Sberbank Profits From Flight to Quality Amid Russian Purge

Updated on
  • Lender’s second-quarter profit was a record 186 billion rubles
  • One-third of private lenders have lost license since 2014

Sberbank PJSC’s record second-quarter profit highlighted how the state-owned giant is benefiting from a flight to quality as many Russian private banks remain mired in a crisis that has thinned their ranks by a third.

The lender reported net income of 185.8 billion rubles ($3.1 billion), compared with a 164.5 billion-ruble average estimate of nine analysts surveyed by Bloomberg and profit of 144.6 billion rubles a year earlier. The previous record was set in the first quarter. Earnings were driven by loan growth as the economy recovered from a recession that ended late last year.

Many Russian banks are under-capitalized, fueling speculation that some of the country’s biggest private lenders could need central bank intervention to clean up their balance sheets. Stronger state-backed banks, including Sberbank, are set to be the biggest beneficiaries of an ongoing sector consolidation that has seen more than 300 banks lose licenses since 2014.

The market has been jittery since the July collapse of Russia’s 15th-biggest retail deposit holder, Jugra Bank, and as 433 billion rubles of deposits were withdrawn from Bank Otkritie FC in June and July. Raiffeisen Bank International AG analysts said in an Aug. 22 note that most of the Otkritie outflows went to Sberbank and state-owned Gazprombank JSC.

The second-quarter results will allow Sberbank to “maintain adequate capital levels for future growth despite significant dividend payments made and upcoming regulatory changes affecting capital adequacy ratios,” Chief Financial Officer Alexander Morozov said in a statement.

Sixteen of 17 analysts surveyed by Bloomberg rate Sberbank a buy, with one labeling the stock a hold.

Sberbank shares rose as much as 2 percent and were up 1.6 percent at 173.77 rubles at 3:09 p.m. in Moscow. The stock price got an additional boost when the bank won an appeal Wednesday against Transneft PJSC over a 67 billion-ruble derivatives deal.

Net interest income, the difference between interest generated from loans and that paid on deposits, rose to 357.6 billion rubles from 339.3 billion rubles a year earlier. Sberbank’s return on equity, a measure of profitability, was 24.8 percent in the second quarter, up from 22.8 percent a year earlier.

The quarterly results were boosted by corporate loans growing by 5.4 percent to 13.8 trillion rubles, while retail loans rose by 3.1 percent to 5.2 trillion rubles. Net fee and commission income was up 18 percent to 94.9 billion rubles.

— With assistance by Ksenia Galouchko

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