Russia's Sberbank income collapses, plunging by 85%, return on equity down to 3% in April, RAS results show

Russia's Sberbank income collapses, plunging by 85%, return on equity down to 3% in April, RAS results show
Russia's largest bank Sberbank reported net income of RUB11.5bn ($155mn) in April 2020, plunging by 85% year on year and 81% month on month. The bank's return on equity has also fallen off a cliff to only 3%.
By bne IntelliNews May 14, 2020

Russia's largest bank Sberbank reported net income of RUB11.5bn ($155mn) in April 2020, plunging by 85% year on year and 81% month on month, and making a return on equity (ROE) of only 3%, the lowest since 2015, the Russian Accounting Standard (RAS) report showed.

As reported by bne IntelliNews, the banking sector is expected to be under severe pressure amid the coronavirus (COVID-19) crisis, but Sberbank, one of the top Russian equity exposures, has pledged to maintain a 50% dividend payout and can count on state support.

For January-April overall net income stood at RUB230bn, down by 22% y/y, making a 15% ROE, down from Sberbank's usual 20% and higher.

"April revealed more implications from lockdown," BCS Global Markets commented on May 13, noting a decline in ROE, top line pressure (mostly on fees) and elevated cost of risk of 3.5% (albeit down from March's peak of 6.1%).

BCS GM analysts see the news as negative for the name, but still maintain a Buy recommendation for Sberbank's shares.

In April the issuance of retail loans dropped by 42% from the average seen in 1Q20 to RUB116bn, with the repayment of loans for the first time in three years exceeding the loans granted, Sberbank said, without providing exact figure of repaid loans.

The decline was the steepest in unsecured consumer loans (down by 59%), while mortgages decreased by 9%. The overall retail loan portfolio shrank by 0.4% to RUB14.3 trillion. Despite the 22% decline in corporate issuance, the corporate loan portfolio added 1.8% in real terms.

In the meantime net interest margin of the bank continued to show resilience and stayed unchanged at 5.8% in April and for 4M20 (-30bp y/y), with net interest income up 10% y/y. On the funding side retail deposits inflow supported with 2% m/m growth, offset by corporate accounts decline of 5% m/m. Fees and commissions were weak in April (-32% m/m and -20% y/y), affected by lower transactional activity during lockdown, but supported by stronger brokerage, BCS GM commented.

Sberbank's capital adequacy levels (CAR) "look strong", BCS GM believes, with a first-tier capital ratio at 15% as of May 1 versus the 8% regulatory minimum.

 

Sberbank 4M20 RAS results

 

4M20

4M19

Y/Y chg

Apr-20

Mar-20

M/M chg

Apr-19

Y/Y chg

NII, Rb bn

445.5

406.4

10%

113.8

115.5

-2%

107.5

6%

Fees, Rb bn

150.8

138.8

9%

31.8

46.7

-32%

40.0

-20%

Provisions, Rb bn

-242.1

-9.9

-

-63.3

-109.4

-42%

11.5

-

Opex, Rb bn

-187.7

-181.2

4%

-52.7

-47.7

11%

-51.1

3%

Net income, Rb bn

230.1

293.4

-22%

11.5

62.1

-81%

75.2

-85%

ROAE

15%

22%

-7.0 pp

3%

16%

-13.4 pp

22%

-19.2 pp

NIM

5.8%

6.1%

-0.33 pp

5.8%

5.8%

-0.01 pp

6.1%

-0.33 pp

Cost of risk

3.4%

0.2%

3.3 pp

3.5%

6.1%

-2.6 pp

-0.7%

4.2 pp

Cost / income

26.3%

32.3%

-6.0 pp

40.5%

20.1%

20.4 pp

34.4%

6.1 pp

Retail loans

7 426

6 500

14%

7 426

7 459

0%

6 500

14%

Corporate loans

14 338

12 929

11%

14 338

14 356

0%

12 929

11%

Retail deposits

14 162

13 202

7%

14 162

13 946

2%

13 202

7%

Corporate accounts

7 083

7 030

1%

7 083

7 448

-5%

7 030

1%

L/D

95.9%

90.1%

5.8 pp

95.9%

95.8%

0.2 pp

90.1%

5.8 pp

Equity

4 664

4 112

13%

4 664

4 562

2%

4 112

13%

Core Tier I (N1.1, min 4.5%)

13.0%

11.8%

1.2 pp

13.0%

12.2%

0.8 pp

11.8%

1.2 pp

Total CAR (N1.0, min 8.0%)

15.2%

14.7%

0.5 pp

15.2%

13.8%

1.4 pp

14.7%

0.5 pp

Source: Company, BCS GM

               

Note: Monthly NIM  is adjusted for deposit insurance payment

 

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