Sberbank Rossii : releases Financial Highlights for 5M, 2015 (under RAS; non-consolidated)

Sberbank releases Financial Highlights for 5M, 2015 (under RAS; non-consolidated)

Please note that the numbers are calculated in accordance with Sberbank`s internal methodology.

June 5, 2015

Income Statement Highlights for 5M, 2015 (as compared to 5M, 2014):

• Interest income increased by 27.8% y-o-y, but interest expenses increased by 97.1% y-o-y. Net interest income decreased by 24.8% y-o-y
• Noncredit commission income grew by 14.0% y-o-y, net fee and commission income decreased by 2.3% y-o-y
• Operating income before total provisions decreased by 20.9% y-o-y
• Total provision charge was RUB139.5 bn vs. RUB119.2 bn charge for 5M, 2014
• Operating expenses were up by 0.7% y-o-y
• Net profit before income tax reached RUB71.0 bn vs. RUB191.0 bn for 5M, 2014
• Net profit totaled RUB59.4 bn vs. RUB155.3 bn for 5M, 2014. Increase in cost of the CBR's funding and cost of client funds were the main drivers for the decline in Net profit.

Net interest income came at RUB262.3 bn, down by 24.8% compared to that for 5M, 2014. The pace of net interest income growth in 2015 is catching up to 2014 rate.

• Interest income increased by RUB170.3 bn, or 27.8% driven mostly by loan portfolio growth and increase in corporate loan interest rates.

• Interest expenses increased by RUB256.9 bn, or 97.1% due to the increase in market interest rates and inflow of funds. The strongest effect on interest expense came from the CBR funding and client deposits. Slowdown on interest expenses growth continued driven by the gradual decrease in the key interest rate by the CBR from the beginning of 2015.

Net fee and commission income came at RUB100.5 bn in 5M, 2015 that was 2.3% lower than in 5M, 2014, driven by decline in commission income from corporate lending due to lending slowdown. On the contrary, noncredit commission income increased by 14.0%. Transactions with bank cards and acquiring remain main drivers in noncredit commission income growth. Also, there was significant increase in income from cash settlements and bank guaranties.

Net income from FX revaluation and trading operations on capital markets amounted to RUB4.7 bn for 5M, 2015.

Operating expenses increased by 0.7% y-o-y for 5M, 2015 due to the increase in staff costs. Other operating costs decreased by 8.0% due to the Bank`s cost optimization program.

Please note, that comparison of 2015 staff costs to staff costs for the same period of 2014 is not quite correct. Effective 2015 the Bank uses accrual method in staff costs accounting to spread these costs more evenly across the year. Excluding the effect of this adjustment, operating expenses for 5M, 2015 decreased by 2.1% y-o-y.

Total provision charges amounted to RUB139.5 bn for 5M, 2015 vs. RUB119.2 bn a year earlier. The Bank continues to practice a conservative approach in loan-loss provisioning based on requirements of the Central Bank of Russia. Coverage ratio remained strong: loan-loss provisions are 2.1 times the overdue loans.

Net profit before income tax came at RUB71.0 bn for 5M, 2015 vs. RUB191.0 bn a year earlier. Net profit totaled RUB59.4 bn vs. RUB155.3 bn.

Assets decreased by 1.8% in May to reach RUB19.7 trln mainly driven by reduction in ending balance of cash position and amounts due from banks, including correspondent accounts.

The Bank lent about RUB300 bln to corporate clients in May. Loan issues from the beginning of the year reached about RUB1.8 trln. Total corporate loan portfolio in May decreased insignificantly (-0.4%) to RUB10.8 trln.

The Bank lent about RUB95 bn to retail clients in May, which exceeded average monthly issues of the previous four months. In total the volume of new loan issues to retail clients from the beginning of the year was over RUB400 bln. Total retail loan portfolio remained unchanged over the month at RUB4.0 trln. The share of mortgages continues to increase while the share of consumer unsecured loans is contracting in the structure of retail loan portfolio.

Overdue loans increased by 0.1p.p. to 2.9% of total loans in May, which reflects current macroeconomic situation in the country. Nonetheless the level of overdue loans at Sberbank is half the level of the banking sector's average.

Securities portfolio was up by RUB20 bn in May, or by 1.2%. The portfolio ending balance was RUB1.77 trln as of June 1, 2015.

Retail deposits and accounts increased by RUB130 bn in May, or up by 1.5%. The inflow of funds was both to deposits as well as savings certificates. Overall retail deposits and accounts portfolio reached RUB8.9 trln as of June 1, 2015.

Corporate funding decreased by RUB110 bn in May, or down by 2.2%, from term deposits. Overall corporate clients' funding amounted to RUB4.9 trln as of June 1, 2015.

The CBR and Federal treasury decreased by RUB519 bn, or 22.7%, in May. This source of liquidity remains the most expensive, and in order to reduce the overall cost of funding the Bank continuously lowers exposure to this funding. The share of the CBR funding (excluding the subordinated loan) in the Bank liabilities reached 7.2% as of June 1, 2015, down from 15.2% as of January 1, 2015.

Core Tier 1 and Tier 1 capital (equal since Sberbank does not have instruments of additional capital) reached RUB1,724 bn as of June 1, 2015 under preliminary calculations. Total capital amounted to RUB2,508 bn on the same date.

Risk-weighted assets decreased by RUB181 bn in May mainly due to lowered credit risk on Balance Sheet items from the contraction of the loan portfolio.

Capital adequacy ratios under preliminary calculations as of June 1, 2015 were:

• N1.1 - 9.0% (minimum adequacy level, required by the Central Bank of Russia at 5.0%)
• N1.2 - 9.0% (minimum adequacy level, required by the Central Bank of Russia at 6.0%)
• N1.0 - 13.0% (minimum adequacy level, required by the Central Bank of Russia at 10.0%, considering Deposit Insurance Regulation).

Sberbank 5M 2015 Financial Highlights (under RAS, non-consolidated)