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SBERBANK Sberbank reports 2Q 2019 Net Profit of RUB250.3 bn under International Financial Reporting Standards (IFRS)

Directive transparence : information réglementée

31/07/2019 09:51

Sberbank (SBER)
Sberbank reports 2Q 2019 Net Profit of RUB250.3 bn under International Financial Reporting Standards (IFRS)

31-Jul-2019 / 09:51 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 is solely responsible for the content of this announcement.


Sberbank reports 2Q 2019 Net Profit of RUB250.3 bn under International Financial Reporting Standards (IFRS)

Moscow, July 31, 2019 - Sberbank (hereafter "the Group") has released its interim condensed IFRS financial statements (hereafter "the Financial Statements") as at and for the 6 months ended 30 June 2019, 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: «Expansion of the retail business, focus on SME lending, a further increase in efficiency driven by processes optimization and sustainable growth in the number of digital users ensured a 23.9% return on equity in the first half of 2019. That forms a strong basis to achieve the targeted level of return on equity for the whole year».

 

 The 2Q 2019 Financial Highlights:

  • The Group net profiti reached RUB250.3 bn for 2Q 2019 (+16.3% y/y), and RUB476.9 bn for 6M 2019 (+11.6% y/y);
  • The Group earnings per ordinary share (EPS) came at RUB10.70 per share, up by 17.2% compared to 2Q 2018;
  • The Group annualized return on equity (ROE)i reached 24.9%, while the Group annualized return on assets (ROA) reached 3.4%;
  • Retail loan portfolio was up by 4.2% in 2Q 2019 to more than RUB7 trn reaching more than 35% of the total loan portfolio;
  • Client deposits increased by 2.0% for the quarter exceeding RUB21 trn;
  • The combined Cost of Risk (CoR) came at 14 bp including the effect of provisions' release as part of completion of Agrokor debt restructuring;
  • The quality of the Group loan portfolio improved: share of Stage 3 and POCI loans came at 7.8%, showing a 0.1 pp decrease compared to 1Q 2019.

 

Selected Financial Results

RUB bn, unless stated otherwise

2Q

2Q

1Q

2Q

2Q

6 months

6 months

6 months

2019

2018

2019

2019/

2019/

2019

2018

2019/

 

 

 

2Q

1Q

 

 

6 months

 

 

 

2018,

2019,

 

 

2018,

 

 

 

% change

% change

 

 

% change

Net interest income

353.1

349.0

337.5

1.2%

4.6%

690.6

682.5

1.2%

Net fee and commission income

116.7

112.0

102.9

4.2%

13.4%

219.6

205.2

7.0%

Other non-interest income / (expense)ii

14.6

(13.4)

39.8

--

(63.3%)

54.4

7.0

677.1%

Operating income before provisions***

484.4

447.6

480.2

8.2%

0.9%

964.6

894.7

7.8%

Net charge related to change in asset quality: 

(8.8)

(35.8)

(45.5)

(75.4%)

(80.7%)

(54.3)

(57.0)

(4.7%)

     Net credit loss allowance charge for debt financial assets

(9.2)

(12.0)

(17.3)

(23.3%)

(46.8%)

(26.5)

(32.1)

(17.4%)

     Negative revaluation of loans at fair value due to change in credit quality

0.4

(23.8)

(28.2)

--

--

(27.8)

(24.9)

11.6%

Staff and administrative expenses

(168.5)

(151.7)

(150.7)

11.1%

11.8%

(319.2)

(296.5)

7.7%

Net profit  from continuing operations

245.9

208.3

226.1

18.1%

8.8%

472.0

433.4

8.9%

Profit / (Loss) from discontinued operations

4.4

7.0

0.5

(37.1%)

780.0%

4.9

(6.0)

--

Net profit

250.3

215.3

226.6

16.3%

10.5%

476.9

427.4

11.6%

Earnings per ordinary share  from continuing operations, RUB

10.70

9.13

10.53

17.2%

1.6%

21.23

19.58

8.4%

Total comprehensive income  from continuing operations attributable to the shareholders of the Bank

281.1

181.7

221.2

54.7%

27.1%

502.3

417.5

20.3%

Book value per share *, RUB

176.4

154.3

179.7

14.3%

(1.8%)

176.3

154.3

14.3%

Ratios  based on continuing operations

 

 

 

 

 

 

 

 

