Sberbank: RAS 7M 2019 - The Bank earned RUB75.5 bn in July. Return on Equity (ROE) came at 22.2% for 7M 2019

Sberbank releases Financial Highlights for 7M 2019 (under RAS; non-consolidated)
Please note that the numbers are calculated in accordance with Sberbank's internal methodology.
Also note that some changes became effective in the Russian accounting standards in 2019 as part of convergence with IFRS, including transition to IFRS 9.
                                                                                                                                              August 07, 2019
Key highlights for July 2019:

• The Bank earned RUB75.5 bn in July. Return on Equity (ROE) came at 22.2% for 7M 2019.
• The Bank issued RUB275 bn loans to retail clients. Retail loan portfolio increased by 1.4%.
• Corporate loan portfolio denominated in rubles expanded by RUB31 bn for the month.

Deputy Chairman of Sberbank Alexander Morozov stated:
"Sberbank had a solid growth of retail loan portfolio in July and substantially increased lending to corporate clients. As a result our ruble-denominated loan portfolio expanded by over RUB125 bn. Loan growth coupled with a gradual decrease in cost of funding led to an ROE above 22%, which is in line with our expectations."
 
 
Comments for 7M 2019:
 
Net interest income totaled RUB718.2 bn. As compared to 7M 2018, the dynamics was affected by rising cost of client funding as well as payment of dividends which led to lower yield on money-market operations in July.
Fee and commission income grew by 12.0% driven by transactional business. Net fee and commission income was up by 3.9% to RUB252.5 bn. The slowdown reflected a high-base effect in July 2018 due to the income received from international payment systems as well as specifics of accounting for loyalty program costs. As part of convergence with IFRS, the Bank started accruing these income and expense items evenly from the beginning of this year. Therefore, the effect will largely be absorbed by the yearend. Excluding these factors, net fee and commission income growth for 7M 2019 would be 7.7%.
Operating expenses increased by 9.1%. OpEx dynamics was affected by annual wage increase effective in July as well as VAT rate increase from January 1, 2019 and staff reshuffling from Sberbank Technologies JSC to Sberbank PJSC over the second half of 2018. Cost-to-income ratio came at 31.5%.
 
Provision charges amounted to RUB26.6 bn in July and RUB57.5 bn year to date, which is three times less than for the similar period a year ago. This is caused by the opposite direction in FX rate dynamics for comparable periods as well as restructuring of the Agrokor debt completed in June 2019. As of August 1, loan-loss provisions were 2.8 times that of the overdue loans. Positive revaluation of loans at fair value amounted to RUB1.0 bn for 7M 2019.
 
Net profit before tax grew by 11.8% to RUB649.8 bn for 7M 2019. Net profit increased by 10.8% to RUB519.7 bn.
Total assets increased by 0.6% in July to RUB27.7 trn.
The Bank lent RUB780 bn to corporate clients for the month and RUB5.6 trn year to date. Corporate loan portfolio denominated in rubles increased by RUB31 bn in July, mainly led by loans to small and medium-size enterprises.
The Bank issued RUB275 bn loans to retail clients in July and over RUB1.8 trn for 7M 2019. Retail lending increased by 1.4% for the month to RUB6.76 trn, which corresponds to 34.7% of the total loan look.
The share of overdue loans in the total portfolio amounts to 2.27%.
Securities portfolio grew in July by 2.9% to more than RUB3.5 trn, largely due to purchases of OFZ bonds.
Deposits and accounts of corporate and retail clients decreased in July by 0.4% to RUB13.1 trn and RUB7.0 trn July, respectively. Combined client funding increased in real terms by 2.7% year to date.
The Bank issued three series of exchange-traded bonds with 2 and 3 year-maturities for the amount of RUB45 bn. 
Closing of Denizbank sale transaction had a significant impact on capital of Sberbank PJSC in July. Core Tier 1 and Tier 1 capital adequacy ratios increased by 30 bps, due to the reduction of equity investments in the Bank's financial subsidiaries. Total capital adequacy was up by 66 bp, on the back of incremental reduction of exclusions from capital related to subordinated loans. The fully-fledged effect from the deal closing will be reflected on the Group level and will amount to 120 bp of the core capital adequacy ratio.
Risk-weighted assets barely decreased in July as lending growth and securities portfolio expansion was offset by reduced investments into subsidiaries further to the Denizbank sale.
 

Capital, RUB bn	1 Aug '19*	1 July'19	1 Aug'19*/ 1 July'19	1 Jan'19	1 Aug '19*/ 1 Jan'19
Core Tier 1 capital N1.1	3,360	3,302	1.75%	3,178	5.74%
Tier 1 capital N1.2	3,360	3,302	1.75%	3,178	5.74%
Total capital N1.0	4,338	4,119	5.32%	4,244	2.23%
Capital adequacy ratios, %
Core Tier 1 capital N1.1, min. 4,5%	11.60%	11.42%	0.18 pp	11.11%	0.48 pp
Tier 1 capital N1.2, min. 6,0%	11.60%	11.42%	0.18 pp	11.11%	0.48 pp
Total capital N1.0, min. 8,0%	14.97%	14.24%	0.73 pp	14.84%	0.13 pp
Risk-weighted assets, RUB bn	28,980	28,926	0.19%	28,596	1.34%

* preliminary calculations