SBERBANK
Information
(materials)
TO BE SUBMITTED TO PERSONS ENTITLED TO ATTEND THE ANNUAL GENERAL SHAREHOLDERS’ MEETING OFOJSC SBERBANK OF RUSSIA ON2011RESULTS
MOSCOW 2012
Contents
- Notice of Meeting3
- The Bank's 2011 Annual Report prepared pursuant to securities laws of the Russian Federation
- The Bank's 2011 Annual Report prepared pursuant to Directive #2089-U of the Bank of Russia dated 8 October 2008 On the Procedure to Be Followed by Lending Institutions in Preparing an Annual Report:
- An Audit Opinion of ZAO Ernst & Young Vneshaudit on the 2011 Annual Report
- The Statement of Financial Position (disclosure form)
- The Profit and Loss Statement (disclosure form)
- The Cash Flow Statement (disclosure form)
- The Statement of Capital Adequacy, Allowance for Doubtful Loans and Other Assets (disclosure form)
- Details of Mandatory Requirements (disclosure form)
- Explanatory Note
- The Audit assessment carried out by the Audit Committee of the Bank's Supervisory Board
- Opinion of the Bank's Audit Committee on the results of financial and business operations in 2011
- Recommendations of the Bank's Supervisory Board on profit distribution and amount of dividends payable on the Bank's shares for 2011
- Information about candidate members to the Supervisory Board
- Information about candidate members to the Audit Committee
- Draft revised Charter of the Bank
- Draft resolutions of the Meeting
Notice
on the Annual General Shareholders’ Meeting
of Joint Stock Company Sberbank of Russia
Dear shareholders,
Joint-Stock Company Sberbank of Russia, located at 19 Vavilova Street, city of Moscow 117997, Russia, hereby advises that the Annual General Shareholders’ Meeting will be held on 1 June 2012 on 2011 results as a meeting (concurrent attendance by shareholders to discuss issues on the Meeting's agenda and make resolutions on issues put to the vote).
The list of persons entitled to attend the Meeting has been prepared on the basis of the Share Register as of the close of the trading day on 12 April 2012.
The Meeting will be held in the conference hall of OJSC Sberbank of Russia at 19 Vavilova St., Moscow, at 10 a.m. (Moscow time).
Agenda of the Meeting:
1.Approval of the Annual Report
2.Approval of the Annual Financial Statement
3.Distribution of profits and payment of dividends for 2011
4.Approval of the auditor
5.Election of members to the Supervisory Board
6.Election of members to the Audit Committee
7.Payment of compensation to members of the Supervisory Board and the Audit Committee
8.Approval of the draft revised Charter of the Bank
Registration of the Meeting attendees will commence at 8 a.m. (Moscow time) on 1 June 2012.
Completed ballots can be sent to the following mail address: 19 Vavilova St., Moscow 117997.
Completed ballots should be received by 6 p.m. (Moscow time) on 29 May 2012 at the latest.
Information (materials) submitted for review to persons entitled to attend the Meeting is available, starting on 28 April 2012, for review at the Bank's location, 19 Vavilova St., Moscow; at territorial banks and branches located in regional and republican centers of constituent entities of the Russian Federation, and at the Bank's website:
Questions related to the Meeting can be asked by telephone: (495) 505-88-91, (495) 505-88-89.
For registration purposes the attending shareholder should produce a passport or any other personal ID, and a shareholder's representative – a personal ID and documents acknowledging their powers.
