Sberbank Third-Quarter Profit Beats Estimates on Loan Increases

OAO Sberbank, eastern Europe’s biggest bank, said third-quarter profit rose 8 percent, beating analysts’ estimates on higher fee income and lending to Russian households.

Net income at the Moscow-based bank climbed to 94.6 billion rubles ($2.9 billion) from 87.7 billion rubles in the same period last year, it said in a statement on its website today. That beat the average estimate of 92.4 billion rubles of 12 analysts surveyed by Bloomberg.

“We consider these results as positive,” Jason Hurwitz, banking analyst at Alfa Bank, wrote in an e-mailed report to clients. The figures give “increased confidence in core earnings and cost efficiency,” he said.

Sberbank, controlled by the government, is cutting 30,000 jobs and closing more than 3,600 branches over the next five years to boost profitability as loan growth slows. Those measures should help the company double profit and assets by the end of 2018, the firm said in a presentation this month.

Net interest income, the difference between what a bank earns from lending and what it pays on deposits, advanced 21 percent from a year ago to 217 billion rubles.

Sberbank’s shares rose 0.4 percent to 103.75 rubles at 12:27 p.m. in Moscow, valuing the company at about $68 billion.

Consumer loans jumped 21 percent in the first nine months from a year earlier to 3.4 trillion rubles. Corporate lending grew 8.7 percent to 8.9 trillion rubles. The bank did not give a quarterly breakdown.

Loan Impairments

Net provisioning for loan impairments surged to 44.1 billion rubles in the third quarter from 11.7 billion rubles a year ago. The impairments jumped 10-fold from a year ago to 106.8 billion rubles in the first nine months.

“Slow growth of net profit” explains the increase in provisioning, Sberbank said in today’s statement.

Russia’s $2 trillion economy grew less than estimated in the third quarter, extending its worst slowdown since the 2009 recession. The expansion “doesn’t inspire optimism” and the government can no longer afford additional budget spending increases, Finance Minister Anton Siluanov said last month.

Non-performing loans at Sberbank increased to 3.3 percent of total lending at the end of September from 3.2 percent at the start of the year.

Net fee and commission income increased to 56.5 billion rubles in the third quarter from 41.8 billion rubles a year earlier.

The Tier 1 capital adequacy ratio increased to 10.6 percent at the end of the third quarter from 10.4 percent at the start of the year. Sberbank didn’t specify whether the ratio was measured under Basel III rules, the latest global standard most European banks report under. Russian banks aren’t required to apply the standard until next year.

Sberbank, headed by former economy minister Herman Gref, sees corporate loan growth slowing to 18-20 percent next year and 13-15 percent by 2018, according to the November presentation. The expansion in consumer loans will slow to 22-25 percent next year and 12-15 percent by 2018, it said.

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