DJ Sberbank reports 3Q 2018 Net Profit of RUB228.1 bn under International Financial Reporting Standards (IFRS)
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Sberbank (SBER)
Sberbank reports 3Q 2018 Net Profit of RUB228.1 bn under International Financial Reporting
Standards (IFRS)
01-Nov-2018 / 08:07 CET/CEST
Dissemination of a Regulatory Announcement that contains inside information according to
REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer / publisher is solely responsible for the content of this announcement.
Sberbank reports 3Q 2018 Net Profit of RUB228.1 bn under International Financial Reporting
Standards (IFRS)
Moscow, November 1, 2018 - Sberbank (hereafter "the Group") has released its interim condensed
consolidated IFRS financial statements [1] (hereafter "the Financial Statements") as at and for
the 9 months ended 30 September 2018, with report on review by AO PricewaterhouseCoopers Audit.
All information is presented net of Denizbank A.S. operations, unless stated otherwise.
Alexander Morozov, Deputy Chairman of the Executive Board, CFO, commented: "the third quarter
underwent through intensifying volatility, both on the global markets, and in Russia. That said,
our business-model has yet again proven its resilience. Business development dynamics, including
outpacing growth of usage of digital services among our clients, fortify our expectations. We are
confident that our financial targets for 2018 would be met."
The 3Q 2018 and 9M 2018 Financial Highlights:
- The Group net profit[i] reached RUB228.1 bn for 3Q 2018, and RUB655.5 bn for 9M 2018
- The Group earnings per ordinary share (EPS)i came at RUB29.91 per share for 9M 2018, up by
13.0% as compared to 9M 2017
- The Group annualized return on equity (ROE)i reached 25.5%, while the Group annualized return
on assets (ROA)i reached 3.3%
- Net fee and commission income increased by 17.7% y/y to RUB114.6 bn
- The Group loan portfolio (includes loans at amortized cost and at fair value) increased by
3.5% during 3Q 2018 to RUB20.1 trn, with retail loans growing by 6.8% to RUB6.4 trn, and
corporate loans to RUB13.7 trn, up by 2.0% during the quarter. Consequently, for 9M 2018
corporate loan portfolio increased by 8.1%, while retail loan portfolio expanded by 18.9%
Selected Financial Results
RUB bn, unless stated otherwise 3Q 2018 3Q 2017 3Q18/
3Q17,
% change
Net interest income 359.3 348.2 3.2%
Net fee and commission income 114.6 97.4 17.7%
Other non-interest income / 34.4 23.7 45.1%
(expense)[ii]
Operating income before provisions 508.3 469.3 8.3%
Net charge related to change in asset (78.1) (51.4) 51.9%
quality:
Net credit loss allowance charge for (59.5) (51.4) 15.8%
debt financial assets
Negative revaluation of loans at fair (18.6) --
value due to change in credit quality
Staff and administrative expenses (156.8) (147.4) 6.4%
Net profit from continuing operations 217.1 216.3 0.4%
Profit from discontinued operations 11.0 7.8 41.0%
Net profit 228.1 224.1 1.8%
Earnings per ordinary share from 10.09 9.96 1.3%
continuing operations, RUB
Total comprehensive income from 191.7 222.8 (14.0%)
continuing operations
Book value per share *, RUB 169.3 159.2 6.3%
Ratios based on continuing operations
Return on equity i 25.5% 28.4%
Return on assets i 3.3% 3.4%
Net interest margin 5.8% --
Cost of risk (amortized cost loans) 123 bp 117 bp
Cost of risk (amortized cost and FV 157 bp --
loans)
Cost-to-income ratio ** 30.6% 31.2%
* Total equity / Total number of ordinary shares outstanding
** Operating income before provisions for debt financial assets, revaluation of loans at fair
value due to change in credit quality and credit related commitments
Selected Balance Sheet Results
RUB bn, unless 30/09/18 30/06/18 01/01/18 30/09/18 30/09/18
stated vs. vs.
