Sberbank — Earnings Release 2017

Nov 15, 2017

Sberbank (SBER)

15-Nov-2017 / 08:05 CET/CEST Dissemination of a RegulatoryAnnouncement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer / publisher is solely responsible for the content of this announcement.

Sberbank reports 3Q 2017 Net Profit of RUB 224.1 bn, or RUB 10.33 per ordinary share, under International Financial Reporting Standards (IFRS)

15 November 2017, Moscow

Sberbank (hereafter "the Group") has released its interim condensed consolidated IFRS financial statements (hereafter "the Financial Statements") as at and for the 9 months ended 30 September 2017, with review report by AO PricewaterhouseCoopers Audit.

Alexander Morozov, Deputy Chairman of the Executive Board, CFO, commented: "Increased lending activity and strong focus on fee and commission income on the back of improving macro-economic environment resulted in ^a solid quarter for the Group. Active asset and liability management allowed us to optimise our funding costs , sustain asset yields and thus report an improved margin .

The Group started reporting its capital position under Basel III standard resulting in ^a common equity T ier 1 capital adequacy ratio of 11.0% at the end of the quarter."

The 3Q 2017 Financial Highlights:

• The Group net profit reached RUB224.1 bn
• The Group earnings per ordinary share (EPS) came at RUB 10.33, up by 62.4% compared to 3Q 2016
• The Group annualized return on assets (ROA) reached 3.4%, up from 2.1% in 3Q 2016
• The Group gross loan portfolio increased by 2.5% during the quarter to RUB19.5 trn, with corporate loans up by 1.8% to RUB14.1 trn, and retail loans - by 4.2% to RUB5.4 trn, with the mortgages portfolio increasing by 4.5% during the quarter
• The Group net fee and commission income came at RUB100.9 bn, up by 13.9% relative to 3Q 2016
• The Group Cost-to-Income ratio improved to 32.0% from 37.3% in 3Q 2016
• The Group started reporting capital position under Basel III standard: common equity Tier 1 capital adequacy ratio came at 11.0% at the end of the quarter, while total capital adequacy ratio - at 12.7%

RUB bn, unless stated otherwise	3Q 2017	2Q 2017	3Q 2016	3Q17/ 2Q17 % change	3Q17/ 3Q16 % change	9M 2017	9M 2016	9M17/ 9M16 % change
Net interest income	375.0	357.6	342.8	4.9%	9.4%	1 069.2	1 007.6		6.1%
Net fee and commission income	100.9	94.9	88.6	6.3%	13.9%	276.2	251.7		9.7%
Other non-interest [1] income	22.1	28.9	3.6	(23.5%)	513.9%	56.5	(3.9)		--
Total revenues	498.0	481.4	435.0	3.4%		14.5% 1 401.9	1 255.4		11.7%
Net provision charge for impairment of debt financial assets	(58.2)	(89.1)	(101.7)	(34.7%)	(42.8%)	(214.6)	(282.1)		(23.9%)
Operating expenses	(160.4)	(161.2)	(163.0)	(0.5%)	(1.6%)	(468.9)	(475.6)		(1.4%)
Net profit	224.1	185.6	137.0	20.7%	63.6%	576.3	400.1		44.0%
Earnings per ordinary share, RUB	10.33	8.36	6.36	23.6%	62.4%	26.48	18.46		43.4%
Total comprehensive income	226.0	217.7	130.6	3.8%	73.0%	581.9	404.4		43.9%
Book value per share*, RUB	144.6	134.6	126.6	7.4%	14.2%	144.6	126.6		14.2%
Ratios
Return on equity	28.4%	24.8%	20.5%			25.5%	20.9%
Return on assets	3.4%	2.9%	2.1%			3.0%	2.0%
Net interest margin	6.1%	6.0%	5.8%			6.0%	5.6%
Cost of risk	120 bp	191 bp	213 bp			152 bp	195 bp
Cost-to-income ratio	32.0%	33.5%	37.3%			33.3%	37.5%

Selected Financial Results

* Total equity / total numbers of shares outstanding (ordinary ⁺ preferred). Unaudited

Net interest income reached RUB375.0 bn in 3Q 2017, up by 9.4% from the year-ago period:

• Interest income (up 0.7% to RUB595.5 bn compared to 3Q 2016) dynamics were explained by more upbeat lending volumes;
• Interest expenses including deposit insurance expenses decreased by 11.2% from 3Q 2016 to RUB220.5 bn;
• Furthermore, despite the declining interest rate environment, the yield on working assets remained unchanged during the quarter at 9.7%;
• The cost of liabilities decreased by 10 basis points to 4.1% in 3Q 2017 relative to 2Q 2017.

The Group 3Q 2017 net fee and commission income came at RUB100.9 bn, up by 13.9% from the year-ago period. The main drivers of this growth as

The Group 3Q 2017 net fee and commission income came at RUB100.9 bn, up by 13.9% from the year-ago period. The main drivers of this growth as compared to the same period a year ago were banking cards operations net of applicable expenses that increased by 19.6% in 3Q 2017 from 3Q 2016.

Net provision charge for loan impairment for 3Q 2017 totaled RUB57.8 bn compared to RUB102.1 bn for 3Q 2016. This translated into the cost of risk of 120 basis points for the quarter versus 213 basis points a year ago.

