Sberbank releases 1H08 IFRS results in line with consensus expectations

20 октября 2008 года

Sberbank has released its 1H08 IFRS results, reporting net profit 6 pp above consensus expectations. Although the bank met expectations in assets, net interest income was 3.5 pp below the anticipated results.

Net profit: Net profit increased 40% y-o-y (vs. the expected 34% in RUB terms) to reach RUB 67 bn (USD 3 bn). On a negative note, the bank reported net interest 3% weaker than expected and did not report any interest income growth on a q-o-q basis. The bank also reported a 4 pp q-o-q decrease in the portion of net interest income in the total revenue breakdown to 77%. Positively, however, there was a 15% q-o-q increase in net fees and commissions revenue.

Loan portfolio: Sberbank's loan book increased 9% q-o-q (18% YTD) to RUB 4 612 bn (USD 197 bn). Retail loans growth beat corporate loans growth by 3 pp q-o-q at 11% and 8% q-o-q (20% and 17% YTD), respectively. The portion of retail loans within the gross loan portfolio continues to make up a stable 24%. In 2Q08 the bank reported an unchanged loan-loss-reserves-to-gross-loans ratio of 2.7%, nevertheless reporting a higher provisioning-changes-to-net-loan-book ratio of 0.21% (up 0.03 pp). We expect Sberbank to report higher net credit losses in 2H08 and 2009 mainly due to the worsening economic situation in Russia and increased pressure from loan interest rates.

Assets: Total assets increased 7% q-o-q (14% YTD), reaching RUB 5 604 bn (USD 239 bn).

Funding: Customer deposits increased 10% q-o-q (15% YTD), with higher deposits growth in 2Q08 reaching RUB 4 467 bn (USD 190 bn). As a result, the bank continues to support a healthy loans-to-deposits ratio of 103%. We foresee even higher deposits growth in 2H08 due to transfers of deposits from small banks to larger, safer state banks as a result of the liquidity panic in the banking sector at the end of 3Q08.

Margins: We were disappointed by the bank's lower NIM, which dropped 0.4 pp q-o-q to 6.6% in 2Q08. Furthermore, even though the bank's C/I ratio improved 5.1 pp q-o-q to reach 50.9% in 2Q08 it worsened 7.1 pp on a y-o-y basis. Growth in costs came from a 3% YTD increase in the number of employees, salary adjustments, an increase in senior management remunerations and costs adjustment for inflation growth. On the whole we expect the bank's YE08 C/I ratio to be higher than in 2007, when it was 55%.

Conclusion: We regard Sberbank's results as mixed and anticipate the bank's management to provide additional details on margins deterioration in 2Q08, 2H08 growth projections, planned management of state funds worth RUB 500 bn (19 bn) obtained in 2H08, and some details on the bank's current liquidity management procedures.

The bank will hold a conference call tomorrow (October 21, 2008) at 19:00 MSK (11:00 EST/14.00 GMT) hosted by Anton Karamzin (deputy chairman of the board and CFO) and Dmitry Zhdanovich (head of investor relations)

To access the conference call, dial toll-free:

Russia: +8 1 0800 2806 3011

US: +1 877 491 0064

UK: +44 20 7162 0025

Passcode: Sberbank

To view the presentation, go to:

www.sbrf.ru/en/ (for English) or www.sbrf.ru (for Russian)