Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Sberbank Sees 6% Rise in Q3 Profit

MTSberbank's third-quarter results fell short of predictions but stand out as a bright spot in the troubled sector. ��
Sberbank said Monday that its third-quarter profit rose a modest 6 percent to 23.2 billion rubles ($704 million) after losses on trading.

The country's largest lender saw its nine-month net income grow 29 percent to 90.2 billion rubles ($2.7 billion) from 69.9 billion rubles in the same period last year.

The gains were because of an increase in interest income, a larger corporate loan portfolio and growth in profit on consumer transactions, chief financial officer Anton Karamzin said in a conference call with reporters, adding that additional losses in the fourth quarter are "possible."

Sberbank's net interest income for the third quarter rose 50 percent to 99 billion rubles from 66 billion rubles a year earlier, an increase that analysts said outperformed estimates.

"The net interest margin was much better than expected, sending a positive signal about future revenue," said Alexander Kantarovich, head of Russian equity research at JPMorgan in Moscow.

The bank's positive core-revenue growth tempered the effect of the bank's reported trading losses of 16.3 billion rubles ($495 million) in the first nine months and an increase in loan-loss provisions, Kantarovich said.

"Given the financial environment and reports other global and domestic institutions are putting out, this is good news," said Mark Rubenstein, a senior analyst at Metropol.

The results come after VTB, the country's second-largest bank, disappointed the market Thursday with much larger third-quarter losses, sending its stock to a record low.

Sberbank's shares closed up 12 percent at 17.02 rubles on the MICEX on Monday.

Sberbank calculated its results according to international accounting standards, a decision applauded by analysts.

"Sberbank was not trying to hide their losses and said 'it is what it is, let's move forward,'" Kantarovich said.

International accounting standards value the firm's financial derivatives at market prices instead of their purchase price, which is permissible under Russian law.

"We had the opportunity to not disclose a large part of the losses we had from the deterioration of our securities portfolio, but we didn't think it was necessary to manipulate the results," Karamzin said, adding that the company's holdings were not "speculative."

The bank also reported 5.8 trillion rubles in assets for the nine-month period ending Oct. 1, an increase of 18 percent; its capital rose 11 percent, to 706 billion rubles from 637 billion rubles.

Provisions for nonperforming loans increased to 1.52 percent of the bank's total debts as of Sept. 30, only a slight increase from the 1.50 percent of debts at the start of 2008.

Analysts say that while the percentage of bad loans will most likely rise in the fourth quarter, Sberbank will nevertheless be able to weather the storm.

"The third quarter is just the beginning of the trouble, but Sberbank is clearly a profitable bank," Rubenstein said.