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

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

October 7, 2014

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

- Net interest income increased by 22.3% y-o-y

- Net fee and commission income grew by 23.5% y-o-y

- Noncredit commission income grew by 25.0% y-o-y

- Operating income before total provisions increased by 24.8% y-o-y

- Total provision charge was RUB217.9 bn vs. RUB83.5 bn charge in January-September 2013

- Operating expenses were up by 11.8% y-o-y

- Net profit before income tax amounted to RUB359.8 bn, up by 2.7% vs. January-September 2013. Net profit totaled RUB286.7 bn, or up by 0.2% vs. January-September 2013. 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 that came into force in 2014. Excluding the effect of the one-off change in accounting, net profit would have amounted to RUB295.7 bn, up by 3.3% vs. January-September 2013.

Net interest income came at RUB633.7 bn, up by 22.3% compared to January-September 2013:

- Interest income increased by RUB219.2 bn driven by both corporate and retail loan portfolio growth;

- Interest expenses grew by RUB103.9 bn, due to customer deposits growth (both corporate and retail) and increase in CBR funding volumes and costs.

Net fee and commission income amounted to RUB195.9 bn; up by 23.5% y-o-y compared to January-August 2013. Noncredit commission income growth remains strong, up by 25.0%, mostly driven by bank cards and acquiring. Commission income from insurance, pension and investment products, bank guaranties and documentary operations becomes more significant.

Net income from trading operations amounted to RUB32.6 bn vs. RUB17.6 bn for January-September 2013. Revenues on conversion operations increased significantly (RUB44.8 bn vs. RUB10.2 bn). There were also gains arising from revaluation of foreign investments while income dynamics on the securities market remained negative, due to the market situation.

Operating income before provisions increased by 24.8% to reach RUB884.5 bn.

Operating expenses increased by 11.8%. C/I ratio for January-September 2014 decreased by 4 ppt to 34.7%. The Bank managed to maintain the trend when pre-provision operating income growth (24.8%) significantly outpaced operating expenses increase (11.8%).

Total provision charges amounted to RUB217.9 bn vs. RUB83.5 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 2.2 times the overdue loans.

Profit before tax for January-September 2014 totaled RUB359.8 bn. As of this year deferred tax liability was reflected in the Balance Sheet (please note Sberbank releases Financial Highlights for January-May 2014 (under RAS; non-consolidated). Consequently, net profit for January-September 2014 amounted to RUB286.7 bn. Excluding the effect of adjustments that reflect new regulation, net profit for January-September 2014 would have increased by 3.3% vs. corresponded period a year earlier, totaled RUB295.7 bn.

In September assets increased by 3.5%, or RUB618 bn. The growth of the Balance Sheet was further influenced by positive revaluation of FX component on ruble devaluation compared to key foreign currencies. Exchange rate of USD to RUB increased by 6.6% to RUB39.4, of EUR - by 2.7% to RUB50.0. Assets growth for 9M 2014 reached RUB1.85 trln, or up by 11.3%, mainly due to total loan portfolio growth.

The Bank lent over RUB660 bn to corporate clients in September. Total corporate loan issues for 9M 2014 reached RUB5.3 trln, or by 17% more than for the same period last year. Total corporate loan portfolio increased by RUB218 bn in September driven by both new loan demand as well as positive revaluation of previously issued FX loans. Total corporate loan portfolio for 9M 2014 increased by RUB1.24 trln, or 14.5%, to exceed RUB9.8 trln.

The Bank lent over RUB150 bn to retail clients in September. Total retail loan issues for 9M 2014 reached over RUB1.5 trln, which exceeded the amount of issues for the same period last year (excluding the credit cards turnover) by 22%. Total retail loan portfolio increased by RUB56 bn in September to exceed RUB3.9 trln, over half of which are mortgages. The increase of the retail loan portfolio for 9M 2014 amounted to RUB586 bn, or up 17.6%.

The Bank keeps the quality of its loan portfolio at a good level: overdue loans came at 2.3% of total loans (as of October 1, 2014).

Securities portfolio increased by RUB15.0 bn, or 0.8% in September due to purchases of OFZ bonds.

Corporate funding increased by RUB167.8 bn in September due to both current accounts and term deposits. Corporate deposits and accounts portfolio increased by RUB452 bn, or 14.5%, for 9M 2014.

Retail deposits and accounts decreased by RUB33.9 bn in September. Retail deposits and accounts portfolio reached about RUB8.1 trln, up 0.2% for 9M2014.

Core Tier 1 and Tier 1 capital (equal since Sberbank does not have instruments of additional capital) reached RUB1,623 bn as of October 1, 2014 under preliminary calculations. Total capital amounted to RUB2,259 bn on the same date, increased by RUB31 bn in September.

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

- N1.1 - 8.9% (minimum adequacy level, required by the Central Bank of Russia at 5.0%)

- N1.2 - 8.9% (minimum adequacy level, required by the Central Bank of Russia at 5.5%)

- N1.0 - 12.2% (minimum adequacy level, required by the Central Bank of Russia at 10.0%, considering Deposit Insurance Regulation).

Sberbank 9M 2014 Financial Highlights (under RAS, non-consolidated)

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