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. Last Updated: 07/27/2016

Sberbank Nets Record $904M Profit


Andrei Kamzin

Sberbank shook up the banking sector Monday, posting a net profit of $904 million for the first nine months of the year, the most ever by a Russian bank.

"This is a record result," Sberbank chairman Andrei Kazmin told reporters, adding that the figure far surpassed the bank's own full-year forecast.

Kazmin said state-controlled Sberbank, the largest bank by assets in Central and Eastern Europe, nearly doubled its net profit under Russian accounting standards to 28.7 billion rubles ($900 million) in January-September from 14.7 billion rubles in the same period last year.

The news took analysts by surprise, and Kazmin gave no clear explanation of the surprising figures, saying only that "they confirm the success of internal organizational reform, which has been going on over the last few years."

"The results are far above our expectations," said Andrei Ivanov, banking analyst at Troika Dialog, which was expecting a net profit of $740 million.

"But before making any conclusions I would prefer to look at the detailed financial report," Ivanov said. "Even so, it is difficult to explain such a considerable increase."

Ivanov said there could be several factors behind the jump, including the introduction of new accounting techniques, a lower profit tax and coupon yields from Eurobonds.

Irina Penkina, banking analyst at S&P-EA Ratings, international rating agency Standard & Poor's Russian partner, said about half of Sberbank's profit rise in 2001 was attributable to a revaluation of its assets, including stocks and bonds that were bought before the 1998 crisis.

"Just minor changes in accounting standards for provisions in such a large bank like Sberbank can make a big difference," said Scott Bugie, a managing director with Standard & Poor's Financial Services Group. "For us, it's not a big surprise to see very different results of Russian banks from quarter to quarter," he said. "But Sberbank is the only public bank in Russia, and as a traded company, it needs to explain what is behind these figures," he said.

Investors, however, did not wait for an explanation, driving the company's stock up 2.6 percent to close at $196 Monday. Sberbank shares have gained 151 percent since the start of the year, and analysts say there is room for more.

Besides record profits, Sberbank has increased its capital 40 percent to 106 billion rubles ($3.34 billion) from 60 billion rubles as of Oct. 1, 2001.

The bank has also topped the 1 trillion ruble mark in total assets, boosted its lending portfolio 45 percent to 542 billion rubles and raised the volume of private deposits from 440 billion rubles to 640 billion rubles, which is 70 percent of all deposits in the country.

Troika has a "buy" on the stock, even though the bank still needs to improve its transparency, Ivanov said.

"If nonresidents were allowed to buy into Russian banks without the Central Bank's permission, it would boost Sberbank's share price," he said.

The smooth privatization next year of the nation's second-largest bank, Vneshtorgbank, would be another positive factor for Sberbank, as well as the whole industry, Ivanov added.