Russia's Sberbank raises forecasts after record profit

MOSCOW: Russia's biggest bank Sberbank raised its forecast for full-year profitability on Thursday after setting a new profit record in the second quarter, further reinforcing its status as market leader despite a weak economy.

State-controlled Sberbank has thrived during Russia's economic crisis as households and companies concerned about the health of weaker lenders have moved their business to the bank.

It is seen as more risk averse than rivals such as VTB , which suffered heavy losses after slumping oil prices and Western sanctions over the Ukraine conflict sent Russia into recession. Sberbank posted a net profit of 145 billion roubles ($2.2 billion) in the second quarter, better than analysts had forecast and up on a previous record of 118 billion roubles in the first quarter.

The record came despite the bank being under the sanctions, which limit its access to international capital markets.

Sberbank said on Thursday it expected its risk management costs this year to be lower than previously forecast, while its return on equity and capital adequacy levels would be higher.

Alex Kantarovich, managing director at JP Morgan, said Sberbank was able to generate bigger profits than competitors because of its large size and funding advantages. Sberbank has about a third of total banking sector deposits in Russia, meaning it is less dependent on more costly central bank financing.

"These factors rise in importance during an economic downturn, when safety considerations come to the fore," Kantarovich said. "Instead of prioritising market share the way it did before 2014, Sberbank now focuses on profitability and asset quality."

Sberbank's shares were up 2.4 percent by 1540 GMT after earlier hitting their highest ever, while the MICEX index was up only 0.2 percent. In the second quarter, Sberbank's return on equity jumped to 22.8 percent from 10.3 percent in the second quarter of 2015.

Its net interest margin rose to 5.6 percent from 4.2 percent, while it took a provision charge for bad loans of 98 billion roubles, versus 118 billion a year earlier.