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Sberbank reports 3Q 2019 Net Profit of RUB230.8 -2-

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DJ Sberbank reports 3Q 2019 Net Profit of RUB230.8 bn under International Financial Reporting Standards (IFRS)



Sberbank (SBER)
Sberbank reports 3Q 2019 Net Profit of RUB230.8 bn under International
Financial Reporting Standards (IFRS)

31-Oct-2019 / 08:27 CET/CEST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.

Sberbank reports 3Q 2019 financial results under International Financial
Reporting Standards (IFRS)

*Moscow, October 31, 2019* - Sberbank (hereafter "the Group") has released its
interim condensed IFRS financial statements (hereafter "the Financial
Statements") as at and for the 9 months ended 30 September 2019, with report
on review by AO PricewaterhouseCoopers Audit. All information is presented net
of Denizbank A.S. operations, unless stated otherwise.

*Alexander Morozov, Deputy Chairman of the Executive Board, CFO, commented:*
«The Bank earned RUB230 bn net profit from continuing operations in 3Q 2019.
Given the effect from the Denizbank sale the Group net profit was RUB156.1 bn.
The deal resulted in a 123 bp increase in the CET 1 capital adequacy ratio.
This quarter showed a turnaround in the corporate loan portfolio dynamics and
substantial acceleration of net fee and commission income. It's also important
to note the growth in frequency of usage of Sberbank's digital services
through mobile application, thus the engagement increased to 41.4% DAU/MAU.
The solid performance in all key strategic areas allows us to confirm our ROE
guidance at the targeted level of over 20%."

The 3Q 2019 Financial Highlights:

· The Group net profit from continuing operations was RUB230.8 bn (+6.3%
y/y) in 3Q 2019 and RUB702.8 bn in 9M 2019 (+8.0% y/y). The quarterly
results were affected by the recognition of loss from Denizbank sale in the
amount of RUB73.3 bn, mostly associated with recycling of the foreign
currency translation reserve booked in Equity through the Statement of
Profit or Loss, as well as the income tax paid under Russian accounting
standards (RAS). Thus the Group net profit including the effect from
Denizbank sale amounted to RUB156.1 bn (-31.6% y/y) in 3Q and RUB 633.0 in
9M 2019 (-3.4% y/y).

· The Group earnings per ordinary share (EPS) based on profit from
continuing operations came at RUB10.72 per share, up by 6.2% compared to 3Q
2018, while the earnings per ordinary share (EPS) including the effect from
Denizbank sale were RUB7.25, down by 31.6% y/y.

· The Group annualized return on equity (ROE) based on profit from
continuing operations was 22.4%, while annualized return on equity (ROE)
including the effect from Denizbank sale came at 15.2%. The Group annualized
return on assets (ROA) based on profit from continuing operations was 3.1%
and annualized return on assets (ROA) including the effect from Denizbank
sale totaled 2.0%;

· The Group gross loans (including loans at amortized cost and at fair
value) increased by 2.8% to RUB21.2 trn in 3Q 2019.

Sberbank pays special attention to the growth of client engagement and quality
of client experience. As a result, the number of active clients has increased
significantly since the beginning of the year:

· The number of active retail clients was up by 2.3 mln and exceeded 95 mln
clients

· The number of monthly active users (MAU) of mobile app Sberbank Online
increased by 9 mln to 51.4 mlniii while the number of daily active users
(DAU) exceeded 21 mlniii, DAU/MAU improved by 2.3 pp to 41.4% in 3Q 2019.

· The number of Sberbank active corporate clients approached 2.5 mln with
around 50% share of sales in digital channels. MAU in digital channels
showed a quarterly growth of 18% to 2.1 mln users.

· As of the end of 3Q 2019 more than 4 mln clients use Sberbank ID, a
unified user account that provides access to more than 40 partners' websites
though Sberbank Online credentials.

