Sberbank — Earnings Release 2017

Jan 15, 2018

Sberbank (SBER)

15-Jan-2018 / 08:08 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 releases FinancialHighlights for 2017,excluding effect of subsequentevents (underRAS; non-consolidated)

Please note that the numbers are calculated in accordance with Sberbank's internal methodology. Also note that the ef ect of subsequent events is included in the numbers as of January 1, 2017 but excluded from the numbers as of January 1, 2018.

January 15, 2018

Key highlights forDecember:

• InDecember, the Bank earned RUB49.9 bn in net profit;
• Record loan volumeissued:almost RUB1.8 trln to corporateclientsand over RUB270 bn to retailclients. For the year, the Bank granted RUB13.5 trln in loans, whichwas 27%morethan in 2016;
• Operating expenses were down y/y inDecember.Asaresult, operating expenses grew only 2.2%for the year, whichwas belowinflation.
• Overdue debt declined byRUB15.8 bn inDecember,and the overdueloansas percentage oftotalloan portfolio was down by 0.1 p.p. to 2.4%.

DeputyChairman of SberbankAlexander Morozov stated:

"In 2017, the Bank showed record loan issuances outperforming the market, as well as growth in net fee and commission income. Furthermore, the Bank achieved its ef iciency target by keeping the increase in operating expenses below inflation. As a result, Return on Assets reached 3.1%, while Return on Equity- 21.9%."

Comments for 2017:

Net interest income increased by 7.7% to exceed RUB1.2 trln for the year. The increase was largely driven throughout the year by declining interest rates on client fundsand theexpansion of retailloan portfolio.

Net fee and commission income was up by 12.5%to RUB355 bn, whichwas mainly due to growth in operations with bank cards (+25.4%) and bank insurance(+22.7%).

Operating income before provisions increased by 19.4% for the year, thus outpacing operating expenses by asignificant margin of 17.2 p.p. The Bank further enhanced itsapproach to spread certain costs more evenly throughout the year. As a result, operating costs for December were down y/y. For thefull year, operating expenses increased by 2.2%, whichwas belowtheannualinflation rate of 2.5%.

Excluding payrollcosts, operating expenses fell 4.1%or RUB9.7 bn for the year,as cost reductionmeasures implemented by the Bank took effect. Cost-to-Incomeratio improved enhanced by 5.4 p.p. to 32.1%, whichwas thelowestever under RAS for the Bank.

Provision charges totaled RUB6.9 bn inDecemberand amounted to RUB287 bn for 2017, whichwas 13.3% higher in comparisonwith 2016. As ofJanuary 1, 2018, loan-loss provisions were 2.6 times overdueloans.

Net profit before income tax cameat RUB848 bn for 2017, while net profit,excluding effect of subsequentevents, totaled RUB674 bn. The Bank is nowaccounting foreventsafter thereporting date. Thetotalimpact oftheseevents isexpected at thelevel of 2016.

Total assets increased b y 2.6% in December, driven mainly by loans to retail clients and banks, securities portfolio expansion as well as accumulation ofsufficientcash reserves for the period ofseasonal holidays.As ofJanuary 1, 2018 assetsamounted to RUB23.3 trln.

The Bank granted about RUB1.8 trln in loans to corporate clients inDecember and RUB11.4 trln total for the year, which is 25% more than in 2016. Corporate loan portfolio decreased by 0.9% in December due to early loan repayments along with revaluation of FX loans. The outstanding balancetotaled RUB12.0 trln as ofJanuary 1, 2018.

Starting fromthesummer onwards, the Bank has been hitting newrecords of loan issuances to retail clients. The last month of the year was the most remarkable with loans granted exceedingRUB270 bn, achieving newhistorical highs both in mortgages and consumer loans. Retail loan portfolio added 1.8% in December. As of January 1, the outstanding balance reached RUB4.93 trln. During the full year 2017 the Bank granted over RUB2.1 bn in loans to retailclients, or 38%morethan a yearago.

Regular work with problemloans helped the Bank to reduce its overdue exposure byRUB15.8 bn inDecember. As a result, the share of overdue loans as percentage of total portfolio reduced by 0.1 p.p. to 2.4%. The indicator remains substantially lower than the sectoraverage (8.5% excl. Sberbank as of December 1, 2017).

Securities portfolio expanded by 2.8% to RUB2.53 trln, due to purchases of Russian federaland sub-federal bonds. The portfolio increased by 22.5%in 2017 and was largely represented by governmentand corporate bonds.

Customer deposits and accounts increased inDecember by 0.5%to RUB5.64 trln. Retail depositsadded RUB546 bn for the month, or 4.7%, to RUB12.1 trln, largely led by balances on bank card accounts. Overallfor 2017, client fundsexpanded by 5.4% to RUB17.8 trln and accounted for 89%oftotalliabilities.

Common EquityTier 1 and Tier 1 capital (equal since Sberbank does not have instruments of additional capital) stood at RUB2,646 bn as of January 1, 2018 under preliminary calculations.

Totalcapitalamounted to RUB3,688 bn for this date, with retained earnings being the main source of capitalincreaseinDecember.

Risk-weighted assets remained virtually unchanged inDecemberand amounted to RUB24.8 trln as of 1 January, 2018.

Capitaladequacy ratiosas of January 1, 2018 under preliminary calculations were:

• N1.1 10.7%(minimumadequacy level, required by the CentralBank ofRussiaat 4.5%)
• N1.2 10.7%(minimumadequacy level, required by the CentralBank ofRussia at 6.0%)
• N1.0 14.9%(minimumadequacy level, required by the CentralBank ofRussia at 8.0%).

Sberbank 2017 FinancialHighlights (under RAS, non-consolidated,excluding subsequentevents)

ISIN: US80585Y3080, RU0009029540, RU0009029557, US80585Y4070 Category Code:MSCU TIDM: SBER LEICode: 549300WE6TAF5EEWQS81 Sequence No.: 5106

End ofAnnouncementEQS News Service