Return on equityi

24.9%

24.4%

22.9%

--

--

23.9%

24.3%

--

Return on assets

3.4%

3.3%

3.1%

--

--

3.3%

3.4%

--

Net interest margin

5.18%

5.80%

4.98%

--

--

5.08%

5.75%

--

Net interest margin**

5.41%

6.09%

5.27%

--

--

5.34%

6.06%

--

Cost of risk (amortized cost loans)

15 бп

23 бп

44 бп

--

--

30 бп

36 бп

--

Cost of risk (amortized cost and FV loans)

14 бп

72 бп

96 бп

--

--

55 бп

62 бп

--

Cost-to-income ratio***

34.6%

30.8%

31.7%

--

--

33.2%

31.7%

--

* Total equity attributable to shareholders of the Bank / Total numbers of shares outstanding (ordinary + preferred)

** Net interest margin was recalculated as working assets adjusted for the amount of provisions, created against Stage 3 loans

*** Operating income before provisions for debt financial assets, credit related commitments and revaluation of loans at fair value due to change in credit quality

Selected Balance Sheet Results

RUB bn, unless stated otherwise

30.06.2019

31.03.2019

31.12.2018

30.06.2019/ 31.03.2019,

% change

30.06.2019/ 31.12.2018,

% change

Gross total loans*:

20 617.6

20 823.9

21 082.3

(1.0%)

(2.2%)

Corporate loans*

13 341.0

13 838.5

14 331.1

(3.6%)

(6.9%)

Retail loans*

7 276.6

6 985.4

6 751.2

4.2%

7.8%

Securities portfolio

4 343.1

4 058.3

3 749.5

7.0%

15.8%

Assetsi

31 561.9

31 328.7

31 197.5

0.7%

1.2%

Total deposits:

21 808.0

21 379.3

20 897.3

2.0%

4.4%

Retail deposits

13 672.5

13 343.7

13 495.1

2.5%

1.3%

Corporate deposits

8 135.5

8 035.6

7 402.2

1.2%

9.9%

Ratios

 

 

Net Loans / Deposits ratio (LDR)

88.1%

90.5%

93.7%

--

--

Stage 3 + POCI loans / total gross loans at amortized cost

7.8%

7.9%

8.1%

--

--

Provision coverage of Stage 3 + POCI loans

90.7%

91.9%

90.4%

--

--

               

* Before credit related commitments and combined loans at amortized cost and at fair value

Net interest income came at RUB353.1 bn in 2Q 2019, up by 1.2% y/y.

Total interest income amounted to RUB605.5 bn, up by 13.1% in 2Q 2019 on the background of the loan portfolio growth (at amortized cost and at fair value) by 5.9% to RUB20.6 trn.

  • Retail loan portfolio increased by 4.2% to RUB7.3 trn in 2Q 2019
    • Consumer loan portfolio was up by 6.5% in 2Q 2019 supported by online sales through the digital channels that comprised 50% of total origination as of the end of the quarter.
    • Mortgages grew by 2.5%. The platform DomClick substantially supports mortgage lending and accounts for 25% of newly issued Sberbank loans. DomClick holds the leading position among all the aggregators by number of secondary market listings in Russia.
    • Retail loan yield increased by 20 bp to 12.2% in 2Q 2019 on the back of increase of consumer loans share in the total loan portfolio as well as the effect of rates change for newly issued loans at the beginning of the year.
  • Corporate loan portfolio (at amortized cost and at fair value combined) came down by 3.6% to RUB13.3 trn in 2Q 2019 mostly influenced by lower demand for lending in the segment of large borrowers. However, there is an accelerated growth in the small and medium business lending (more than 5% for the quarter). Online lending for individual entrepreneurs was launched in the 2Q 2019.
    • Based on management accounts, Rouble loan portfolio decreased by 1.7% during the quarter, FX portfolio, net of currency revaluation, was down by 2.3%.
    • Corporate loan yield was up by 60 bp to 8.6% in 2Q 2019 as compared to 1Q 2019. The increase is mainly driven by the structural changes in the loan portfolio in favor of Rouble lending as well as the focus on SME segment.

Total interest expense, including deposit insurance expenses, increased by 35.5% to RUB252.4 bn in 2Q 2019 on the back of growth of interest bearing liabilities by 13.6% and cost of funding increase by 70 bp y/y.

  • Retail deposits grew by 2.5% to RUB13.7 trn, the average cost of retail term deposits increased by 20 bp for the quarter.
  • Corporate deposits were up by 1.2% to RUB8.1 trn, the average cost of term deposits remained unchanged in the 2Q 2019.

