Sberbank releases 2010 Financial Highlights (under RAS)

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Please note that the data are prepared in accordance with

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.  Also note that the effect of events occurring after the balance sheet date is included in the numbers as of 1 January 2010 but excluded in those as of 1 January 2011.

25 January 2011

Income Statement Highlightsfor 2010 (as compared to 2009)

• Net interest income decreased by 0.3% y-o-y

• Net fee and commission income rose by 10.0% y-o-y

• Provision charge amounted to RUB86.6 bn vs. RUB387.3 bn for 2009

• Operating income before provisions decreased by 11.6% y-o-y

• Operating income after provisions grew 1.9 times y-o-y

• Operating expenses were up by 18.3% y-o-y

• Profit before tax amounted to RUB225.0 bn vs. RUB39.0 bn for 2009

• Net profit totaled RUB183.6 bn vs. RUB21.7 bn for 2009 

 Net interest incomeremained virtually unchanged in 2010 from a year ago. Growth was held back by lower income from lending to corporate clients due to declining market rates and a bulk of early repayments late 2009-early 2010. Income on corporate loans fell by 13.8%.

In the meantime, income on investment securities increased (+88%) as the Bank expanded its portfolio, while a revival of retail lending led to higher income on consumer loans (+4.8%). Along with lower interest expense, this offset the decline in income in the corporate segment.  

Interest expensefell by 5.5%, which was mainly a function of lower corporate funding costs and reduced volumes and costs of amounts due to other banks. Interest expense on corporate accounts was down 32.3% and interbank funds dropped 43.3% in 2010. Interest expense on retail funds increased 13.8% led by continued deposit inflows, while the cost of retail funding declined.

Net fee and commission

incomegrew 10.0% in 2010 as compared to 2009 in spite of the cancellation of retail loan commissions in April 2010. Growth stemmed from almost all fee-generating services, with the largest contribution from banking cards, settlement operations and lending to corporate clients.

Operating income before provisionsfell 11.6% which was primarily the result of costs incurred from the sale of assets at fair value to the Bank’s subsidiary in March 2010 (see ‘Sberbank releases 1Q 2010 Financial Highlights’).

Additional pressure came from conversion operations, namely currency swaps due to the specifics of their recognition under RAS with the financial result related to two parts of transaction reflected with a temporal lag. These operations are conducted for FX liquidity management given the Bank’s multi-currency exposure.

Operating expensesrose by 18.3% mainly led by higher staff costs which increased in line with planned wage adjustments for 2010 as well as general and administrative expenses related to the business expansion in line with the strategy implementation. Furthermore, strong deposit inflows entailed an increase in mandatory fee payments to the state-deposit insurance system. Cost to income ratio, adjusted for the effect of the asset sale at fair value in March 2010, stood at 42.4%.

In 2010, the Bank allocated RUB86.6 bn into provisions with RUB79.3 bn of those attributable to loan impairments. The set-asides in 2009 were worth RUB387.3 bn and RUB364.7 bn, respectively. The decline in provision charges was a function of stabilizing credit quality as well as provision write-backs on disposal of bad loans in 2010.

Operating income after provisionsgrew 1.9 times y-o-y.  Profit before taxtotaled RUB225.0 bn andnet profitcame in at RUB183.6 bn. Both numbers are several times higher the year-ago levels.

In 2010,

assets

increased by 20.3% toRUB8,547 bn.

In December, assets added RUB337 bn owning to loan portfolio growth and increased cash balances with the CBR and cash on hand. The Bank tends to keep high stocks of cash, including that in ATMs, ahead of holidays.

Corporate loan bookincreased by RUB94 bn in December to RUB4,766 bn. The Bank granted RUB640 bn loans to Russian companies, the largest monthly amount in two years. In 2010, the Bank provided more than RUB RUB4.35 trln loans vs. about RUB4.00 trln in 2009. Loan growth in 2010 was almost twice as high as in 2009: 12.2% vs. 6.7%.

December saw a strong growth in retail lending, boosted by promo campaigns of consumer loans on favorable terms. The Bank provided about RUB100 bn in loans in December and saw itsretail loan bookincrease by RUB28 bn, which was twice more than the average monthly increase since March 2010, when retail loan growth resumed. In 2010, the Bank granted loans in excess of RUB730 bn, while the loan portfolio expanded by 11.3% to RUB1.301 bn.

Credit quality of the loan portfolioimproved in December, with the overdue loans as percentage of total down from 5.2% to 5.0%. In absolute terms, there was also a decline in overdue loans both, in corporate and consumer segments. 

The Bank keept to its prudent credit-risk management, maintaining high coverage of overdue loans. As of 1 January 2011,loan-loss provisionsamounted to RUB667 bn, or 2.2 times the overdue loans. A RUB23 bn reduction in provisions as compared to 1 December 2010, resulted from a provision release following the assets’ sale to third-party companies as part of ongoing work with distressed assets.

The Bank realized some of itsinvestment securities(CBR bonds) in December. For the year of 2010, however, the portfolio expanded 1.7-fold to RUB1,768 bn. The breakdown shows the share of government bonds at 67% and corporate bonds at 20%.

Inflows oncustomer accountswere the Bank’s major source of funding. December saw an inflow of RUB295 bn on retail deposits, which accounted for more than a quarter of the annual increase. A strong inflow on deposits is typical at the end of the year when Russian enterprises make respective bonus payments. For the year of 2010, retail funds grew 27.4% to RUB4,810 bn, while corporate fundsincreased by 8.2% to RUB1,866 bn.

Regulatory capital(under CBR regulation No. 215-P) increased by RUB26 bn in December to RUB1,251 bn, with net profit remaining the main source of incremental capital.  For 2010, the Bank’s regulatory capital declined by 5.0%, which was due to repayment of a RUB200 bn tranche of the RUB500 bn subordinated loan to the CBR in May 2010 as well as investments into capital of its subsidiaries as part of the Bank’s business development.

Capital adequacy ratiostood at 18% as of 1 January 2011.

For 2010,ROAwas at 2.42% andROE– 19.4%.

Sberbank’s Financial Highlights for 2010 (in accordance with RAS; non-consolidated)

News Source : Sberbank releases 2010 Financial Highlights (under RAS)