Sberbank, Russia's largest lender, reported a net profit of RUB816.1bn ($9.2bn) for the first six months of this year, up 10.7% year on year, the bank reported on August 14.

The bank's return on equity (ROE) for the period stood at 25%, according to its International Financial Reporting Standards (IFRS) results. In the second quarter alone, Sberbank earned RUB418.7bn, with an ROE of 25.9%, surpassing analysts' consensus by 2.6%.

The growth was driven by strong net interest and commission income, despite a challenging market environment. Sberbank's net interest income for April-June reached RUB713.2bn, reflecting a modest 2% quarterly increase due to portfolio expansion. For the first half of the year, net interest income surged by 21.8% y/y, surpassing RUB1.4 trillion.

Net commission income also showed robust growth, rising 13.6% quarter-on-quarter to RUB209.5bn in the second quarter. For the first half, this income grew by 9.9% y/y to RUB393.6bn, bolstered by gains in settlement and cash services, acquiring and documentary business.

However, allocations to reserves in the second quarter nearly doubled compared to the first quarter, reaching RUB98.4bn. Despite this increase, reserve expenses over the six-month period fell by 18% y/y to RUB151.7bn.

Sberbank's net interest margin (NIM) edged down to 5.84% in the second quarter from 5.88% in the first quarter, reflecting the ongoing pressure on margins across Russia's banking sector. "Maintaining margins under current competitive conditions for funding is extremely challenging," said Sberbank’s chief financial officer Taras Skvortsov during a teleconference reports Vedomosti.

The bank's cost of risk (CoR) doubled in the second quarter to 1%, though it remains at historically low levels. Skvortsov noted that the higher CoR is primarily driven by the retail loan portfolio, where CoR increased from 1.4% to 1.9% over the past year. In contrast, the corporate portfolio’s CoR decreased from 1.1% to 0.3% due to significant repayments.

Sberbank's loan book continued to expand, with loans to individuals growing by 8.9% since the start of the year to RUB17.5 trillion by the end of June, while the corporate loan portfolio increased by 4.6% to RUB24.4 trillion. Liabilities also grew significantly, with individual deposits rising nearly 12% to RUB25.6 trillion, and corporate deposits increasing by 10.4% to RUB15.2 trillion.

Second half forecasts revised upwards

Sberbank's strong performance has prompted the bank to revise its 2024 forecasts upward. The bank now expects an ROE above 23% for the full year, compared with an earlier estimate of over 22%. Sberbank also raised its forecast for sector-wide growth in lending to individuals to 12-14%, up from 9-11%, with the bank expecting to exceed this sector growth. Similarly, corporate lending growth is now projected at 14-17%, up from 12-15%.

Despite the elevated key rate environment, Sberbank anticipates that lending growth will continue. The bank expects lending rates to remain stable even if the key rate reaches 20%. However, Sberbank forecasts the Central Bank’s key rate will stay at 18% until the end of 2024, with a potential decrease only in the second quarter of 2025.

In terms of deposits, Sberbank now expects individual deposits to grow by 26-29% by year-end, up from an earlier forecast of 24-26%, aligning with sector trends. The forecast for corporate deposit growth has also been raised to 4-6%, from 2-4%, with Sberbank expecting to outperform the market in this segment.

Sberbank maintained its forecast for an average NIM above 5.7% for 2024, as well as expectations for capital adequacy at over 13.3% and a 10% increase in commission income.

The bank has also adjusted its macroeconomic forecasts, raising its outlook for Russian GDP growth in 2024 to 3.8% from 2.8% and increasing its inflation forecast to 6.5-7.5% from 4-5%.