Sberbanks position in the financial market

Russia’s economy grew in 2011 against a backdrop of slow or negative growth in developed markets characterised by a high level of external and domestic debt. Amid ongoing escalation of the European sovereign debt crisis, the economic recovery in the United States was sluggish. While volatility in the domestic stock and money markets markedly increased, in 2011 the Russian economy continued its steady growth, with GDP rising 4.3%. This growth was driven by strong consumer and investment demand on the domestic market.

Retail sales rose 7.2%, fuelled by deferred demand and lower savings levels. These factors had certain implications for Russian banks’ retail businesses:

Customer deposits slowed from 31% in 2010 to 21% in 2011. With Sberbank’s customer deposit growth rate being below the market average (18%), its share in this segment reduced from 47.9% to 46.6%. Banks actively increased retail lending. Retail loans grew almost one third over the year (36%). Sberbank maintained a market share of 32% in this segment thanks to a growth rate comparable to the market average.

Russian banks worked keenly with domestic companies and enterprises whose deposits and loans grew 26% and 27% respectively. Sberbank also continued to work closely with its corporate customers, especially in the corporate lending segment where its market share increased from 31.3% to 32.9%.

One of the hallmarks of the development of the Russian banking sector in 2011 was that lending grew at a faster pace than customer deposits, putting more pressure on the liquidity of the domestic banking sector in the second half of the year. 2011 saw a steady improvement in the quality of loan portfolios in the domestic banking sector. Nonperforming loans to corporate customers and individuals dropped markedly over the year. Sberbank also placed a special focus on the quality of its loan portfolio and continued its effort to collect nonperforming loans. At the same time, Sberbank actively expanded its term loan portfolio. Together these efforts helped to reduce the share of non-performing loans from 7.3% to 4.9%.

In 2011, Sberbank recovered provisions for certain loan as part of ongoing measures to deal with non-performing assets. While the Bank continued to make provisions on new loans, overall provision charges reduced substantially over the year. This reduction had a positive effect on the level of income, which reached a record high and accounted for 46.5% of total income earned by the national banking sector*.

Sberbank’s share in various segments of the financial services market

Obligations of Sberbank of Russia Fitch Moody's
Borrowings under MTN Programme BBB A3
Russian Federation Eurobonds BBB Baa1
* Quoted before tax and without taking into account events after the balance sheet date. Source: Overview of the Russian Banking Sector (Internet version), No. 113, March 2012
** The 2010 data was restated to reflect a change made in 2011: balances in precious metals were excluded.

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