Sberbank releases Financial Highlights for 9M 2017 (under RAS; non-consolidated)

Please note that the numbers are calculated in accordance with Sberbank's internal methodology. There were some amendments to the methodology from January 1, 2017 and the numbers for 2016 were restated in accordance with the new methodology for comparability purposes.

October 6, 2017

Key highlights for September, 2017:

• In September, the Bank earned net profit of RUB62.4 bn
• The Bank managed to maintain the volume of retail loans issued at a level above RUB190 bn per month.
• The Bank reduced the amount of overdue loans by RUB14.5 bn in September as a result of the work with the problematic loans.

Deputy Chairman of Sberbank Alexander Morozov stated:

"Sustainable growth of the retail loan portfolio, primarily in mortgages, increase of F&C income contribution to revenues, improving credit quality and consistent increase in efficiency reflect long-term priorities of the Bank"

Comments for 9M 2017:

Net interest income increased by 7.2% compared to 9M 2016 and came at RUB893 bn. Similarly to the previous several months, the increase was mainly due to the decrease in interest rates on clients' funds and the increase in the retail loan portfolio.

Fee and commission income was up by 13.7% to RUB255 bn, driven, as previously, by operations with bank cards and bank insurance (+27.7% and 21.7% accordingly).

Operating income before provisions increased by 16.8% compared to 9M 2016, significantly (by 11.4 pp) outpacing operating expenses for the same period. Growth in operating expenses by 5.3% was due to introduction of accrual approach to spread costs more evenly through the year starting from 2017 along with wage indexation in mid-2016. Excluding payroll expenses, operating expenses fell 1.9% for 9M 2017, or RUB2.9 bn, resulting from cost optimization initiatives. Cost-to-Income ratio stood at 30.0% for 9M 2017, an improvement of 3.3 pp as compared to 9M 2016.

Provision charges totaled RUB21 bn in September and amounted to RUB248 bn for 9M 2017, which is 15.0% higher as compared to 9M 2016. As of October 1, 2017, the loan-loss provisions are 2.6 times the overdue loans.

Net profit before income tax came at RUB613 bn. Net profit totaled RUB496 bn, including RUB62.4 bn in September.

Total assets in September remained merely unchanged at RUB22.4 trln, decreasing slightly by 0.2%. The decrease was driven by revaluation of foreign currency denominated assets caused by ruble appreciation. In real terms, total assets increased by 0.2% in September.

Issuances of corporate loans were over RUB0.8 trln in September and over RUB7.7 trln from the beginning of the year, which is 24% higher than in 9M 2016. The corporate loan portfolio decreased by 0.5% in September due to FX revaluation.

The Bank granted RUB193 bn in September to retail clients, more than RUB100 bn of which were mortgage loans. The total amount of retail loans issued from the beginning of the year was over RUB1.4 trln, which was 26% more than in 9M 2016. Retail loan portfolio has been steadily growing by 1% every month from the beginning of summer. It was up by 1.5% in September and exceeded RUB4.65 trln as of October 1, 2017.

Overdue loans decreased by RUB14.5 bn, of which RUB11.1 bn corporate loans and RUB3.3 bn retail loans, in September as a result of measures implemented by the Bank. The share of overdue loans as percentage of total loans decreased by 0.1 p.p. to 2.6% and remained substantially below the average for the sector (8.7% excl. Sberbank as of September 1, 2017).

Securities portfolio decreased by 1.0% in September due to maturity of short-term corporate bonds and amounted to RUB2.45 trln as of October 1, 2017. Securities portfolio was comprised of 53% government securities and 40% corporate bonds.

Clients' funds decreased by 0.5% in September mainly due to FX revaluation and increased by 0.5% from the beginning of the year, amounting to RUB16.9 trln as of October 1, 2017, which was 88% of Bank's liabilities.

Core Tier 1 and Tier 1 capital (equal since Sberbank does not have instruments of additional capital) amounted to RUB2 685 bn as of October 1, 2017 under preliminary calculations.

Total capital amounted to RUB3 548 bn as of September 1, 2017, with retained earnings being the main source of the increase.

Risk-weighted assets decreased by RUB80 bn to RUB24.6 trln in September mainly driven by corporate loans.

Capital adequacy ratios as of October 1, 2017 under preliminary calculations were:

• N1.1 - 10.9% (minimum adequacy level, required by the Central Bank of Russia at 4.5%)
• N1.2 - 10.9% (minimum adequacy level, required by the Central Bank of Russia at 6.0%)
• N1.0 - 14.4% (minimum adequacy level, required by the Central Bank of Russia at 8.0%).

Sberbank 9M 2017 Financial Highlights (under RAS, non-consolidated)