August 23, 2018 / 8:12 AM / a month ago

UPDATE 3-Russia's Sberbank shares at year low despite record high profit

* Q2 net 215.3 billion roubles vs forecast 203.7 billion

* Net interest income up 5.4 percent year on year to 349 billion

* Provisions against bad loans decline 45.9 percent to 45.5 bln

* Shares down nearly 5 pct (Adds Sberbank comments in fourth paragraph, updates prices)

By Polina Nikolskaya and Tatiana Voronova

MOSCOW, Aug 23 (Reuters) - Shares in Russia’s largest lender Sberbank fell on Thursday as investors pulled out of Russian assets due to U.S. sanctions risks, outweighing a higher than expected 16 percent rise in second-quarter net profit.

Sberbank said net profit reached 215.3 billion roubles ($3.2 billion) in April through June, topping an average forecast of 203.7 billion from analysts polled by Reuters on the back of higher net fees and commissions as well as cost savings.

Yet shares in the bank, Russia’s most liquid stock and providing a proxy for the market as a whole, were down almost 4.8 percent at 178.7 roubles by 1549 GMT, having fallen as low as 178.55 roubles, a 12-month low.

“The share movements reflect market nervousness over Russian risk,” Chief Financial Officer Alexander Morozov said on a conference call, presenting the financial results.

Elsewhere in the sector, state-owned VTB was down 3.6 percent and Tinkoff lost 0.7 percent.

The rouble hit its lowest against the dollar in more than two years, pressured by fears of more sanctions and purchases of foreign currency for state reserves, though it later steadied.

The U.S. Treasury imposed sanctions on various Russian entities on Tuesday, and a new tranche of sanctions announced by the U.S. State Department earlier this month was expected to take effect soon.

Russia’s Economy Minister Maxim Oreshkin on Wednesday warned that new U.S. sanctions would pressure the rouble and fuel capital outflows over the next 12 months, becoming one of the first government officials to acknowledge the U.S. measures and the risk of more to come would take a toll on Russia’s economy.

Sberbank is in particular sanctions focus because draft legislation from U.S. senators on Aug. 2 suggests banning Sberbank and VTB from operating in the United States.

GOOD RESULTS

The rouble has lost almost 9 percent of its value against the dollar since the beginning of the month and is vulnerable to risk aversion and volatility fuelled by jitters in other emerging markets and threats of further U.S. sanctions.

“We expect Sberbank will remain volatile until there is clarity regarding the new sanctions,” Mikhail Ganelin, an analyst at Aton brokerage, said in a note.

Sberbank’s results showed quarterly net interest income rose 5.4 percent year on year to 349 billion roubles, while provisions against bad loans declined 45.9 percent to 45.5 billion roubles from 84.1 billion in the same period of 2017.

“Sberbank showed (strong) ... growth in net fees and commissions and improvement in operating efficiency,” Chief Financial Officer Alexander Morozov said. “The first-half results and current business dynamics form a foundation for an upside revision of our 2018 targets.”

The bank, which had 19.5 trillion roubles in its gross loan portfolio, said the share of impaired loans was 8.4 percent. In the previous quarter, it provided a number for non-performing loans which accounted for 4.2 percent of the loan portfolio.

It said it had issued a record amount of retail loans during the quarter and that its share of the Russian retail lending market grew to 41.3 percent. ($1 = 66.9725 roubles) (Reporting by Polina Nikolskaya and Tatiana Voronova Additional reporting by Zlata Garasyuta Editing by Edmund Blair, David Holmes and Alexandra Hudson)

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