• The cost of risk for corporate loans amounted to 140 basis points in 3Q 2017;
• The cost of risk for retail loans amounted to 68 basis points in 3Q 2017.

The Group operating expenses for 3Q 2017 decreased to RUB160.4 bn, down by 1.6% from the same period a year ago as a result of cost discipline across main lines of the operating expenses.

Selected Balance Sheet Results

RUB bn, unless stated otherwise				30/09/17 30/06/17 31/12/16 9M-6M 2017 %change	9M17-12M16 %change
Total gross loans, of which :	19 498.0	19 030.7	18 664.7	2.5%	4.5%
Corporate loans	14 074.1	13 82 7.3	13 633.0	1.8%	3.2%
Retail loans	5 423.9	5 203.4	5 031.7	4.2%	7.8%
Restructured loans	1 188.1	1 286.0	1 209.1	(7.6%)	(1.7%)
Securities portfolio	3 164.9	3 124.1	2 717.5	1.3%	16.5%
Assets	26 220.2	25 754.7	25 368.5	1.8%	3.4%
Total customer deposits, of which:	19 161.5	18 914.1	18 684.8	1.3%	2.6%
Retail deposits	12 798.9	12 816.5	12 449.6	(0.1%)	2.8%
Corporate deposits	6 362.6	6 097.6	6 235.2	4.3%	2.0%
Ratios
Net loans-to-deposits ratio	92.4%	91.0%	90.6%
NPL ratio	4.6%	4.6%	4.4%
NPL coverage ratio	157.2%	159.7%	157.3%
Restructured-to-gross loans	6.1%	6.8%	6.5%
Total provision coverage of total NPLs + restructured non-NPLs	80.6%	77.1%	74.6%

Total gross loans increased by 2.5% to RUB19.5 trn in 3Q 2017 as compared to 2Q 2017, supported by both corporate loan portfolio increase (up by 1.8% during the quarter) and continuing retail loan demand. Mortgages were up by 4.5%, consumer unsecured loan portfolio was up by 3.2%, while credit cards and overdrafts portfolio was up by 6.4% during the quarter.

Total customer deposits demonstrated an increase of 1.3% in 3Q 2017 as compared to 2Q 2017 driven by the inflow of funds from legal entities of 4.3%. The liquidity situation continued to be excellent. The net loans-to-deposits ratio improved to 92.4% within the targeted range of 90-100%.

Total NPL [2] ratio remained unchanged during the quarter at 4.6%. The coverage level of the NPL portfolio came at 157.2% of total NPLs during the quarter.

The share of restructured loan portfolio of total gross loan portfolio came down to 6.1% in 3Q 2017 from 6.8% in 2Q 2017 as a result of regular work with distressed assets. The provision coverage of total NPLs combined with restructured non-NPLs improved to 80.6% in 3Q 2017, up from 77.1% in 2Q 2017.

Selected Equity Position Results

Under BaselIII RUB bn, unless stated otherwise			30/09/17 31/12/16 9M17-12M16 % change
Total Tier 1 capital	3 187.2	2 765.9	15.2%
Total capital	3 662.7	3 241.8	13.0%
Risk-weighted assets	28 862.9	27 028.3	6.8%
Credit risk	25 246.9	23 443.0	7.7%
Operational risk	2 736.0	2 736.0	unch
Market risk	880.0	849.3	3.6%
Ratios
Common equity Tier 1 capital adequacy ratio	11.0%	10.2%
Total capital adequacy ratio	12.7%	12.0%

The Group total equity increased by 15.8% to RUB3.3 trn during 9M 2017.

The Group started reporting capital ratios under Basel III standard effective 3Q 2017. The Group's total capital increased by 13.0% to RUB3.7 trn during 9M 2017 mainly as a result of retained net profit.

The Group's risk-weighted assets increased by 6.8% to RUB28.9 trn during 9M 2017, driven primarily by loan demand. The common equity Tier 1 capital adequacy ratio increased by 80 basis points to 11.0% during 9M 2017. The total capital adequacy ratio (Basel III) increased by 70 basis points to 12.7% during 9M 2017.

[1] Other non-interest income consists of Net gains fromtrading securities; Net gains fromsecurities designated as at fair value through profit or loss; Net gains frominvestment securities

available-for-sale; Impairment of investment securities available-for-sale; Net gains / (losses) gains from trading in foreign currencies, operations with foreign currency derivatives and foreign exchange translation; Net gains / (losses) from operations with precious metals, precious metals derivatives and precious metals accounts translation; Net gains / (losses) from operations with other derivatives; Impairment of premises, equipment and intangible assets; Goodwill impairment; Net gains on initial recognition of financial instruments, loans restructuring and sale of loans; Net charge for other provisions; Revenue of non-core business activities; Cost of sales and other expenses of non-core business activities; Net premiums from insurance and pension fund operations; Net claims, benefits, change in contract liabilities and acquisition costs on insurance and pension fund operations; Other net operating income.

[2] Non-performing loans more than 90 days overdue

ISIN: US80585Y3080, RU0009029540, RU0009029557, US80585Y4070 Category Code:QRT TIDM: SBER LEICode: 549300WE6TAF5EEWQS81 Sequence No.: 4861

End ofAnnouncementEQS News Service