UPDATE 1-Russia’s Sberbank profit hits $4 bln as bad loan provisions fall | Reuters

Russia’s Sberbank more than doubled net profit in the first quarter of 2021 as provisions against bad loans shrank, prompting the state-run bank to lift its profitability forecast.

In 2020, Russia’s biggest bank missed its pre-pandemic target with a 10% decline in net profit due to provisions against bad loans, but pledged to maintain its dividend payout and promised a “significant” rise in 2021 profit.

The health of the sector is in focus after Russian banks set more money aside against potential bad loans in the face of economic contraction and a weaker rouble triggered by the coronavirus crisis and a sharp drop in prices for exports.

Sberbank said on Thursday its net profit rose to 304.5 billion roubles ($4.1 billion) in the first quarter, from 120.5 billion roubles in the same period of 2020.

Meanwhile, it said bad loan provisions fell to 44.2 billion roubles from 138 billion roubles in January-March a year ago.

“The stabilization of the loan portfolio asset quality allowed (a) significant reduction of the credit risk cost,” Alexandra Buriko, Sberbank’s CFO, said in the earnings report.

“A strong start in 2021 gives us the ground to raise our forecast for the Return on Equity to exceed 20% in the current year,” Buriko added in the statement.

Sberbank had previously forecast its 2021 return on equity (ROE), an indicator of how much profit it generated from money invested by its shareholders, at 18%.

In the first quarter, Sberbank’s ROE jumped to 24.3% from 10.6% in the same period a year ago, while its net interest income rose 13.3% year on year to 421.5 billion roubles.

Sberbank shares were up 0.45% at 0740 GMT, in line with the benchmark MOEX index. ($1 = 74.3575 roubles) (Reporting by Andrey Ostroukh; Editing by Alexander Smith)

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