SBERBANK OF RUSSIA Moscow, July 30, 2020 - 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 2020, with report on review by AO PricewaterhouseCoopers Audit.
Alexandra Buriko, CFO, stated:
'Solid capital and liquidity position, high penetration of digital services and a balanced risk-management approach enable us to properly address current challenges and support business and community in the period of pandemic and lockdown. Unprecedented volumes of restructuring and anti-crisis financing processed in the shortest possible timeframe along with the launch of cost-optimization were the main priorities for the Bank in the past quarter. Sberbank earned RUB166.7 bn in net profit and delivered 14.2% ROE in 2Q 2020, despite the drop in business activity and elevated provision charge. As the economy gradually restores, we become cautiously optimistic for the second half of 2020.'
2Q 2020 Financial and Operational Highlights:
- The Group net profit reached RUB166.7 bn (-33.4% y/y);
- The Group earnings per ordinary share (EPS) came in at RUB7.78, down by 27.3% y/y;
- The Group return on equity (ROE) reached 14.2% and the Group return on assets (ROA) was 2.1%;
- The Group gross loans1 increased by 1.6% excluding the FX revaluation effect to RUB22.9 trn. Retail loan portfolio was up by 0.9% to RUB8.3 trn. Corporate loan portfolio expanded by 1.8% excluding the effect of FX revaluation to RUB14.6 trn;
- Active retail client base exceeded 96.9 mln;
- Number of monthly active users(MAU) of mobile App Sberbank Online was up by 2.8 mln to 60 mln, and number of daily active users(DAU) increased by 2.4 to 27.2 mln; DAU/MAU exceeded 45%;
- Active corporate client base exceeded 2.6 mln, while MAU in digital channels kept at 2.2 mln users;
- As of the end of 2Q 2020, over 11 mln clients were using Sber ID, a unified login that provides access to more than 45 ecosystem partners, while 'Sbasibo' bonuses can be used to pay for services of 8 ecosystem companies.
Statement of Profit or Loss Results Highlights
RUB bn, unless stated otherwise | 2Q | 2Q | 1Q | 2Q | 2Q | 6M | 6M | 6M |
2020 | 2019 | 2020 | 2020/ | 2020/ | 2020 | 2019 | 2020/ | |
2Q | 1Q | 6M | ||||||
2019, | 2020, | 2019, | ||||||
% change | % change | % change | ||||||
Net interest income | 398.5 | 353.1 | 371.9 | 12.9% | 7.2% | 770.4 | 690.6 | 11.6% |
Net fee and commission income | 120.0 | 116.7 | 126.4 | 2.8% | -5.1% | 246.4 | 219.6 | 12.2% |
Other non-interest income / (expense) 3 | -3.6 | 17.0 | 10.3 | -121.2% | -135.0% | 6.7 | 52.5 | -87.2% |
Operating income before provisions 2 | 514.9 | 486.8 | 508.6 | 5.8% | 1.2% | 1 023.5 | 962.7 | 6.3% |
Net charge related to change in asset quality: | -132.9 | -8.8 | -167.1 | 1410.2% | -20.5% | -300.0 | -54.3 | 452.5% |
Net credit loss allowance charge for debt financial assets | -126.5 | -9.2 | -138.0 | 1275.0% | -8.3% | -264.5 | -26.5 | 898.1% |
Negative revaluation of loans at fair value due to change in credit quality | -6.4 | 0.4 | -29.1 | -1700.0% | -78.0% | -35.5 | -27.8 | 27.7% |
