Sberbank releases Financial Highlights for January-July 2014 (under RAS; non-consolidated)

Please note that the numbers are calculated in accordance with Sberbank's internal methodology.

August 7, 2014

Income Statement Highlights for January-July 2014 (as compared to January-July 2013):

- Net interest income increased by 23.7% y-o-y

- Net fee and commission income grew by 23.0% y-o-y

- Noncredit commission income grew by 25.9% y-o-y

- Operating income before total provisions increased by 23.7% y-o-y

- Total provision charge was RUB162.6 bn vs. RUB67.3 bn charge in January-July 2013

- Operating expenses were up by 11.5% y-o-y

- Net profit amounted to RUB222.1 bn. Please note that comparison to Net profit for the same period of 2013 is incorrect due to adjustments that reflect new CBR regulation on deferred tax assets and liabilities. Excluding the effect of the one-off change in accounting, net profit would have amounted to RUB232.4 bn vs. RUB220.3 bn in January-July 2013.

Net interest income came at RUB490.8 bn, up by 23.7% compared to January-July 2013:

- Interest income increased by RUB169.1 bn driven by both corporate and retail loan portfolio growth;

- Interest expenses grew by RUB75.1 bn, mostly due to customer deposits growth and increase in CBR funding volumes and costs.

Net fee and commission income amounted to RUB148.1 bn; up by 23.0% y-o-y compared to January-July 2013. Noncredit commission income growth remains strong, up by 25.9%, mostly driven by bank cards, acquiring, cash settlements, bank guaranties and documentary operations.

Net income from trading operations amounted to RUB16.9 bn vs. RUB16.5 bn for January-July 2013. Revenues on conversion operations increased significantly (+129.5%), while there was a reduction of income on the securities market due to the general market situation.

Operating income before provisions that is generated by core operations of the Bank, increased by 23.7% to reach RUB674.4 bn.

Operating expenses increased by 11.5%. C/I ratio for January-July 2014 improved to 34.4% vs. 38.1% a year earlier due to the Bank's cost optimization program. Pre-provision operating income growth outpaced operating expenses increase more than twice (23.7% vs. 11.5%).

Total provision charges amounted to RUB162.6 bn vs. RUB67.3 bn charge a year earlier. The Bank continues to practice a conservative approach in loan-loss provisioning based on requirements of the Central Bank of Russia. Coverage ratio remained strong: loan-loss provisions are 2.1 times the overdue loans.

Profit before tax for January-July 2014 totaled RUB280.1 bn. In May, 2014 deferred tax liability was reflected in the Balance Sheet (please note Sberbank releases Financial Highlights for January-May 2014 (under RAS; non-consolidated). Consequently, the net profit for January-July 2014 amounted to RUB222.1 bn, 0.8% more than the net profit for the corresponding period last year. Excluding the effect of adjustments that reflect new regulation, the net profit for January-July 2014 would have totaled RUB232.4, up by 5,5% vs. January-July 2013.

Assets increased by RUB63 bn in July, or 0.4%. FX revaluation had significant impact on the Balance Sheet items growth in July due to the ruble depreciation against major foreign currencies. The assets growth YTD came at RUB1.1 trln, or 6.7% primarily due to credit portfolio growth.

The Bank lent around RUB440 bn to corporate clients in July. In January-July 2014 the Bank lent RUB4.1 trln, that was RUB0.8 trln more than in January-July 2013. Corporate loan portfolio increased by RUB73 bn in July. The increase was driven by both new lending and positive revaluation of existing FX portfolio. Corporate portfolio growth YTD came at RUB863 bn, or 10.1%, exceeding RUB9.4 trln.

The Bank lent more than RUB190 bn to retail clients in July; where around RUB85 bn were mortgages. In January-July the Bank lent more than RUB1.15 trln to retail clients exceeding the amount for the corresponding period last year (excluding credit cards turnover) by more than RUB250 bn. Retail clients portfolio in July increased by RUB90 bn. YTD growth came at RUB451 bn, or 13.5% to reach RUB3.8 trln.

The Bank retains quality of its loan portfolio at a good level: overdue loans stood at 2.5% as of August 1, 2014.

Securities portfolio decreased by RUB76 bn, or -4.0% in July due to OFZ bonds sales, decrease in market prices of securities and also REPO reflection peculiarities in accounting.

Corporate funds decreased by RUB80 bn in July, driven by current accounts. Total corporate funds growth YTD came at RUB395 bn, or +12.7%, to reach RUB3.5 trln.

Retail funds were up by RUB51 bn in July, primarily driven by FX deposits revaluation. Total retail funds reduced by RUB29 bn, or -0.4% YTD, totaled RUB8.0 trln.

Core Tier 1 and Tier 1 capital (equal since Sberbank does not have instruments of additional capital) reached RUB1,480 bn as of August 1, 2014 under preliminary calculations. Total capital amounted to RUB2,207 bn on the same date. Changes in total capital in July was driven by net profit contribution (+RUB36 bn) and revaluation of investments in financial subsidiaries (-RUB14 bn). As a result, total capital increased by RUB20 bn in July.

Capital adequacy ratios under preliminary calculations as of August 1, 2014 were:

- N1.1 - 8.3% (minimum adequacy level, required by the Central Bank of Russia at 5.0%)

- N1.2 - 8.3% (minimum adequacy level, required by the Central Bank of Russia at 5.5%)

- N1.0 - 12.3% (minimum adequacy level, required by the Central Bank of Russia at 10.0%, considering Deposit Insurance Regulation).

Sberbank 7M 2014 Financial Highlights (under RAS, unconsolidated)

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