Sberbank 2014 profit dropped amid higher bad-loan provisions
By Bloomberg
OAO Sberbank, one of several Russian lenders shut out of capital markets by U.S. and European sanctions, recorded a 20 percent drop in profit in 2014 after almost tripling provisions for loan losses that are eroding capital.
Net income fell to 292 billion rubles ($5.2 billion) from 363.8 billion rubles in 2013, the Moscow-based bank said in a statement Thursday. That beat the average estimate of 283 billion rubles of 18 analysts surveyed by Bloomberg. Its Tier 1 capital adequacy ratio, a measure of financial strength, plunged to 8.6 percent from 10.6 percent at the end of 2013.
The “major concern” is the decrease in capital adequacy, Luis Saenz, head of equity sales and trading in London for Moscow-based BCS Financial Group, said in e-mailed comments.
Russian lenders are facing mounting losses and pressure on capital amid higher funding costs at home and a deteriorating economic outlook. The country’s key interest rate remains 14 percent, down from a record 17 percent in December, but still twice the rate in March 2014. The central bank said earlier this month that gross domestic product may shrink as much as 4 percent this year.
Sberbank’s shares declined 1 percent to 63.94 rubles by 12:56 p.m. in Moscow, trimming its gain this year to 16.5 percent. The benchmark Micex Index fell 0.4 percent.
All Russian banks are in “great difficulty, including us,” Chief Executive Officer Herman Gref told reporters in Moscow on March 20. “If you look at the amount of provisions that we have created in the fourth quarter of this year and the first two months of this year, they are huge.”
Provision charges almost tripled to 361.4 billion rubles from 134.9 billion rubles in 2013. State-controlled Sberbank, which holds almost half of Russia’s deposits and accounts for a third of all lending, said the share of non-performing loans rose to 3.2 percent of total lending as of Dec. 31 from 2.9 percent a year earlier.
Net loans to customers jumped 38 percent to 17.8 trillion rubles from 12.9 trillion rubles in 2013. Fee and commission income increased 28 percent to 282.3 billion rubles.
Net interest income, the difference between what a bank earns from lending and what it pays on deposits, increased by 18 percent last year 1.02 trillion rubles due to the increase in lending.
Sberbank, led by former economy minister Gref, is one of six Russia lenders banks restricted from borrowing in the U.S. and European Union as a result of Russia’s involvement in the Ukraine conflict. Sberbank still operates in Ukraine, the second-most populous nation in the former Soviet Union.