Net loss allowance / provision for credit related commitments | -0.7 | -2.4 | -14.6 | -70.8% | -95.2% | -15.3 | 1.9 | -905.3% |
Staff and administrative expenses | -172.4 | -168.5 | -169.2 | 2.3% | 1.9% | -341.6 | -319.2 | 7.0% |
Net profit from continuing operations | 166.7 | 245.9 | 120.5 | -32.2% | 38.3% | 287.2 | 472.0 | -39.2% |
Profit / (Loss) from discontinued operations | 0.0 | 4.4 | 0.0 | -100.0% | NA | 0.0 | 4.9 | -100.0% |
Net profit | 166.7 | 250.3 | 120.5 | -33.4% | 38.3% | 287.2 | 476.9 | -39.8% |
Earnings per ordinary share from continuing operations. RUB | 7.78 | 10.70 | 5.60 | -27.3% | 38.9% | 13.38 | 21.23 | -37.0% |
Total comprehensive income from continuing operations attributable to the shareholders of the Bank | 229.5 | 281.1 | 121.1 | -18.4% | 89.5% | 350.6 | 502.3 | -30.2% |
Ratios based on continuing operations | ||||||||
Return on equity based on profit from continuing operations | 14.2% | 24.9% | 10.6% | -- | -- | 12.4% | 23.7% | -- |
Return on assets based on profit from continuing operations | 2.1% | 3.4% | 1.5% | -- | -- | 1.8% | 3.3% | -- |
Net interest margin | 5.61% | 5.41% | 5.49% | -- | -- | 5.56% | 5.34% | -- |
Cost of risk (amortized cost loans) | 224 bp | 15 bp | 251 bp | -- | -- | 238 bp | 30 bp | -- |
Cost of risk (amortized cost and FV loans) | 225 bp | 14 bp | 292 bp | -- | -- | 258 bp | 55 bp | -- |
Cost-to-income ratio 2 | 33.5% | 34.6% | 33.3% | -- | -- | 33.4% | 33.2% | -- |
Balance Sheet Highlights
RUB bn. unless stated otherwise | 30.06.2020 | 31.03.2020 | 31.12.2019 | 30.06.2020/ | 30.06.2020/ |
31.03.2020. | 31.12.2019. | ||||
% change | % change | ||||
Gross total loans1: | 22 852.1 | 23 166.0 | 21 749.4 | -1.4% | 5.1% |
Corporate loans 1 | 14 582.1 | 14 972.0 | 13 865.4 | -2.6% | 5.2% |
Retail loans 1 | 8 270.0 | 8 194.0 | 7 884.0 | 0.9% | 4.9% |
Securities portfolio | 4 845.0 | 4 671.2 | 4 369.7 | 3.7% | 10.9% |
Assets 3 | 32 383.4 | 32 068.9 | 29 958.9 | 1.0% | 8.1% |
Total deposits: | 23 312.4 | 23 061.8 | 21 574.4 | 1.1% | 8.1% |
Retail deposits | 15 108.2 | 14 669.9 | 14 209.6 | 3.0% | 6.3% |
Corporate deposits | 8 204.2 | 8 391.9 | 7 364.8 | -2.2% | 11.4% |
Book value per share6. RUB | 213.4 | 203.2 | 198.3 | 5.0% | 7.6% |
Ratios | |||||
Net Loans / Deposits ratio (LDR) | 90.9% | 93.5% | 94.4% | -- | -- |
Stage 3 + POCI loans / total gross loans at amortized cost | 7.5% | 7.4% | 7.5% | -- | -- |
Provision coverage of Stage 3 + POCI loans | 102.0% | 98.2% | 89.3% | -- | -- |
Net interest income increased by 12.9% y/y in 2Q 2020 to RUB398.5 bn.
Interest income was down by 1.8% y/y in 2Q 2020 to RUB594.8 bn on the back of a gradual decline in yields following the market rates.
-
Growth in retail loan portfolio decelerated to 0.9% in 2Q 2020 and the balance came in at RUB8.3 trn due to the slowdown within the pandemic-related restrictions. The share of retail lending in the total loan portfolio was up by 0.9 pp to 36.2%. The yield on retail loans declined by 20 bp to 11.9%.
