Sberbank Net Income Beats Estimates on Fees, Lending Growth

OAO Sberbank, Russia’s largest bank, said first-quarter net income fell about 4 percent, beating analyst estimates on increased fees and growth in lending.

Net income attributable to shareholders declined for the first three months to 88.6 billion rubles ($2.8 billion) from 92.2 billion rubles in the same period last year, the Moscow-based lender said in a statement today on its website. Profit beat the 84.8 billion-ruble average estimate of eight analysts surveyed by Bloomberg.

While Russia’s economy grew at its slowest pace in the first quarter since a recession in 2009, loans to households continued to increase as unemployment declined to a record. Growth in consumer lending accelerated though the first quarter, gaining 2.2 percent in March and 1.7 percent in February, central bank data show.

“The results look weak as the bank, due to its size, is trapped by slow economic environment in Russia,” Andrey Tretelnikov, an analyst at Rye, Man & Gor Securities in Moscow, wrote in an e-mailed report. “Loan growth has decelerated while low new loans demand calls for decline of interest rates and we expect this trend to continue.”

Sberbank’s shares fell 3.3 percent to 100.6 rubles by 4:36 p.m. in Moscow, compared with a decline of 2.4 percent for the Micex Index. The stock has advanced 9.2 percent this year. Russia raised about $5 billion in September, selling Sberbank shares at 93 rubles apiece.

Lending Rises

Europe’s third-largest bank by market value said net interest income and net fee and commission income accounted for 96 percent of total operating income before provisions for loan impairments. Net interest income, the difference between what a bank earns from lending and what it pays on deposits, jumped 28 percent to 200.2 billion rubles in the first quarter. The share of non-performing loans rose to 3.3 percent of total lending by March 31, compared with 3.2 percent at the start of the year.

Corporate lending rose 0.9 percent to 8.3 trillion rubles while consumer lending gained 2.6 percent to 2.91 trillion rubles. A decrease in Sberbank’s Russian corporate lending was compensated for by “strong” loan operations in the group’s units in Turkey and some former Soviet republics, the bank said.

Provisions against loan losses in the first quarter totaled 31.8 billion rubles compared with the release of 3.2 billion rubles in the same period of 2012.

Sberbank is cutting rates on some of its deposit accounts before May 31, Moscow newspaper Kommersant reported on May 22, citing an interview with director Dmitry Oguryaev.

Interest Rates

Andrey Kostin, chief executive officer of VTB Group, appealed to policy makers to cut rates to help encourage lending amid Russia’s slowest expansion since a 2009 contraction. Lowering the refinancing rate to between 5 percent and 6 percent from 8.25 percent would allow banks to reduce loan costs and make “a big difference for the industry,” Kostin, who heads Russia’s second-largest lender, said in a May 22 interview. Both VTB and Sberbank are majority-owned by the Russian state.

Russia’s central bank held its main lending rates unchanged for an eighth month at a May 15 meeting, while reducing the cost of some lesser-used instruments.

The lender’s Tier 1 capital ratio, a measure of financial strength, rose to 10.9 percent from 10.4 percent at the end of the year.

Its regulatory capital slid last year after the bank agreed to buy Istanbul-based Denizbank AS for $3.5 billion and most of Vienna-based Oesterreichische Volksbanken AG’s eastern European business for 505 million euros ($651 million).

The bank may sell subordinated debt later this year to support its regulatory capital, Deputy Chairman Anton Karamzin said. Sberbank prefers “traditional subordinated debt” to “perpetual bonds,” he told reporters at a briefing. The lender sold $1 billion of 10-year subordinated bonds in May.

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