision charge for loan impairment amounted to RUB150.9bn, translating to Cost of risk of 210 basis points in 1H 2014.
Statement of financial position highlights:
- As of 30 June, 2014, the Group's total assets reached RUB 19,390.4 bn showing a 6.5% growth (13.0% annualized) compared to 2013 year end, the main driver of the growth being an increase in loans to customers.
- In 1H 2014, net loans and advances to customers increased by 9.1% (18.2% annualized) to RUB 14,113.1 bn compared to RUB 12,933.7 bn at 2013 year end.
- In 1H 2014, the share of non-performing loans in Group's total gross loans increased to 3.4% as of 30 June 2014 (31 December 2013: 2.9%).
- Customer deposits increased by 4.4% (8.8% annualized) to RUB 12,600.7 bn compared to RUB 12,064.2 bn at 2013 year end with corporate deposits being the main driver of the growth.
- The Group's Equity increased in 1H 2014 by 4.0% (8.0% annualized) to RUB 1,955.8 bn, with net profit being the major driver.
- The total capital adequacy ratio (Basel 1) improved by 110 basis points in 1H 2014 to 14.5%. The core capital adequacy ratio decreased by 10 basis points to 10.5%.
Financial and Operating Review:
Interest income for 1H 2014 increased by 22.2% year-on-year to RUB 857.3 bn. The increase is attributable to a significant expansion in volumes of both corporate and retail loans.
Interest expenses in 1H 2014 increased by 24.3% year-on-year to RUB 367.4 bn. The largest component of interest expenses was related to retail deposits, which are the core source of funds for the Group. In 2Q 2014 the cost of term retail deposits decreased to 5.2% as compared 5.3% in 1Q 2014, while the average cost of term corporate deposits in 2Q 2014 increased to 5.8% versus 5.4% in 1Q 2014.
Net interest income in 1H 2014 totaled RUB 489.9 bn, a 20.7% increase year-on-year. The increase is driven by growth of interest earning assets, primarily loans. Net interest income remains the main component of the Group's operating income accounting for 78.0% of total operating income before provision charges for loan impairment. Net interest margin remained relatively stable in 2Q 2014 despite the funding cost increase.
The Group's net fee and commission income in 1H 2014 totaled RUB 122.7 bn, a 25.8% increase year-on-year. Income from operations with bank cards was the key driver of the growth, expanding by 35.9% year-on-year. Customer cash and settlement transactions also remained an important source of fee and commission income, with their share in fee and commission income being 44.3% in 1H 2014.
Other operating income in 1H 2014, which includes net results from operations with securities, foreign exchange, derivatives and precious metals and other items, totaled 15.2 bn versus 17.5 bn in 1H 2013, and comprised 2.4% of Operating income before provision. The main components of other operating income were foreign exchange effects and results from derivatives.
Total operating income before provision charge for loan impairment in 1H 2014 reached RUB 627.8 bn compared to RUB 520.9 bn in 1H 2013, a 20.5% increase year-on-year. The growth was driven primarily by the growth of net interest income and net fee and commission income.
Net provision charge for loan impairment in 1H 2014 totaled RUB 150.9 bn compared to RUB 62.7 bn in 1H 2013 translating into Cost of risk of 210 basis points versus 110 basis points in 1H 2013.
The Group's operating expenses in 1H 2014 increased by 9.5% year-on-year to RUB 261.5 bn. The main driver of this growth is an increase in staff costs as a result of business growth. Since operating income growth outpaced the growth of operating expenses, the Group's cost to income ratio in 1H 2014 decreased to 41.7% versus 45.8% in 1H 2013.
The Group's net profit in 1H 2014 reached RUB 170.4 bn versus RUB 174.5 bn in 1H 2013, a 2.3% decrease year-on-year. The decrease in net profit for 1H 2014 as compared to 1H 2013 is explained mostly by a significant increase in net provision charge for loan impairment.
As of 30 June 2014, the Group's total assets reached RUB 19,390.4 bn, a 6.5% (or 13.0% annualized) increase since 31 December 2013.
In 1H 2014, the Group's gross loan portfolio before provision for loan impairment increased by 9.5% (or 19.0% annualized). Gross loans to corporate clients increased by 8.8% (17.6% annualized) to RUB 10,661.9 bn; loans to individuals increased by 11.2% (22.4% annualized) to RUB 4,169.2 bn. Mortgage loan portfolio grew up by 16.5% in 1H 2014 (33.0% annualized) and was the main driver for retail loan portfolio growth.
The proportion of non-performing loans (NPL), defined as loans for which payment of principal and/or interest is overdue by more than 90 days, in the total loan portfolio (the NPL ratio) increased in 1H 2014 to 3.4% as at 30 June 2014 compared to 2.9% at the 2013 year end. The NPL coverage ratio (total provisions for loan impairment to non-performing loans) decreased slightly in 1H 2014 to 1.4 as compared to 1.5 at 2013 year end. Provisions for loan impairment increased in 1H 2014 by 17.6% (35.2% annualized) reaching RUB 718.0 bn. As of 30 June 2014, the proportion of provisions for loan impairment to total gross loans was 4.8% compared with 4.5% at 2013 year end.
As at 30 June 2014, the Group's total liabilities amounted to RUB 17,434.6 bn, a 6.8% (13.6% annualized) increase for 1H 2014 while retail deposits, totaling RUB 8,438.7 bn. The political uncertainty and volatility of foreign exchange rates cumulatively resulted in some outflow of retail deposits in March from Russian banking system as a whole including Sberbank. The situation improved in 2Q 2014 when the decline was mostly compensated. Retail deposits remain the core source of the Group's funding, accounting for 48.4% of the Group's total liabilities. Corporate deposits increased to RUB 4,162.0 bn as at 30 June 2014 showing a 14.7% (29.4% annualized) growth for the half year, while their share in total liabilities amounted to 23.9%.
As at 30 June 2014, the Group's amounts due to bankstotaled 2,099.4 bn and remained almost stable versus 2013 year end.
At 30 June 2014, the Group's exposure to Ukrainian risk amounted to approximately 0.6% of total consolidated assets, a 0.2 percentage point decrease as compared to 0.8% at 31 December 2013.
The Group's equity amounted to RUB 1,955.8 bn as at 30 June 2014, a 4.0% (8.0% annualized) increase in 1H 2014. As at 30 June 2014, the Group's total capital adequacy ratio as per Basel 1 reached at 14.5%, well above the 8% minimum requirement, and the Tier 1 ratio was 10.5%. The improvement of total capital adequacy ratio as of 30 June 2014 is mostly explained by increase in subordinated debt received from the Central Bank of Russia in 2Q 2014.
Sberbank Group's Financial Highlights for the six months ended 30 June 2014
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