The CEO of state-owned retail behemoth Sberbank German Gref promised to pay "very serious dividends" for 2017 during a meeting with Russian President Vladimir Putin on March 21.
Sberbank has been earning the lion’s share of profits in the Russian banking sector. However, while the Ministry of Finance has introduced a new rule that state-owned companies have to pay 50% of their profits as dividends to help fill the depleted state coffers, most of the biggest state-owned enterprises (SOE) have got exemptions – and banks doubly so as the Central Bank of Russia (CBR) has argued that thanks to their need to maintain regulatory levels of capital they need more flexibility when it comes to paying dividends.
Having said all that, Sberbank has become so profitable that Gref, a former economics minister who is expected to go back into government in a government reshuffle anticipated after Putin’s inauguration in May, is keen to do his bit for the country and increase dividend payments.
"The amount has not yet been definitively determined, but it will be very serious dividends," Gref said according to a transcript of his conversation with the head of state on the Kremlin website, Vedomosti reported.
Sberbank agreed to increase payments to shareholders up to 50% of net profit under IFRS, provided that Tier 1 capital adequacy is not less than 12.5% — well above the mandatory minimum of 10%.
In 2017, the state bank earned a record RUB749bn ($13.1bn) in net profit, up 38% on the year before, which was only slightly less than the aggregate profit for the entire sector of RUB790bn.
"Thus, we will provide very serious tax payments, the second — we will ensure very serious budgetary revenues and dividend payments to our minority shareholders, and at the same time we will naturally increase our capital to ensure the stability of the institution," Gref told Putin.
In the meantime Sberbank has been increasing dividend payments and is expected to spend 35% of profits on dividends by the end of 2017 under IFRS, but this could be revised upwards, says Gref. A final decision will be made in April.
If the state bank decides to allocate 35% of the profit for dividends, the payout will be RUB262bn. At the end of 2016, Sberbank spent 25% of its net profit on dividends, or RUB135.5bn, and 20% (RUB44.5bn) in 2015. Half of the dividends go to the budget of Russia via the central bank, its nominal shareholder which owns 50% plus one share of Sberbank.
The tier 1 capital adequacy ratio of Sberbank for 2017 increased by 40 basis points to 11.4%, while its capital was up by 30bp up to 13%, Gref reported.