Group’s 2014 key Financial Results
Despite significant worsening in macroeconomic indicators in 2014, Sberbank Group managed to demonstrate decent financial results. The net profit under IFRS amounted to RUB 290.3 bn reduced in comparison to 2013 due to a sharp increase in cost of funding in December 2014 and an increase in provision charge. The Group managed to maintain a return on equity at a fairly high level of 14.8% and return on assets at 1.4%. Based on its return on assets, the Group is rated among the ten leading companies in Central and Eastern Europe and the BRICS countries.
Following a conservative approach to forming provisions for loan impairment, the Group allocated RUB 357.0 bn to provisions for loan impairment, and the cost of risk Cost of risk is understood as the ratio of expenses for forming provisions against the average loan book in the period and prepayments to customers before deduction of provisions for loan book impairment. totalled 2.3%. The growth of the cost of risk was driven by the need to additionally create provisions for FX loans due to the reduced RUB FX rate and the overall deterioration of the quality of the loan portfolio for corporate and retail customers, one-off provisions for several major borrowers and provisions for Ukrainian borrowers due to the challenging situation in Ukraine.
However, the Group’s loan book grew by 40.7% in corporate loans and 29.3% in loans to retail customers. Sberbank continued to improve its operating performance and cutting costs, which facilitated a significant reduction of cost to income ratio to 43.4%.
The capital adequacy level (calculated in accordance with Basel I requirements) decreased on RUB devaluation in 2014 to 8.6% in comparison to 2013 with total capital adequacy at 12.1%.