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MOSCOW, April 29 (Reuters) - Russia’s Sberbank made a record profit in the first quarter of 2021, more than doubling year on year thanks to lower provisions against bad loans, prompting the bank to raise its profitability forecast.
Last year Russia’s biggest bank missed its pre-pandemic target with a 10% decline in net profit owing to provisions against bad loans, but it 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.
State-run Sberbank on Thursday said 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, bad loan provisions fell to 44.2 billion roubles from 138 billion roubles in the same period last year.
“The stabilisation of the loan portfolio asset quality allowed (a) significant reduction of the credit risk cost,” finance chief Alexandra Buriko said in the earnings report.
Sberbank lowered its 2021 cost of risk forecast to 100 basis points from a previously expected 120-140 basis points.
“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 earlier, while net interest income rose 13.3% year on year to 421.5 billion roubles.
Revenue from Sberbank’s loss-making ecosystem of non-banking services increased 295% year on year in the first quarter, a boost for the lender as it strives to diversify away from its core business.
Sberbank shares rose after the report but was down 0.7% by 1606 GMT, underperforming the benchmark MOEX index that closed 0.2% down. ($1 = 74.3575 roubles) (Reporting by Andrey Ostroukh; additional reporting by Tatiana Voronova and Alexander Marrow Editing by Alexander Smith and David Goodman)