- Mortgage portfolio grew by 1.9% in 2Q 2020, benefiting from robust demand for both state and bank's own subsidized mortgage programs. The share of subsidized lending accounted for about 30% of mortgage origination by the end of the quarter.
- Consumer loan portfolio remained virtually unchanged for the quarter (-0.2%).
- Corporate loan portfolio1 grew by 1.8% adjusted for the impact of FX revaluation in 2Q 2020 to RUB14.6 trn, and was down by 2.6% in nominal terms due to stronger ruble. The yield on corporate loans was down by 10 bp for the quarter to 7.1%.
- The bank has been actively participating in the state support programs for business and signed loan agreements for the amount of over RUB330 bn up until now.
Interest expense, including deposit insurance expenses, decreased by 22.2% y/y in 2Q 2020 to RUB196.3 bn on the back of monetary easing as well as the deposit insurance rate reduction. Allocations for deposit insurance were down by 62% y/y to RUB8.2 bn in 2Q 2020, given that the reduced rate on deposit insurance is applicable retrospectively since the beginning of the year.
- Retail funding increased by 3% in 2Q 2020 to RUB15.1 trn, supported among other factors by direct state payments, including support programs for families with kids. The average cost of retail funding decreased by 60 bp to 4.1%.
- Corporate funding was down by 2.2% in 2Q 2020 to RUB8.2 trn, and grew by 2.0% adjusted for FX revaluation. The average cost of corporate funding was down by 40 bp to 3.1%.
- In 2Q 2020, Sberbank issued RUB20 bn of four-year exchange-traded bonds, and thus the outstanding balance of exchange-traded bonds totaled RUB465.5 bn.
Net LDR ratio equaled to 90.9% in 2Q 2020, down by 2.6 pp as compared to 1Q 2020.
Growth in the Group net fee and commission income slowed in 2Q 2020 to 2.8% y/y due to the lockdown constrains to RUB120.0 bn.
- Net income from bank cards was down by 6% y/y, as activity started to restore only in the final month of the quarter. In the meantime, the lockdown was a natural trigger for cashless penetration in client habits: almost 40% of Sberbank clients opted for purely cashless transactions in 2Q 2020.
- Transport acquiring became available in 116 Russian cities.
- Monthly audience of DomClick digital platform increased almost 1.5-times for the quarter to 7.5 mln users. A remarkable growth in demand for non-financial services stemmed both from mortgage and non-mortgage clients: usage of online property title registration by clients without a mortgages showed a 5-fold increase on the primary market and grew 8 times on the secondary.
- A gradual release of lockdown constraints encouraged transactional activity at the end of the quarter and supported growth in fees from cash and settlement transactions (+8.6% y/y).
According to management accounts, operating income of insurance, pension and asset management businesses increased by 2% y/y to RUB29 bn in 2Q2020. Total assets under management increased by 6% in 2Q 2020 to RUB1.59 trn.
The Group operating expenses (staff and administrative) were up by 2.3% y/y to RUB172.4 bn in 2Q 2020. The pandemic-related efficiency enhancement program facilitated the slowdown of the cost growth. Meanwhile the increase in staff expenses (+6.7% y/y) was related to payroll indexation in July last year as well as the ongoing IT transformation.
The Group Cost-to-Income ratio2 came in at 33.5% in 1Q 2020, down by 1.1 pp y/y.
Net credit loss allowance charge for loans at amortized costs amounted to RUB 123.1 bn in 2Q 2020. The Cost of Risk for loans at amortized cost was 224 bp. According to IFRS 9 part of the loan portfolio is accounted at fair value through profit or loss. Negative revaluation of these loans due to change in credit quality amounted to RUB6.4 bn in 2Q. The combined provision charge was RUB129.5 bn, while the combined Cost of Risk including negative revaluation of loans at fair value decreased by 67 bp to 225 bp in 2Q 2020.
