* Net profit to double from 370 bln roubles seen in 2013
* Margins, return on equity seen slightly down on weak economy
* Retail, foreign business to help boost profits
By Oksana Kobzeva and Katya Golubkova
MOSCOW, Nov 12 Russia's biggest lender, Sberbank , unveiled an ambitious strategy on Tuesday to double its assets and earnings by 2019 by lending more to consumers at home and developing its existing network of businesses abroad.
Sberbank set its new five-year target despite Russia last week cutting its annual growth rate for the economy to just 2.5 percent until 2030 from a previous 4 percent as weak investment and a lack of economic reforms take their toll.
However, the state-controlled bank, led by former economy minister German Gref, expects to grow faster than the local market, predicting growth for domestic banking overall in Russia will slow to 10 percent a year by 2018 from 13-15 percent next year.
"A slowdown of asset growth rates will result in tougher competition for the most attractive customers, which will be one of the factors for margin reduction," the bank said in its 94-page strategy document (to access, click on).
Sberbank still plans to double its profits, however, accelerating retail growth by focusing on credit cards and other high-margin products, and expanding organically abroad after recent acquisitions in Eastern Europe and Turkey.
Retail lending has become increasingly important for Russian banks, who are still suffering from a weakness in demand for corporate credit following the global financial crisis, as a slowing economy has hit production plans for many.
Meanwhile households are still keen to acquire new cars, TVs and domestic appliances and have relatively low debts at around 12 percent of GDP. That leaves room for growth, even though the cost of consumer credit is high in Russia.
"Everything we have done is just the beginning of the journey," Gref said in the strategy document, defining his goal as the creation of "a really innovative high-tech bank of world class and scale".
The bank, Europe's third-largest by market value, aims to be making an annual return on equity (ROE) of 18 to 20 percent by the end of 2018, a decline from the 20.8 percent rate seen at the end of June.
Sberbank's current ROE is twice that of HSBC, Europe's largest bank by market capitalisation, which closed its Russian retail operations two years ago due to the tough competition it encountered from state banks.
Sberbank still sees Russia as its main market, with a net interest margin (NIM) of 4.5 percent by 2019, down 1 percentage point from average in 2008-2013 but double the profitability of its units in Turkey and Central and Eastern Europe by then.
Its cost-to-income ratio is expected to be running at 40 to 43 percent from almost 46 percent for the first six months of 2013, with the share of profits coming from foreign units seen at 8 to 10 percent by 2019 compared with 7 percent now.
In that time Sberbank does not envisage buying any more businesses abroad. It is now present in 22 countries with over 10 million customers.
"The figures are achievable - they can be delivered if the economy grows," said Natalia Berezina, an analyst with Uralsib brokerage.
Gref also said on Tuesday that Sberbank expects to make a net profit in 2013 of 370 billion roubles, up 6 percent on last year's 348 billion roubles.
In the last five years Gref has transformed the former Soviet state savings bank into a diversified institution with an investment banking arm and earning 7 percent of its profits abroad.
Among the main challenges it faces are how to adapt to the radical changes in technology and customer behaviour that are being seized on by agile competitors such as TCS, a mid-sized Russian bank focused on online credit cards.
TCS last month raised over $1 billion in a share offering, valuing the business at more than four times its book value, which compares with Sberbank's price-to-book ratio of just over one.
"The threat of losing relationships with customers due to insufficient understanding of their preferences and needs is increasing," Sberbank said in its strategy document.