Sberbank Second-Quarter Profit Beats Estimates on Lending

OAO Sberbank (SBER)’s second-quarter profit jumped 13 percent as Russia’s largest lender countered a slowing economy with higher fee income and lending to households.

Net income advanced to 97.5 billion rubles ($2.7 billion) from 86.5 billion rubles in the same period last year, the Moscow-based bank said in a statement today. That beat the 82 billion-ruble average estimate of 14 analysts surveyed by Bloomberg.

These are “strong results,” Luis Saenz, head of equity sales and trading at BCS Financial Group in London, wrote in e-mailed comments. The main reasons behind the performance “were the stronger revenues, both on net interest income, and due to stronger trading revenues,” he said.

U.S. and European Union toughened sanctions against Russian companies and banks in July and August over President Vladimir Putin’s support for separatists in eastern Ukraine, measures that threaten to push Russia’s $2 trillion economy into a recession. It slumped to its weakest in five quarters in the second quarter.

Sberbank, Eastern Europe’s largest bank by market value, said the share of non-performing loans rose to 3.4 percent of total lending as of June 30 from 2.9 percent at the start of the year.

Shares Fall

Consumer lending gained 11 percent to 4.17 trillion rubles in the first half, while corporate lending increased 8.8 percent to 10.7 trillion rubles from the end of the year. Fee and commission income jumped 26 percent to 122.7 billion rubles.

Sberbank shares fell as much as 3.9 percent to 74.90 rubles by 2:00 p.m. in Moscow trading, compared with 2.1 percent drop in the benchmark Micex stock index. They rebounded 6 percent since MSCI’s decision on Aug. 8 to leave the lender in its Russia equity index, a benchmark for investors.

“The Russian market is ignoring strong results from Sberbank, and selling off across the board due to continued accusations of Russian interference in Ukraine,” John Heisel, the Moscow-based vice president of sales and trading at Renaissance Capital, wrote in e-mailed comments.

Sberbank, the 173-year-old former Soviet savings bank, holds about 46 percent of the nation’s deposits and has been run by Putin’s former Economy Minister Herman Gref since 2007.

The bank said on July 31 sanctions against the lender destroy the “foundations of the global financial system” and don’t “contribute to the easing of the European crisis caused by the situation in Ukraine.”

Slowing Economy

Net interest income, the difference between what a bank earns from lending and what it pays on deposits, rose to 489.9 billion rubles in the quarter, a 21 percent gain from a year ago.

Retail sales in Russia decelerated for a third month in June, growing the least since January 2010, and real wages rose 1.7 percent, the weakest since February 2011.

VTB Group, Russia’s second-largest lender, last week said the slowing economy and political tensions over Ukraine had hurt its business, as it reported a 82 percent drop in first-half profit. VTB was sanctioned by both the EU and the U.S.

To contact the reporter on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net

To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net Steve Bailey

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