In 2Q 2019 Sberbank redeemed Eurobonds and Rouble-denominated exchange-traded bonds issued on the local market in the nominal amount of USD1 bn and RUB10 bn respectively according to the schedule. Sberbank Group also placed bonds on the Russian market in the amount of RUB20 bn. At the end of 2Q 2019, the nominal volume of exchange-traded bonds, issued on the Russian market, comprised RUB325.5 bn as well as USD2.5 bn and EUR1.0 bn on the international market. The share of wholesale funding in total liabilities of the Bank decreased below 1.2%.

The Group net fee and commission income for 2Q 2019 came at RUB116.7 bn, up by 4.2% y/y mainly driven by bank card fees from acquiring, commissions of payment systems and other similar commissions, settlement transactions and brokerage business. The slowdown in net fee and commission income growth in the reporting quarter was explained by a one-off effect on the income from documentary operations that elevated a comparative base of 2Q 2018. Excluding this factor, the growth for the 2Q 2019 would have comprised 8.1%. From 1 January 2019 VAT from loyalty programs is included in net fee and commission income, the comparative base is adjusted as well.

  • Number of active retail clients reached about 93 mln. The "youth" segment accounts for more than half of Sberbank's new clients (1.6 out of 3.1 million).
  • The number of active retail users in digital channels exceeded 66 million, while the number of daily active users (DAU) increased to 21.7 mln. DAU / MAU (mobile app) improved by 5.1 pp to 39.1% in 2Q 2019.
  • The number of cities with transport acquiring reached 80 by the end of 2Q 2019.

According to management accounts, operating income of insurance and pension businesses increased by 14% in 1H 2019 based on both gross premiums written and investment income.

The Group operating expenses (staff and administrative) for 2Q 2019 came at RUB168.5 bn, up by 11.1% as compared to the same period a year ago and up by 7.7% for 6M 2019 y/y. 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 that took place in July, 2018. Apart from that it was influenced by VAT rate increase from the beginning of the year. Excluding these factors, operating expenses growth would not exceed 4.5% for 6M 2019.

The Group Cost-to-Income ratio*** totaled 34.6%. 

Net credit loss allowance charge for loans at amortized costs amounted to RUB7.7 bn for 2 quarter 2019. The charge includes recovery of previously created provisions against Agrokor's exposure due to completion of restructuring. This translates into Cost of Risk at 15 bp for the loan book at amortized cost. According to IFRS 9 a part of the loan portfolio is accounted at fair value through profit or loss. Positive revaluation of loans at fair value due to change in credit quality amounted to RUB0.4 bn in 2Q 2019. Consequently, the combined Cost of Risk for loans at amortized cost and at fair value in 2Q 2019 was 14 bp.  Starting from 1Q19 we exclude FX-component from provision charge/ recovery for FX-denominated loans at amortized cost as well as from revaluation of FX-denominated loans at fair value. This FX component was shown as foreign exchange translation (losses) / gains and amounted to RUB7.3 bn for 2Q 2019.

The total provision coverage of Stage 3 and POCI loans decreased by 1.2 pp compared to the previous quarter and comprised 90.7%. The share of Stage 3 and POCI loans in total gross loans at amortized cost improved by 0.1 pp and came at 7.8%. 

Capital Adequacyi

Under Basel III

RUB bn, unless stated otherwise 

30.06.2019 (standardized + IRB)

31.03.2019 (standardized + IRB)

31.12.2018 (standardized + IRB)

30.06.19 (standardized + IRB)/ 31.03.19 (standardized + IRB), % change

30.06.19 (standardized + IRB)/ 31.12.18 (standardized + IRB), % change

Total Tier 1 capital

3 894.4

3 976.3

3 766.5

-2.1%

3.4%

Total capital

4 006.2

4 080.2

3 950.6

-1.8%

1.4%

Risk-weighted assets

31 682.2

31 480.9

31 793.1

0.6%

-0.3%

Credit risk

27 218.0

27 108.5

27 477.4

0.4%

-0.9%

Operational risk

3 339.9

3 339.9

3 339.9

0.0%

0.0%

Market risk

1 124.3

1 032.5

975.8

8.9%

15.2%

Ratios

 

 

Common equity Tier 1 capital adequacy ratio

12.29%

12.63%

11.85%

--

--

Total capital adequacy ratio

12.64%

12.96%

12.43%

--

--

               

 

The Group's total capital under Basel III came at RUB4.0 trn as of 30 June 2019, down by 1.8% as compared to 31 March 2019, mainly on the back of dividends distribution in the 2Q 2019.

