Sberbank Net Misses Estimates on Jump in Bad-Loan Provisions

OAO Sberbank, eastern Europe’s biggest lender, posted a smaller increase in full-year profit than analysts estimated as provisions for bad loans rose.

Net income at the Moscow-based bank climbed 4.3 percent to 363.8 billion rubles ($10.2 billion) in 2013, the Moscow-based bank said in a statement today. That missed the average estimate of 364.5 billion rubles of 18 analysts surveyed by Bloomberg. Net provisioning for loan impairments surged to 133.5 billion rubles from 21.5 billion rubles a year ago.

The shares have fallen more than 10 percent this month after Russia annexed Ukraine’s Crimean peninsula, and slid 3.2 to 79.9 rubles in Moscow trading today. Banks including state-run VTB Capital say the world’s ninth-biggest economy will shrink for at least two quarters as penalties for annexing Crimea rattle markets, curb investment and raise the cost of borrowing.

This will be a “less than simple year,” for Sberbank, Chief Executive Officer Herman Gref said on an investor call today. “We are prepared for any eventuality. We are certainly more prepared than 2008 but we don’t see anything on the horizon that will unseat us.”

Capital outflows from Russia, sparked by sanctions by the U.S. and European Union, may reach $70 billion in the first quarter, more than the $63 billion recorded in the whole of 2013, London-based Capital Economics Ltd. said last week.

Interest Income

“It’s not just about the sanctions,” Gref said in an interview with Bloomberg TV’s Ryan Chilcote on March 24. “We are seeing some areas in the Russian economy that are not working well, like agriculture, metals, machinery. This is the consequence of the whole economic situation and not just the Ukrainian situation.”

Net interest income, the difference between what a bank earns from lending and what it pays on deposits, advanced to 862.2 billion rubles, Sberbank said today. Net fee and commission income increased by 29 percent to 220.3 billion rubles.

Consumer loans jumped 32 percent in 2013 from a year earlier to 3.75 trillion rubles, while corporate lending advanced 19 percent to 9.8 trillion rubles. Non-performing loans fell to 2.9 percent of total lending at the end of 2013 from 3.2 percent at the start of the year.

Sberbank’s Tier 1 capital adequacy ratio, a measure of financial strength, increased to 10.6 percent from 10.4 percent at the start of the year. Capital adequacy under Basel 1 rules slipped to 13.4 percent from 13.7 percent, while the bank’s return on equity retreated to 20.8 percent from 24.2 percent a year earlier.

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