Selected Financial Results

RUB bn, unless 3Q 3Q 2Q 3Q 3Q 9 9 9
stated months months months
otherwise
2019 2018 2019 2019/ 2019/ 2019 2018 2019/
3Q 3Q 9
months
2018, 2019, 2018,
% % %
change change change
Net interest 353.9 359.3 353.1 (1.5%) 0.2% 1 044.5 1 041.8 0.3%
income
Net fee and 130.0 112.9 116.7 15.1% 11.4% 349.6 318.1 9.9%
commission
income
Other 23.2 17.2 14.6 34.9% 58.9% 77.6 24.2 220.7%
non-interest
income /
(expense)ii
Operating 507.1 489.4 484.4 3.6% 4.7% 1 471.7 1 384.1 6.3%
income before
provisions***
Net charge (54.0) (60.9) (8.8) (11.3%) 513.6% (108.3) (117.9) (8.1%)
related to
change in
asset quality:
Net credit (30.6) (43.7) (9.2) (30.0%) 232.6% (57.1) (75.8) (24.7%)
loss allowance
charge for
debt financial
assets
Negative (23.4) (17.2) 0.4 36.0% (51.2) (42.1) 21.6%
revaluation of
loans at fair
value due to
change in
credit quality
Staff and (167.4) (155.1) (168.5) 7.9% (0.7%) (486.6) (451.6) 7.8%
administrative
expenses
Net profit 230.8 217.1 245.9 6.3% (6.1%) 702.8 650.5 8.0%
from
continuing
operations
Profit / (74.7) 11.0 4.4 (69.8) 5.0
(Loss) from
discontinued
operations
Net profit 156.1 228.1 250.3 (31.6%) (37.6%) 633.0 655.5 (3.4%)
Earnings per 10.72 10.09 10.70 6.2% 0.2% 31.94 29.68 7.6%
ordinary share
from
continuing
operations,
RUB
Total 252.7 191.7 281.1 31.8% (10.1%) 755.0 609.2 23.9%
comprehensive
income from
continuing
operations
attributable
to the
shareholders
of the Bank
Book value per 188.3 161.9 176.3 16.3% 6.8% 188.3 161.9 16.3%
share *, RUB
Ratios based on continuing operations
Return on 22.4% 24.3% 24.5% 23.2% 24.5%
equity based
on profit from
continuing
operations
Return on 3.1% 3.3% 3.4% 3.2% 3.4%
assets based
on profit from
continuing
operations
Net interest 5.13% 5.75% 5.18% 5.10% 5.75%
margin
Net interest 5.30% 5.96% 5.41% 5.33% 6.03%
margin**
Cost of risk 63 ?? 90 ?? 15 ?? 41 ?? 55 ??
(amortized
cost loans)
Cost of risk 106 ?? 122 ?? 14 ?? 72 ?? 83 ??
(amortized
cost and FV
loans)
Cost-to-income 32.8% 30.4% 34.6% 33.0% 31.2%
ratio***

* Total equity attributable to shareholders of the Bank / Total numbers of
shares outstanding (ordinary + preferred)

** Net interest margin was recalculated as working assets adjusted for the
amount of provisions, created against Stage 3 loans

*** Operating income before provisions for debt financial assets, credit
related commitments and revaluation of loans at fair value due to change in
credit quality

Selected Balance Sheet Results

RUB bn, 30.09.2019 30.06.2019 31.12.2018 30.09.2019/ 30.09.2019/
unless 30.06.2019, 31.12.2018,
stated
otherwise

% change % change
Gross 21 200.4 20 617.6 21 082.3 2.8% 0.6%
total
loans*:
Corporate 13 562.2 13 341.0 14 331.1 1.7% (5.4%)
loans*
Retail 7 638.2 7 276.6 6 751.2 5.0% 13.1%
loans*
Securities 4 181.8 4 343.1 3 749.5 (3.7%) 11.5%
portfolio
Assetsi 30 254.2 31 561.9 31 197.5 (4.1%) (3.0%)
Total 22 318.1 21 808.0 20 897.3 2.3% 6.8%
deposits:
Retail 13 717.5 13 672.5 13 495.1 0.3% 1.6%
deposits
Corporate 8 600.6 8 135.5 7 402.2 5.7% 16.2%
deposits
Ratios
Net Loans 88.7% 88.1% 93.7%
/ Deposits
ratio
(LDR)
Stage 3 + 7.9% 7.8% 8.1%
POCI loans
/ total
gross
loans at
amortized
cost
Provision 88.0% 90.7% 90.4%
coverage
of Stage 3
+ POCI
loans

* Before loan loss allowance and including loans at amortized cost and at fair
value

Net interest income came at RUB353.9 bn in 3Q 2019, down by 1.5% y/y mainly
due to an accelerated growth of interest expenses.

Interest income increased by 8.1% y/y to RUB602.6 bn in 3Q 2019 on the back of
the gross loan portfolio (including loans at amortized cost and at fair value)
expansion by 5.2% to RUB21.2 trn.

· Retail loan portfolio increased by 5% to RUB7.6 trn for the quarter.
Decreasing rates had a noticeable impact on the growth of client demand for
mortgages. Retail loan yield was 12.1%, down by 10 bp.

