April 30, 2020 / 7:17 AM / a month ago

Russian lender Sberbank's profit hit by soaring provisions

MOSCOW (Reuters) - Russia’s largest lender Sberbank (SBER.MM) on Thursday reported a 46.8% slump in first-quarter profit after boosting provisions against bad loans in the face of the coronavirus outbreak.

The health of the banking sector is in focus as it takes a hit from the coronavirus crisis and related lockdowns that are pushing Russia’s economy into contraction and driving down prices for oil, its key export, while weakening the rouble.

“Obviously, COVID-19 has disrupted our plans. With a high degree of uncertainty globally we have opted for significant provision builds, which have put pressure on the group financial result,” said Alexander Morozov, deputy chairman of Sberbank’s executive board.

Sberbank made 120.5 billion roubles ($1.66 billion) in net profit in the first three months of 2020, against 226.6 billion roubles in the same period last year.

Provisions against bad loans were increased to 138 billion roubles from 17.3 billion roubles a year earlier.

Sberbank’s return on equity (ROE) from continuing operations - an indicator of how much profit the bank generated from money invested by its shareholders - was 10.6%, down from 22.9% in the same period of 2019.

Non-performing loans, however, declined slightly to 7.4% of total lending, from 7.5% a year earlier.

Central Bank Governor Elvira Nabiullina this week said that the banking sector in Russia was in “a quite good shape” but warned that loan arrears and bad debt will grow.

People and companies that are most vulnerable to the crisis owe banks about 19 trillion roubles, a third of the overall credit portfolio, Nabiullina said.

Sberbank reported a 10.2% increase in first-quarter net interest income to 371.9 billion roubles while net fee and commission income grew by 22.8% to 126.4 billion roubles under international financial reporting standards.

Reporting by Andrey Ostroukh and Tatiana Voronova; Editing by David Goodman

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