Sberbank Posts Record Profit on Lower Borrowing Costs

  • Net income rises fourfold, beating first-quarter estimates
  • Decline in loan-loss provisions contributes to surge

Sberbank PJSC reported a fourfold jump in first-quarter profit, propelled by lower borrowing costs and a decline in provisions for loan losses.

Net income rose to 118 billion rubles ($1.8 billion) from 30.6 billion rubles a year earlier, Russia’s biggest lender said in a statement on Wednesday. That topped the 102 billion-ruble average of six analyst estimates and was also the largest quarterly profit ever posted by the state-controlled bank, according to data compiled by Bloomberg.

Sberbank benefited from signs of positive change in the Russian economy, including a decline in the central bank’s main rate, JSC Alfa-Bank analyst Leonid Slipchenko said by phone. "Declining rates won’t be that supportive in the future, so Sberbank will have to stick to effective cost control and a conservative approach to lending."

The shares rose 3.9 percent to 128.3 rubles at 4:10 p.m. in Moscow.

Rate Cuts

Net interest income, the difference between interest generated from loans and that paid on deposits, rose to 326 billion rubles from 200 billion rubles as loans increased 6.6 percent. That translates to a margin of 5.3 percent compared with 3.7 percent a year earlier.

Russia’s central bank has cut its benchmark interest rate to 11 percent from 17 percent at the start of 2015, reversing a spectacular spike to defend the ruble from sanctions and tanking oil prices. Sberbank has relied more on the central bank for funding since it was restricted from borrowing abroad under U.S. and EU sanctions imposed in 2014 over the Kremlin’s role in Ukraine.

The bank revised its method for calculating provisions, which fell 27 percent even as the share of overdue loans increased, both for corporate and retail customers. That accounted for the beat on estimates, VTB Capital analyst Jason Hurwitz said in an e-mail.

Sberbank’s previous best quarter was the three months through June 2014, when it recorded 97.6 billion rubles in profit. That was just before Russia annexed the Crimea peninsula from Ukraine and the country fell into a recession from which it has yet to emerge.

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