otherwise 30/06/18 01/01/18
% %
Gross total 20 144.7 19 460.0 18 096.1 3.5% 11.3%
loans *
Corporate 13 725.0 13 451.0 12 696.5 2.0% 8.1%
loans *
Retail loans * 6 419.7 6 009.0 5 399.6 6.8% 18.9%
Restructured 1 243.8 1 231.1 1 172.4 1.0% 6.1%
loans
Securities 3 601.8 3 539.3 3 166.0 1.8% 13.8%
portfolio
Assets i 29 247.9 28 786.3 27 044.5 1.6% 8.1%
Total 19 888.1 19 199.7 18 123.3 3.6% 9.7%
deposits:
Retail 12 605.5 12 581.5 12 278.1 0.2% 2.7%
deposits
Corporate 7 282.6 6 618.2 5 845.2 10.0% 24.6%
deposits
Ratios
Net Loans / 93.8% 93.8% 91.9%
Deposits ratio
(LDR)
Stage 3 + POCI 8.4% 8.4% --
loans / total
gross loans at
amortized cost
Provision 91.6% 92.0% --
coverage of
Stage 3 + POCI
loans at
amortized cost
* combined loans at amortized cost and at fair value
Net interest income was RUB359.3 bn in 3Q 2018, up by 3.2% y/y.
Total interest income (RUB557.7 bn, up by 3.1% y/y) during the quarter was influenced by dynamics
in the loan portfolio: total gross loans growth (at amortized cost, gross, and at fair value), was
up 3.5% to RUB20.1 trn in 3Q 2018 as compared to 2Q 2018.
? Retail loan portfolio was up by 6.8% as compared to 2Q 2018 to RUB6.4 trn:
? Prevailing market interest rates encouraged demand for consumer credit; Sberbank consumer
unsecured loan portfolio was up by 8.8% q/q. Sberbank mortgage portfolio increased by 6.2%
during the quarter.
? The convenience and ease of applying for credit via Sberbank Online took the share of online
sales of consumer loans in total number of unsecured loan issuances to 29% in September.
? Retail loan yields remained unchanged during the quarter at 13.0% as compared to 2Q 2018, on
the back of the mix effect within the retail portfolio as consumer unsecured lending was growing
faster.
? Corporate loan portfolio (at amortized cost and at fair value combined) came up by 2.0% to
RUB13.7 trn, as compared to 2Q 2018.
? Based on management accounts, Ruble loan portfolio increased by 2.7% during the quarter,
while FX portfolio, net of currency revaluation, was down by 1.5%.
? Corporate loan yields were down by 40 basis points to 7.9% in 3Q 2018 as compared to 2Q 2018
from gradual redemptions of older vintage loans at higher rates.
Total interest expense for 3Q 2018 increased by 3.0% from 3Q 2017 to RUB198.4 bn on the back of
stabilization in the cost of funding:
? Client deposits portfolio increased by 3.6% in 3Q 2018 predominantly due to inflows of
corporate deposits (+10.0% q/q).
? Cost of retail term deposits remained unchanged at 4.6% during 3Q 2018. Cost of corporate term
deposits was up 40 basis points during the quarter to 3.4%; yet there was a 1.1% inflow of funds
to current accounts to RUB2.4 trn for the same period.
? Deposit insurance expenses increased by the 33.8% y/y in 3Q 2018 related to change in the
allocation rate in 2018.
Liquidity position of the Group in 3Q 2018 remained strong; net LDR ratio for 3Q 2018 was stable
at 93.8% as compared to 2Q 2018.
? Net LDR by currency also demonstrated resilience, as net LDR in Rubles was at 100%, while in
U.S. dollars remained at 70%.
The Group 3Q 2018 net fee and commission income came at RUB114.6 bn, up by 17.7% from the year-ago
period mainly from bank card operations:
? The number of issued retail bank cards reached 123,5 mn in 3Q 2018, adding over 1.1 mln for 9M
2018.
? Fees from acquiring, commissions of payment systems and other similar commissions, net of
applicable costs and Loyalty programs expenses, increased by 27.3% in 3Q 2018 y/y.
? The number of cities that offer transportation acquiring reached 62 by the end of the quarter.
? Clients continue to go digital: the number of active retail digital users increased by 1.5 mn
during the quarter to 62.4 mn, of which the number of daily users reached 16.7 mn (+32% y/y).
? The number of new corporate clients that chose to bank with Sberbank in 3Q 2018 exceeded 170
ths, which was 1.5X more than in the same period a year ago.
? Net commission income from conversion operations increased by 31.4% y/y in 3Q 2018 mainly due
to improvement in pricing offerings and development of the global markets platform Sberbank
Markets.
? Sberbank became the leader in the brokerage services market, adding 149 ths retail accounts
since the beginning of the year to over 400 ths brokerage accounts by the end of September, as
this service became available via Sberbank Online.
