Russia’s largest lender state-controlled Sberbank (Sber) posted RUB411bn profit under IFRS in 3Q24 and RUB1.23 trillion in 9M24 overall, up by 7% year on year in 9M24 and making return on equity (ROE) of 25%.

Sber’s results for 9M24 show “consistently strong profitability despite rising cost of risk and income tax expenses,” Renaissance Capital commented.

In 3Q24, the loan portfolio grew by 6.5% quarter on quarter (13.3% year to date), while deposits grew by 4.9% q/q (16.8% ytd). In both cases, the corporate sector was the growth driver in 3Q24. 

“The growing loan-to-deposit ratio (up to 100%) coupled with a high share of floating-rate loans in the corporate portfolio (65%) allowed Sberbank to maintain its net interest margin (at 5.7%, according to our calculations), despite the decline in the share of current accounts and the subsequent rise in funding costs,” RenCap noted.

At the same time provisioning costs for expected credit losses jumped 37% q/q in 3Q24, mostly due to the retail segment. Sberbank raised its 2024 cost of risk forecast by 0.1 percentage points to 1.1-1.2% (0.9% in 9M24), implying significant growth in 4Q24 (to 1.9%, we estimate).

RenCap expects Sberbank's net profit and profitability to decline in 4Q24, given the slowdown in loan growth, seasonal increase in operating expenses, and higher cost of risk. The analysts lowered the 2024 net profit forecast to RUB1.6 trillion (from RUB1.624 trillion), which corresponds to a return on equity of more than 23% in Sberbank's updated forecast. 

The latter implies a dividend of RUB35.4 per share (previously expected RUB36.0 per share by RenCap) or 15% to the current share price, still being one of the highest dividend yields in the sector.

To remind, Sber, under full blocking sanctions, did not pay the RUB623bn dividend for 2021 amid the fallout from Russia’s full-scale military invasion of Ukraine.

But the bank surprised with the record-breaking total dividend payout of RUB565bn ($7.3bn) in 2022, making more than double the RUB271bn net profit the bank earned last year. The largest recipient of the dividend, at RUB282.5bn, was the state (50% plus one share in Sberbank).

Sber then paid another record-high RUB752bn ($8.5bn) dividend for 2023, or RUB33.3 per ordinary and one preferred share (10.6% yield for both). According to the latest reports, Russia's budget revenues from dividends of Sber in 2025 are planned at RUB375bn ($4bn).

The state, represented by the National Welfare Fund, owns 50% plus one share in Sberbank. Thus, the total amount of dividends that can be paid by the bank in 2025 could amount to RUB750bn, or 50% of the IFRS net profit of RUB1.5 trillion according to the bank’s dividend policy.