Russian Sberbank's October profit is highest in 12 months

By bne IntelliNews November 9, 2015

Russia's largest bank Sberbank posted net profit of RUB33.9bn ($526mn) in October, up by 5% m/m and making the highest monthly profit since September 2014, the bank said on November 9.

In January-October overall, Sberbank's Russian Accounting Standard (RAS) net profit stood at RUB178.3bn, still down by -39% y/y.

The bank attributed October's net profit to lower cost of funding and transfers to reserves for bad loans, while expecting a faster recovery of net interest income due to improving structure of assets.

Transfers to reserves in October were RUB29.9bn, below the 2015 average RUB33.7bn, and bringing ten-month transfers to reserves to RUB333.6bn (up by 7% y/y).

Meanwhile, VTB bank on November 9 argued that technical factors support Sberbank's profit while operating results appear weak.

Net interest income increased 12.3% m/m "due mostly to technical factors as the bank switched to accrual basis from cash basis in its accounting for deposit insurance payments". Adjusting for this change, VTB estimated that net interest margin declined by 3bp m/m to 4.1%.

Net fees and commission income declined 18.6% m/m in October. "With non-core income down sharply, operating revenues were down 3.2% m/m, in spite of the positive effect from the accounting change," VTB writes.

The investment bank added that Sberbank's October's profit increase was also due to net tax gain of RUB 4.5bn compared with a tax expense of RUB 6.7bn in September.

VTB notes that risks of high taxation in the final months of 2015 exist as through October the corporate tax rate was only 15.6%, down from 23.6% for the same period of last year and well below the statutory rate of 20%.

"With provision expenses below the 2015 monthly average, a net corporate tax gain and a positive effect from a change in accounting all during October, the quality of the solid bottom line appears weak, in our view," VTB Bank concludes on Sberbank's operating results.

Sberbank RAS income statement
RUB bn 9/15/2015 8/15/2015 Chng, MoM 9/14/2015 Chng, YoY 9mo15 9mo14 Chng, YoY
Net interest income 64.3 74.4 -13.60% 68 -5.40% 532.6 636.3 -16.30%
Net fee & commission income 29.6 26.1 13.40% 25.6 15.40% 207.4 195.9 5.90%
Core revenues 93.9 100.5 -6.60% 93.6 0.30% 740.1 832.1 -11.10%
Net gain/(loss) from trading 3.2 1.7 84.00% 10.6 -69.70% 41.2 32.7 26.10%
Other operating income (estimated) 5.1 2.4 112.40% 1.8 191.10% 14.5 19.5 -25.30%
Operating income (estimated, pre-prov) 102.2 104.7 -2.30% 106 -3.50% 795.8 884.3 -10.00%
Net provision (charge)/release -25.9 -57.1 -54.60% -28.7 -9.80% -303.7 -217.9 39.40%
Operating costs -35.6 -34.3 3.90% -34.4 3.40% -309.6 -306.8 0.90%
Adjustments -1.6 1.6 n/a -0.5 221.50% -0.7 0.3 n/a
Profit before tax 39.1 14.9 162.80% 42.3 -7.60% 181.8 359.8 -49.50%
Tax (charge)/gain -6.7 4.7 n/a -8.2 -18.20% -37.3 -73.1 -49.00%
Net profit 32.4 19.6 65.50% 34.1 -5.10% 144.4 286.7 -49.60%
Source: Company data, VTB Capital Research
                 
Sberbank RAS balance sheet ratios
  9/15/2015 8/15/2015 Chng, MoM 9/14/2015 Chng, YoY 9mo15 9mo14 Chng, YoY
Net loans / assets 67.80% 68.90% -1.1pp 71.60% -3.8pp 67.80% 68.70% -0.8pp
Securities / assets 8.10% 8.00% 0.1pp 10.10% -2.0pp 8.10% 8.80% -0.7pp
Cash & other assets / assets 24.10% 23.10% 1.0pp 18.20% 5.8pp 24.10% 22.50% 1.6pp
Deposits / liabilities 80.00% 79.30% 0.7pp 72.10% 7.9pp 80.00% 68.50% 11.6pp
Gross LTD 100.30% 102.90% -2.5pp 118.20% -17.9pp 100.30% 116.10% -15.8pp
Net LTD 94.30% 96.60% -2.3pp 112.10% -17.8pp 94.30% 110.10% -15.8pp
Overdue amounts / gross loans 2.90% 3.00% -0.1pp 2.30% 0.6pp 2.90% 2.00% 0.9pp
Provisions as % gross loans 6.00% 6.10% -0.1pp 5.20% 0.8pp 6.00% 5.10% 0.9pp
Provision coverage ratio 206.60% 202.30% 4.3pp 224.10% -17.5pp 206.60% 257.00% -50.4pp
Equity / assets 10.10% 10.00% 0.1pp 11.40% -1.3pp 10.10% 8.90% 1.2pp
Capital adequacy (N1) 12.40% 12.10% 0.3pp 12.20% 0.2pp 12.40% 11.50% 0.9pp
Risk-weighted assets / assets 94.90% 97.10% -2.2pp 101.70% -6.8pp 94.90% 90.90% 4.0pp
Source: Company data, VTB Capital Research

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