The sales volumes of life insurance for 9M 2018 increased by 79% as compared to 9M 2017. Assets
under management of the Wealth Management business increased by over 30% during 9M 2018 to RUB1.1
trln.
The Group operating expenses (staff and administrative) for 3Q 2018 came at RUB156.8 bn, up by
6.4% from the same period a year ago. The increase was explained by the change in capitalization
principles of expensing for in-house developed IT products in light of optimization of operations
of the Technology Block to increase time-to-market of new products and services. Should this
change has not taken place, operating expenses would have increased by 2.5%.
The Group headcounti in 3Q 2018 was down by 3.3 ths, or 1.1%, to 296.1 ths employees as a result
of implementation of new technologies focused on increasing operating efficiencies.
The Group Cost-to-Income ratio improved to 30.6%.
The net provision charge for loan portfolio at amortized cost totaled RUB58.9 bn for 3Q 2018,
(MORE TO FOLLOW) Dow Jones Newswires
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DJ Sberbank reports 3Q 2018 Net Profit of RUB228.1 -2-
affected by volatility in the exchange rate. This translated into the cost of risk (CoR) of 123
basis points for the quarter for the loan portfolio at amortized cost. The IFRS 9 standard
reporting requires that loans at fair value are revalued through the Profit & Loss Statement. The
credit impairment of loans at fair value in 3Q 2018 was RUB18.6 bn. Consequently, the combined CoR
for loans at amortized cost and at fair value in 3Q 2018 was 157 bp (or 121 bp cumulative for 9M
2018).
The total provision coverage of Stage 3 and POCI loans remained merely unchanged in 3Q 2018 at
91.6%. The share of Stage 3 and POCI loans of total gross loans at amortized cost also remained
unchanged at 8.4%.
Capital Adequacyi
Under Basel 30/09/18 30/09/18 30/06/18 30/06/18 01/01/18 30/09/18 30/09/18
III (std+IRB (std+IRB
) vs. ) vs.
30/06/18 01/01/18
(standardized (standardized) (standardized (standardized) (std+IRB
RUB bn, + IRB) + IRB) )
unless stated
otherwise %
%
Total Tier 1 3 562.0 3 562.0 3 387.1 3 387.1 3 291.1 5.2% 8.2%
capital
Total capital 3 766.2 3 706.7 3 597.8 3 533.2 3 750.8 4.7% 0.4%
Risk-weighted 30 002.6 30 695.6 30 105.8 30 608.4 29 369.0 (0.3%) 2.2%
assets
Credit risk 25 953.6 26 646.6 25 972.7 26 475.3 25 195.1 (0.1%) 3.0%
Operational 3 092.8 3 092.8 3 092.8 3 092.8 3 092.8 unch unch
risk
Market risk 956.2 956.2 1 040.3 1 040.3 1 081.1 (8.1%) (11.6%)
Ratios
Common equity 11.9% 11.6% 11.3% 11.1% 11.2%
Tier 1
capital
adequacy
ratio
Total capital 12.6% 12.1% 12.0% 11.5% 12.8%
adequacy
ratio
The Group's total capital under Basel III (Standardised and IRB approach) reached RUB3.8 trn as of
30/09/2018, up by 4.7% as compared to 30/06/2018, mainly on the back of retained earnings.
The Group's risk-weighted assets decreased by 0.3% to RUB30.0 trn during 3Q 2018 from improved
credit and market risks, down 0.1% and 8.1% respectively.
The Group leverage ratio improved to 11.4% from 10.9% in 3Q 2018.
Common equity Tier 1 capital adequacy ratio improved by 60 basis points to 11.9%, while total
capital adequacy ratio increased by 60 basis points to 12.6% as of 30/09/2018.
=-------------------------------------------------------------------------------------------------
[i] Including corresponding line from discontinued operations, that, effective May 2018, Denizbank
is classified as
[ii] The line is composed of: Net (losses) / gains from non-derivative financial instruments at
fair value through profit or loss (2017: Net gains from trading securities and securities
designated as at fair value through profit or loss); Net gains from financial instruments at fair
value through other comprehensive income (2017: Net gains from investment securities
available-for-sale); Net gains from derivatives, trading in foreign currencies, foreign exchange
and precious metals accounts translation; Net (losses) / gains arising on initial recognition of
financial instruments and loan modification; Impairment of non-financial assets; Net charge for
other provisions; 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 income
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