BPS-Sberbank Performance results for 2010
Highlights of the Bank’s financial performance under IFRS for the year ended on December 31, 2010:
- The Bank’s net profit (IFRS) for 2010 totaled BYR 114.7 billion, up by 9.3% compared with profit in 2009 (BYR 104.9 billion);
- Net interest income before provision reached BYR 279.6 billion, outperfoming the respective showings achieved in 2009 by 49.5%;
- Net fee and commission income grew by 25.2% and reached BYR 196.9 billion;
- Operating profit before provision was BYR 241.1 billion (increase by 41.0% in comparison with 2009);
- The loan portfolio before provision for loan impairment grew up by 84.6% from the beginning of 2010;
- Return on equity made 13.5%;
- Tier 1 capital adequacy in accordance with Basel 1 made 12.3% as of December 31, 2010; total capital adequacy ratio made 15.0%.
Growth of interest income from BYR 553.6 billion in 2009 to BYR 687.7 billion in 2010 was attributed to the increase of volume of loans issued to corporate and retail customers.
The average interest income generating assets increased by 49.0% due to growth of loans to customers by 54.3% and to banks by 32.3%. The average return on interest income generating assets decreased by 2.5%, down to 12.1%. The trend to decrease cost of borrowings in the national currency was declared by the National Bank of the Republic of Belarus in the monetary and credit policy for 2010 which was supported by steady reduction of the refinancing rate throughout 2010.
Growth of interest expenses from BYR 366.6 billion up to BYR 408.1 billion in 2010 was attributed to increase of the Bank's resource base from all available sources. In spite of decrease of the average annual cost of borrowings by 2.5% down to 6.9%, the volume of raised funds grew up materially.
The expenses on issued debt securities increased by more than 2.5 times, or by BYR 30.2 billion. In 2010, the Bank pursued active use of own debt instruments to attract stable and long-term financial resources. The total volume of issued bonds grew from BYR 188.1 billion at the start of 2010 up to BYR 500.1 billion at the end of the year. The growth of issued securities made 16.6% for retail customers and 247.8% for corporate ones.
The average return on interest income generating assets decreased in 2010 simultaneously with decrease of average cost of borrowings which maintained the net interest spread at the level of 2009 – 5.2%. The interest income growth rate (49.5%) corresponded to the average annual interest income assets base growth rate (49.0%), which determined maintenance of the net interest margin in 2010 at the level of the previous year — 4.9%.
Growth of volumes of assets and liabilities was the determining factor of interest income and expense growth in 2010. Exception was the investments available for sale which earned more interest income due to increase of the average interest rate. This is attributed to a larger share of corporate bonds in the Bank's portfolio in 2010 that are characterized by higher risk and adequate premium.
Net income of the Bank from operations with foreign currency made BYR 42.9 billion, which is by 38.6% lower than in 2009. The situation in the foreign currency market described by objective disproportions of export and import allowed the Bank to increase income from trade operations with foreign currency by 121.0% in 2010. Expenses on derivative instruments in the form of currency swaps made BYR 41.1 billion. The group uses currency swaps to adjust liquidity.
Net income of the Bank from operations with precious metals made BYR 16.7 billion.
Operating expenses increased by 25.3% up to BYR 311.0 billion, which was directly related to growth of business volumes. Operating cost-to-income ratio before provision made 56.3 %, i.e. improved by 2.9% throughout the year.
In accordance with the accounting policy of Sberbank Group, in 2010 the Bank revaluated own buildings at fair value. Positive revaluation of buildings before deduction of income tax disclosed in other components of comrehensive income made BYR 215.5 billion.
In general, total comprehensive income of the Bank for 2010 made BYR 304.7 billion, i.e. almost tripled in comparison with BYR 105.4 billion earned in 2009.
The Bank's assets in 2010 increased up to BYR 8807.0 billion. Asset growth from the year start made 80.9%. Income-generating to total assets ratio as of the year end made 82.3%. Return on assets was 1.7 %.
The loan portfolio (before provision) based upon results for 2010 reached BYR 6602.9 billion. Allowance rate for loan impairment at the end of 2010 made 3.53%. Increase of lending volume was supported both by corporate sector (corporate loans increased by 78.8% in comparison with the year start, and made BYR 5750.1 billion) and retail sector (retail loans increased by 135.3% up to BYR 852.8 billion).
The loan portfolio was built up in all currencies but growth of lending in the local currency was the strongest. Share of local currency loans in the loan portfolio increased from 50.6% in 2009 to 64.5% in 2010.
Allowance for loan impairment recognized in income statement in 2010 made BYR 69.9 billion against BYR 29.8 billion a year earlier, which was attributed to growth of the Bank's loan portfolio when the allowance rate reduced by 1% to 3.53%.
Due to alleviation of consequences of the world financial crisis for the economy of the Republic of Belarus and measures taken by the Government for the quickest restoration of economic activity parameters, the share of non-performing loans in the Bank's loan portfolio decreased from 2.71% as of 2010 year start down to 0.87% at the year end and made BYR 57.6 billion. Meanwhile, allowance for loan impairment created by the Bank fully cover the volume of non-performing loans: NPL coverage made 4.0 at 2010 year end.
The structure of the Bank's investments into debt instruments in 2010 drastically changed. This was attributed to the debut of the Republic of Belarus in the Eurobond market, and issue of corporate bonds of Belarusian companies. The share of instruments in the volume of investments available for sale at the end of 2010 was 70.9% in local currency and 29.1% in foreign currency.
Customer accounts grew from BYR 3005.6 billion at 2010 year start up to BYR 4651.2 billion. Their structure remained almost unchanged. Growth of corporate accounts made 63.0% up to BYR 2538.4 billion, increase of retail accounts was by 45.8% up to BYR 2112.8 billion. Almost 70% of retail funds on accounts with the Bank were in foreign currency. This was attributed to high expectations of devaluation among the population. Corporate funds were in the local currency in their majority (62.2%).
In accordance with the Basel convention, the Bank's capital as of the end of 2010 for capital adequacy purposes was BYR 1041.7 billion, and the amount of Tier 1 capital made BYR 855.2 billion, with capital adequacy ratios being 15.0% and 12.3%, respectively.