The Bank's 2011 Annual Report preparedpursuant to securities laws oftheRussian Federation
Approved
bythe Supervisory Board
of OJSC Sberbank of Russia
(Minutes #116 dated 13 April 2012)
2011 Annual Report
of OJSC Sberbank of Russia
Prepared pursuant to securities laws ofthe Russian Federation
Endorsed by the Audit Committee of OJSC Sberbank of Russia
Contents
1.Introduction
2.Position of Sberbank in the Financial Market
Credit ratings
3.Income and Expense Analysis
4.Assets and Liabilities Analysis
5.Corporate business
Lending to Corporate Clients
Funds Raised from Corporate Clients
Services to Corporate Clients
6.Retail Business
Lending to Retail Clients
Funds Raised from Retail Clients
Services to Retail Clients
Organization of Retail Services and Sales
7.Operations in Financial Markets
Operations in the Money Market, Foreign Exchange Market
andPrecious Metals Market
Operations in Securities
8.Risk Management
Credit Risk
Liquidity Risk
Market Risk
Legal Risk
Strategic Risk
Operating Risk
Risk of Loss of Business Reputation
9.Corporate Governance
Organizational structure of the Bank
Remuneration for members of the Bank’s management bodies
Major transactions
Non arm's-length transactions
Share capital
Report on payment of declared and accrued dividends
Code of Corporate Conduct Compliance
10.Branch network
Branch network in the Russian Federation
Development of the bank network and subsidiaries abroad
11.Human Resources
12.Operational Bank functions
13.Selectedbank projects
14.Energy resources used by the Bank
15.Development prospects
1.Introduction
This Report is a report of the Supervisory Board of OJSC Sberbank of Russia[1] on the 2011 results of the Bank's development in priority lines of business.
Priority lines of business of the Bank:
- Corporate business: maintenance of settlement and current accounts, deposits, all types of finance, bank guarantees, support of clients' export and import transactions, collection, cash services, conversion services, money transfers made by retail clients to legal entities, transactions in promissory notes etc.
- Retail business: banking services provided to retail clients such as deposits, lending, maintenance of bank cards, transactions in precious metals, transactions in deposit certificates and promissory notes, purchase and sale of foreign currencies, money transfers, payments, safe custody of valuables etc.
- Operations in financial markets: transactions in securities, derivatives, funds placed and raised in the interbank market, funds raised in capital markets, foreign currency transactions etc.
In addition to banking transactions, the Bank performs transactions such as granting surety for third parties, acquiring claims from third parties, carrying out trust management of cash, professional activities in the securities market, including broking, dealing and depositary activities.
The Report has been prepared pursuant to securities laws of the Russian Federation, including:
- the applicable version of the Regulation on Additional Requirements to Preparation, Calling and Conduct of the General Shareholders’ Meeting approved by Resolution #17/ps of the Federal Commission for the Securities Market of Russia dated 31 May 2002;
- the applicable version of the Regulation on Disclosure by Issuers of Issued Securities approved by Order #11-46/pz-n of the Federal Service for Financial Markets dated 4October 2011.
The Report has been prepared on the basis of disclosurereporting forms (Russian Accounting Standards, unconsolidated data) and the Bank's internal forms of statistical reporting. Events that occurred after the reporting date of 1 January 2012 and 1 January 2011 have been accounted for.
2.Position of Sberbank in the Financial Market
The Russian economy developed in 2011 against the backdrop of ambiguous foreign economic conditions. Global trends in international financial markets were primarily related to low or negative growth rates in developed countries the economy of which is characterized by a significant degree of foreign and domestic debt. In the US, these problems manifested themselves in a slow recovery of the economy in the context of political controversies. Europe suffered from an intensifying debt crisis. As a result, the volatility of the Russian stock and forex markets spiked. In particular, in the second half of the year the ruble depreciated from 28.1 RUB/USD in July to 32.2 RUB/USD by year's end in the context of a worsening financial crisis in the Eurozone.
The Russian economy continued its recovery growth. In 2011 GDP was up by 4.3%. It was mainly boosted by consumer spending and restoration of enterprises' stocks. In general, the 2011 growth was based on domestic demand, both in the consumer and investment segments. Foreign demand fell significantly in conditions of global instability, causing deterioration in export-oriented sectors of the Russian economy. Growth slowed down in the extractive industry; growth in the processing industry failed to regain pre-crisis levels.
Real income of the population barely increased in 2011. That said, retail trade turnover grew 7.2% as a result of realization of deferred demand, growth in consumer lending and a lower rate of savings. This had an impact, among other things, on the dynamics of retail services of Russian banks:
- The growth rate in deposits of retail clients (21%) slowed down in the banking sector as compared to previous year (31%). The deposit growth rate in Sberbank was 18%, below the average market figure. As a result, the Bank's share in this segment fell from 47.9% to 46.6%.
