Sberbank First-Quarter Profit Dives Amid a Rise in Funding Costs

OAO Sberbank attributed a 73 percent drop in profit to higher funding costs after sanctions over the Ukraine conflict left Russia’s largest bank shut out of international credit markets.

Profit under Russian accounting standards fell to 26.3 billion rubles ($470 million) for the first three months from 99.3 billion rubles a year earlier, according to a statement on the Moscow-based lender’s website. Net interest income, the difference between what a bank earns from lending and what it pays on deposits, slid 29 percent to 146 billion rubles from 206 billion rubles a year ago.

The lender, which controls about 45 percent of the nation’s deposits and a third of all lending, attributed the drop in profit mainly to a “significant increase” in the cost of funding from the central bank and the cost of client corporate deposits. Sberbank increased provisions to 78.6 billion rubles for the first three months from 70.3 billion rubles for the same period a year ago.

Economic growth in the world’s largest energy exporter was slowing before a slump in oil prices and a collapse in the ruble brought Russia to the brink of a recession. Sanctions imposed by the U.S. and the European Union over the conflict in Ukraine cut off access to international markets for Sberbank and the country’s other major lenders, stoking capital outflows and forcing authorities to respond with spending cutbacks and an emergency increase in the benchmark interest rate in December.

Sberbank’s Tier 1 capital adequacy ratio, a measure of financial strength, rose to 12.7 percent from 11.6 percent on Jan. 1.

Its Moscow-traded shares climbed 0.9 percent to 73.36 rubles by 4:58 p.m., extending its yearly gain to 25 percent. The stock has rebounded from a plunge in December as the ruble has strengthened this year.

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