· Corporate loan portfolio (including loans at amortized cost and at fair
value) showed a positive dynamics in all currencies and increased by 1.7% to
RUB13.6 bn amid accelerated growth in lending to SMEs (more than 6% for the
quarter).

Interest expense, including deposit insurance expenses, was up by 25.4% y/y in
3Q 2019 to RUB248.7 bln.

· Retail deposits grew by 0.3% compared to the previous quarter to RUB13.7
trn. The average cost of retail term deposits decreased by 10 bp for the
quarter.

· Corporate deposits were up by 5.7% to RUB8.6 trn. The average cost of term
deposits increased by 10 bp in 3Q 2019 to 4.5% that is 80 bp lower that the

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October 31, 2019 03:27 ET ( 07:27 GMT)


average cost retail term deposits. The growth of current/settlement accounts
was 13.2% and their share in the total corporate deposits increased to
31.7%.

In 3Q 2019 Sberbank Group placed bonds on the Russian market in the amount of
RUB70 bn. At the end of 3Q 2019, the nominal volume of exchange-traded bonds,
issued on the Russian market, amounted to RUB395.5 bn. The share of wholesale
funding in total liabilities of the Bank is 1.2%.

Net LDR ratio equaled 88.7%, up by 60 bp compared to 2Q 2019.

The Group net fee and commission income for 3Q 2019 came at RUB130.0 bn, up by
more than 15% from the year-ago period mainly driven by transactional
business. The number of cities covered by transport acquiring services is
growing and now exceeds 90. From 1 January 2019 VAT from loyalty programs is
included into net fee and commission income, which was earlier recognized in
operating expenses, the comparative base was adjusted as well.

According to management accounts, year-to-date operating income of insurance,
pension and asset management businesses was up by 14% y/y and achieved RUB90
bln. Assets under management of the Wealth Management business increased by
15% from the beginning of the year and achieved RUB1.4 trn.

The Group operating expenses (staff and administrative) for 3Q 2019 grew by
7.9% as compared to the same period a year ago to RUB167.4 bn. The annual
payroll indexation, happened in the reporting period which was carried out a
quarter earlier than last year, as well VAT rate increase from the beginning
of the year, affected the operating expenses dynamics. The Group
Cost-to-Income ratio*** came at 32.8%.

Net credit loss allowance charge for loans at amortized costs amounted to RUB
31.8 bn for 3Q 2019. This translates into Cost of Risk at 63 bps for this loan
book in 3Q 2019. According to IFRS 9 part of the loan portfolio is accounted
at fair value through profit or loss. Negative revaluation of loans at fair
value due to change in credit quality amounted to RUB23.4bn in 3Q 2019. The
combined Cost of Risk for loans at amortized cost and at fair value in 3Q 2019
was 106 bp. Starting from 1Q19 we exclude FX-component from provision charge/
recovery for FX-denominated loans at amortized cost as well as from
revaluation of FX-denominated loans at fair value. This FX component was shown
as foreign exchange translation (losses) / gains and amounted to RUB 3.4 bn
for the reporting period.

Total provision coverage of Stage 3 and POCI loans decreased in 3Q 2019
compared to the previous quarter by 2.6 pp and comprised 88.0%. The share of
Stage 3 and POCI loans in total gross loans at amortized cost changed
insignificantly, up by 0.1 pp to 7.9%.

Capital Adequacyi

(the data in the table is in accordance with standardized and IRB approaches
applied to the corresponding assets groups)

Under Basel 30.09.2019 30.06.2019 31.12.2018 30.09.19 30.09.19/
III , % 31.12.18,
change % change

RUB bn,
unless stated
otherwise
Total Tier 1 4 164.7 3 894.4 3 766.5 6.9% 10.6%
capital
Total capital 4 273.3 4 006.2 3 950.6 6.7% 8.2%
Risk-weighted 30 791.8 31 682.2 31 793.1 (2.8%) (3.1%)
assets
Credit risk 26 428.6 27 218.0 27 477.4 (2.9%) (3.8%)
Operational 3 339.9 3 339.9 3 339.9 0.0% 0.0%
risk
Market risk 1 023.3 1 124.3 975.8 (9.0%) 4.9%
Ratios
Common equity 13.53% 12.29% 11.85%
Tier 1
capital
adequacy
ratio
Total capital 13.88% 12.64% 12.43%
adequacy
ratio

The Group's total capital under Basel III reached RUB4 273.3 bn as of
30/09/2019, up by 6.7% as compared to previous quarter.

The Group's risk-weighted assets were down by 2.8% to RUB30 791.8 bn during 3Q
2019 mainly due to the Denizbank sale. The Group leverage ratio increased by
150 bp to 13.0% in 3Q 2019.