In 2Q 2020, credit quality of the loan portfolio expectedly worsened, which was evidenced by the increase in Stage 2 loans mainly driven by corporate borrowers affected by COVID-19 related constraints. At the same time, the share of impaired loans, including the POCI loans, in total gross loan portfolio at amortized cost increased for the quarter by 0.1 pp to 7.5%.
By the end of 2Q 2020, total corporate exposure that had restructurings under state programs, Bank's own program's and individual decisions, exceeded RUB2 trn. Restructurings approved to retail clients amounted over RUB160 bn. The loss recognized on loan modification, according to the IFRS 9, amounted to RUB27.6 bn.
Total provision coverage of Stage 3 and POCI loans was up by 3.8 pp compared to the previous quarter to 102.0% due to conservative risk-management approach in crisis environment.
Selected Capital Adequacy Results4
The data in the table is in accordance with standardized and IRB approaches applied to the corresponding assets groups.
Risk-weighted assets under IRB approach were assessed as of 30.06.2020 according to Basel 3.5 and those for the previous periods were assessed according to Basel III.
Under Basel III | 30.06.2020 | 31.03.2020 | 31.12.2019 | 30.06.2020 / | 30.06.2020 / |
RUB bn, unless stated otherwise | 31.03.2020, % change | 31.12.2019, % change | |||
Total Tier 1 capital | 4 721.2 | 4 489.1 | 4 375.4 | 5.2% | 7.9% |
Total capital | 4 863.2 | 4 648.5 | 4 433.5 | 4.6% | 9.7% |
Risk-weighted assets | 31 936.4 | 33 719.4 | 32 634.1 | -5.3% | -2.1% |
Credit risk | 27 538.6 | 29 308.4 | 28 062.7 | -6.0% | -1.9% |
Operational risk | 3 486.8 | 3 486.8 | 3 486.8 | 0.0% | 0.0% |
Market risk | 911.0 | 924.2 | 1 084.6 | -1.4% | -16.0% |
Ratios | |||||
Common equity Tier 1 capital adequacy ratio | 14.78% | 13.31% | 13.41% | -- | -- |
Total capital adequacy ratio | 15.23% | 13.79% | 13.59% | -- | -- |
Leverage ratio | 13.7% | 13.1% | 13.7% | -- | -- |
The Group's total capital reached RUB4,863.2 bn as of 30.06.2020, up by 4.6% as compared to the previous quarter, due to the retained earnings and a positive effect from the revaluation of securities portfolio.
The Group's risk-weighted assets contracted by 5.3% to RUB3,936.4 bn in 2Q 2020 due to a 6%-decrease in the credit risk component of the risk-weighted assets on the back of transition to Basel 3.5, cancellation of the macro add-on for mortgages issued before 01.04.2020 as well as negative FX revaluation of the loan portfolio. Risk-weighted assets density decreased from 98.7% to 92.9%.
The Group's leverage ratio came in at 13.7% in 2Q 2020.
Common equity Tier 1 capital adequacy ratio increased by 147 bp to 14.78%, while total capital adequacy ratio improved by 144 bp to 15.23%.
1 Before loan loss allowance and including loans at amortized cost and at fair value
2 Operating income before provisions for debt financial assets, credit related commitments and revaluation of loans at fair value due to change in credit quality
3 Other non-interest income / (expense) includes: Net losses from non-derivative financial instruments at fair value through profit or loss (excluding revaluation of loans at fair value due to change in credit quality); Net gains from financial instruments at fair value through other comprehensive income; Net gains from derivatives, trading in foreign currencies, foreign exchange and precious metals accounts translation; Net losses arising on initial recognition of financial instruments and loan modification; Impairment of non-financial assets; Net (charge for) / recovery of other provisions and allowances (excluding Net loss allowance / provisions for credit related commitments); 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 (expense) / income
4 Total equity attributable to shareholders of the Bank / Total numbers of shares outstanding (ordinary + preferred)
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Sberbank of Russia published this content on 30 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 July 2020 07:10:05 UTC
