Despite the challenging economic environment, Sberbank keeps on generating income and reducing operating expenses. For 9M09, operating income before provisions grew 33.1% y-o-y to RUB445 bn. The growth was mainly led by net interest income, which was up 41.3% y-o-y to RUB334 bn.

Interest income increased 38.8% y-o-y to RUB567 bn, with the growth rate exceeding that in interest expense. The incremental interest income amounted to RUB159 bn, including RUB136 bn earned from corporate lending. In the meantime, contribution from interest income in the retail segment was less pronounced – RUB9.8 bn – due to the retail lending market squeeze.

Interest expense grew 35.5% y-o-y to RUB234 bn due to increased volumes of deposits and higher funding costs in response to the crisis. The funds raised from the Central Bank of Russia (CBR) at the end of 2008 to support liquidity were another reason for growing interest expense. The CBR-related funding costs peaked in 1Q09 and then fell by 24% q-o-q in 2Q09 and by 16.5% q-o-q in 3Q09 as the funds were being repaid.

Net fee and commission income increased 5.8% y-o-y to RUB99 bn, which was largely due to commissions generated on settlements, operations with foreign currencies and precious metals, operations with banking cards, current account transactions and lending to corporate clients. Subdued consumer demand for retail loans reduced fee and commission income on lending to individual. Furthermore, fee and commission income declined on bank guarantees, currency control operations, depositary and agent services.

With strict cost control in focus, the Bank reduced operating expenses for 9M09by 4.2% y-o-y to RUB151 bn which coupled with growth in operating income before provisions. Cost-cutting was mainly due to headcount reduction to streamline organizational structure and restrained growth in general and administrative expenses. Cost to income ratio stood at 34.0% for 9M09 (vs. 47.3% for 9M08), which is further evidence of the Bank’s efficiency.

Given that the Bank adheres to conservative credit risk management, loan impairment provisions to overdue loans stood at 2.4 as of October 1st, 2009. For 9M09, the Bank allocated RUB282 bn in provisions, including provisions for loan impairment of RUB263 bn. Provisions were charged from the Bank’s operating income and did not affect the regulatory capital.

As a result of a significant increase in provisioning, Sberbank’s profit before tax for 9M09 declined to RUB11.9 bn from RUB134.8 bn in 9M08. Net profit came at RUB9.1 bn vs. RUB102.9 bn for 9M08.

The Bank’s assets increased by 0.01% ytd to RUB6,723 bn.

Source: Sberbank
Date: 23.10.2009