Russia’s dominant lender Sberbank posts record Q3 profits

By Elena Fabrichnaya and Alexander Marrow

MOSCOW (Reuters) -Russia’s dominant lender Sberbank reported a record quarterly profit of 411.4 billion roubles ($4.41 billion) on Thursday and a return on equity (ROE) of 27.6% as it recovers from slumping profits in 2022.

Sberbank saw an almost 80% drop in profits last year as sweeping Western sanctions over Russia sending troops into Ukraine targeted the financial sector, blocking banks’ access to global payment systems and choking off much of their overseas business.

CEO German Gref said the strong nine-month results and a good start to the fourth quarter formed solid ground for an upgrade to Sberbank’s 2023 ROE forecast of more than 24%.

Net interest income increased to 667.9 billion roubles in the third quarter as Sberbank’s margins improved and its volume of working assets expanded.

No comparisons were provided as the central bank ordered banks to limit disclosures last year in the wake of Moscow despatching troops to Ukraine.

Sberbank’s net interest margin rose in the quarter to 6% on the back of higher interest rates. The Bank of Russia has raised interest rates by 750 basis points since July, most recently to 15% in late October.

Russian banks are proving resilient, reporting higher banking revenues as their cost of risk normalises, and jostling for business from the state, particularly a burgeoning defence budget, and the country’s big corporate accounts.

Total provision coverage for impaired loans dropped 2% quarter-on-quarter to 136.4% and operating income before provisions increased.

But operating expenses rose to 234.2 billion roubles, which Sberbank attributed to last year’s “large scale anti-crisis cost optimisation programme”, business growth and increased salaries since July 2023.

Financial chief Taras Skvortsov said Sberbank did not expect the final quarter of 2023 to be as successful as the third in terms of performance dynamics.

Sberbank’s retail lending portfolio reached 15.2 trillion roubles by the end of the third quarter, up 22.1% year-to-date. Skvortsov said Sberbank was expecting lending dynamics to slow in 2024, compared with 2023.

($1 = 93.2950 roubles)