Starting from 3Q 2019 the Group synchronized calculation methodologies for
risk-weighted assets in terms of the credit risk for IFRS capital adequacy
ratio (Basel III) with the macro-prudential requirements of the Central Bank
of Russia (CBR):

· CBR's macro-prudential add-ons to risk weights for some segments of assets
both for standardized and IRB approaches;

· introduction of other national risk weights adjustments.

These changes reduced CET 1 capital adequacy ratio by 35 bp.

As a result, both common equity Tier 1 capital adequacy ratio and total
capital adequacy ratio increased by 124 bp each to 13.53% and 13.88%
correspondingly as of 30/09/2019.

i Including corresponding line from discontinued operations, that, effective
May 2018, Denizbank is classified as

ii Other non-interest income / (expense) includes: Net gains from
non-derivative financial instruments at fair value through profit or loss
excluding revaluation of loans at FV through P&L due to change in credit
quality; Net gains from financial instruments at fair value through other
comprehensive income; Net gains / (losses) from derivatives, trading in
foreign currencies, foreign exchange and precious metals accounts translation;
Net gains on initial recognition of financial instruments and on loans
restructuring; Impairment of non-financial assets; Net recovery of / (charge
for) other provisions; Revenue of non-banking business activities; Cost of
sales and other expenses of non-banking business activities; Net premiums from
insurance and pension fund operations; Net claims related to insurance and
pension fund operations; Income from operating lease of equipment; Expenses
related to equipment leased out; Other net operating income

iii Active clients are calculated using the new revised methodology

DISCLAIMER

This document has been prepared by Sberbank of Russia (the "Bank") and has not
been independently verified. This press release does not constitute or form
part or all of, and should not be construed as, any offer of, or any
invitation to sell or issue, or any solicitation of any offer to purchase,
subscribe for, underwrite or otherwise acquire, or a recommendation regarding,
any shares or other securities representing shares in, or any other securities
of the Bank, or any member of the Bank's group, nor shall it or any part of it
nor the fact of its presentation or distribution form the basis of, or be
relied on in connection with, any contract or any commitment whatsoever or any
investment decision. The information in this press release is confidential and
is being provided to you solely for your information and may not be
reproduced, retransmitted or further distributed to any other person or
published, in whole or in part, for any purpose.

This press release doesn't constitute an offer of securities of the Bank for
sale in the United States. The Securities may not be offered or sold within
the United States, except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the U.S. Securities Act of
1993 as amended.

This press release is only being distributed to and is only directed at (A)
persons in member states of the European Economic Area (other than the United
Kingdom) who are "qualified investors" within the meaning of Article 2(1)(e)
of Directive 2003/71/EC (as amended and together with any applicable
implementing measures in that member state, the "Prospectus Directive")
("Qualified Investors"); (B) in the United Kingdom, Qualified Investors who
are investment professionals falling within Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order")
and/or high net worth companies, and other persons to whom it may lawfully be
communicated, falling within Article 49(2)(a) to (d) of the Order; and (C)
such other persons as to whom this press release may be lawfully distributed
and directed under applicable laws (all such persons in (A) to (C) above
together being referred to as "relevant persons"). The shares, or other
securities representing shares, or any other securities of the Bank are only
available to, and any invitation, offer or agreement to subscribe, purchase or
otherwise acquire such securities will be engaged in only with, relevant
persons. Any person who is not a relevant person should not act or rely on
this press release or any of its contents.

This press release does not constitute any offer of, or any invitation to sell
or issue, or any solicitation of any offer to purchase, subscribe for,
underwrite or otherwise acquire any securities of the Bank within the Russian
Federation or in favor of the Russian entities or persons. Any foreign
securities representing shares of the Bank may not be offered or sold within
the Russian Federation, except as provided by the relevant Russian
legislation.

The information in this press release or in oral statements of the management
of the Bank may include forward-looking statements. Forward-looking statements
include all matters that are not historical facts, statements regarding the
Bank's intentions, beliefs or current expectations concerning, among other
things, the Bank's results of operations, financial condition, liquidity,
prospects, growth, targets, strategies, and the industry in which the Bank
operates. By their nature, forward-looking statements involve risks and
uncertainties, because they relate to events and depend on circumstances that
may or may not occur in the future. The Bank cautions you that forward-looking
statements are not guarantees of future performance and that its actual
results of operations, financial condition and liquidity and the development
of the industry in which the Bank operates may differ materially from those
made in or suggested by the forward looking statements contained in this press
release or in oral statements of the management of the Bank. In addition, even

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