The Group's risk-weighted assets under IRB approach were up by 0.7% to RUB31.7 trn during 2Q 2019. The Group leverage ratio decreased by 30 bp to 11.5% in 2Q 2019.

Common equity Tier 1 capital adequacy ratio decreased by 34 bp and came at 12.29%, total capital adequacy ratio went down by 32 bp to 12.64% as of 30 June 2019.

i Including corresponding line from discontinued operations, that, effective May 2018, Denizbank is classified as

ii Other non-interest income / (expense) includes: Net gains from non-derivative financial instruments at fair value through profit or loss excluding revaluation of loans at FV through P&L due to change in credit quality; Net gains from financial instruments at fair value through other comprehensive income ; Impairment of investment securities available-for-sale ; Net gains / (losses) from derivatives, trading in foreign currencies, foreign exchange and precious metals accounts translation; Impairment of non-financial assets; Net gains on initial recognition of financial instruments and on loans restructuring; Net recovery of / (charge for) other provisions ; Revenue of non-banking business activities ; Cost of sales and other expenses of non-banking business activities ; Net premiums from insurance and pension fund operations; Net claims related to insurance and pension fund operations; Income from operating lease of equipment; Expenses related to equipment leased out; Other net operating income

ii Active clients are calculated using the new revised methodology

 

DISCLAIMER

This document has been prepared by Sberbank of Russia (the "Bank") and has not been independently verified. This press release does not constitute or form part or all of, and should not be construed as, any offer of, or any invitation to sell or issue, or any solicitation of any offer to purchase, subscribe for, underwrite or otherwise acquire, or a recommendation regarding, any shares or other securities representing shares in, or any other securities of the Bank, or any member of the Bank's group, nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or any commitment whatsoever or any investment decision. The information in this press release is confidential and is being provided to you solely for your information and may not be reproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any purpose.

This press release doesn't constitute an offer of securities of the Bank for sale in the United States. The Securities may not be offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act of 1993 as amended.

This press release is only being distributed to and is only directed at (A) persons in member states of the European Economic  Area (other than the United Kingdom) who are "qualified investors" within the meaning of Article 2(1)(e) of Directive 2003/71/EC (as amended and together with any applicable implementing measures in that member state, the "Prospectus Directive") ("Qualified Investors"); (B) in the United Kingdom, Qualified Investors who are investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") and/or high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order; and (C) such other persons as to whom this press release may be lawfully distributed and directed under applicable laws (all such persons in (A) to (C) above together being referred to as "relevant persons").  The shares, or other securities representing shares, or any other securities of the Bank are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons.  Any person who is not a relevant person should not act or rely on this press release or any of its contents.

This press release does not constitute any offer of, or any invitation to sell or issue, or any solicitation of any offer to purchase, subscribe for, underwrite or otherwise acquire any securities of the Bank within the Russian Federation or in favor of the Russian entities or persons. Any foreign securities representing shares of the Bank may not be offered or sold within the Russian Federation, except as provided by the relevant Russian legislation.

The information in this press release or in oral statements of the management of the Bank may include forward-looking statements. Forward-looking statements include all matters that are not historical facts, statements regarding the Bank's intentions, beliefs or current expectations concerning, among other things, the Bank's results of operations, financial condition, liquidity, prospects, growth, targets, strategies, and the industry in which the Bank operates. By their nature, forward-looking statements involve risks and uncertainties, because they relate to events and depend on circumstances that may or may not occur in the future. The Bank cautions you that forward-looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which the Bank operates may differ materially from those made in or suggested by the forward looking statements contained in this press release or in oral statements of the management of the Bank. In addition, even if the Bank's results of operations, financial condition and liquidity and the development of the industry in which the Bank operates are consistent with forward-looking statements contained in this press release or made in oral statements, those results or developments may not be indicative of results or developments in future periods.

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Attachment

Document title: EN_Sberbank Financial Statements IFRS 2Q2019
Document: http://n.eqs.com/c/fncls.ssp?u=FJOPAXLXTU


ISIN: US80585Y3080, RU0009029540, RU0009029557, US80585Y4070
Category Code: MSCH
TIDM: SBER
LEI Code: 549300WE6TAF5EEWQS81
OAM Categories: 2.2. Inside information
Sequence No.: 15213
EQS News ID: 849487

 
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