- Banks were actively developing retail lending. Loans granted to retail clients added more than a third during the year (36%). In this respect, Sberbank demonstrated growth in this area comparable to the market and managed to maintain its market share at 32%.
Russian banks were actively collaborating with Russian companies and enterprises with 26% more funds raised from and 27% more loans granted to them. Sberbank also successfully cooperated with corporate clients, especially in terms of lending, where the Bank managed to enhance its market presence from 31.3% to 32.9%.
In general, development of the Russian banking system in 2011 was distinctively marked by the fact that lending growth rates were higher than client deposit growth rates. This applied additional pressure on the liquidity of the banking system in the second half of the year. The first half of the year was characterized by excessivebank liquidity. In order to reduce it and dampen down inflationary pressure on the economy, the Bank of Russia starting taking measures in February 2011 intended to tighten monetary and lending policy: banks' reserve requirements were raised three times during the year, the refinancing rate was increased twice, and the deposit rate of the Bank of Russia was increased four times. The interbank market's liquidity sharply fell in Q3 in the context of global instability and difficulty that Russian borrowers faced in raising foreign finance. Interbank interest rates significantly grew with MosPrime rates for overnight loans rising from 2.9% early that year to 6.5% in December. The Bank of Russia sharply increased amounts available for REPO transactions, and the Ministry of Finance made deposits in banks in order to maintain low lending rates in the productive sector.
Clients' funds remained the main source of fundingfor Sberbank. Nevertheless, like in the banking system overall, their growth rates lagged behind lending rates. In this respect, Sberbank took measures to raise an additional amount of liquid funds. Sberbank obtained additional ruble liquidity by attracting funds from the Bank of Russia through direct REPO transactions, having the Bank of Russia grant secured loans[2] and reducing investments in the Bank of Russia's bonds (their share in the Bank's portfolio decreased byover 430 bn. rubles during the year). Additional liquidity in foreign currency resulted from issuing a bonded debt and obtaining a syndicated loan, and through trade finance operations.
Positive sentiment prevailed in Q1 2011 in the Russian stock market. Nevertheless, subsequent events such as an escalating lack of confidence in further growth of the global economy and the continuing crisis of trust in the Eurozone caused global stock markets to plummet twice, in August and September. Ultimately, the MICEX index was 17% below early 2011 levels by year's end. Sberbank's [3]market capitalization also fell from 76.1 to 54.8 bn. US dollars though the Bank remained in the world’s Top 20 banks in terms of market capitalization.
The quality of loan portfolios of banks continued improving in 2011. During the year, the share of overdue debt on loans granted to legal entities and retail clients in the banking sector decreased from 5.5% to 4.6%.
Sberbank was also particularly focused on the quality of its portfolio. It continued operations as part of business processes launched back in 2010 to recover troubled debt. Systemic collaboration with large, medium, small and micro business on troubled debt helped to reduce legal entities' overdue debt by 33 bn. rubles. Overdue debt of retail clients added 2.3 bn. rubles during the year which, however, is insignificant as compared to the total portfolio worth 1,777 bn. rubles. The fixed-term loan portfolio was growing fast. All measures taken together allowed the Bank to reduce the share of overdue debt on client loans from 5.0% to 3.4% and improve the quality of the loan portfolio compared with the aggregate portfolio of the banking system.
In 2011 Sberbank restored reserves for a number of loans as part of planned arrangements with troubled assets. As a result, expenses incurred in creating reserves significantly fell by year's end even though the Bank continued creating reserves for new loans. This had a positive impact on the growth of earnings which hit a new record and reached 46.5% of the total earnings of the country's banking system[4].
Sberbank's share in different segments of the financial market.
2011 / 2010Assets / 26.8% / 27.3%
Equity / 29.1% / 26.4%
Loans to corporate clients / 32.9% / 31.3%
Loans to retail clients / 32.0% / 31.9%
Funds from corporate clients / 14.5% / 15.9%[5]
Funds from retail clients / 46.6% / 47.9%
Earnings before income tax / 46.5% / 39.2%
Credit ratings
1 January 2012 / 1 January 2011Fitch / Fitch
Ratings / Moody’s / Ratings / Moody’s
Long-term rating in a foreign currency:
Sberbank / BBB / Baa1 / BBB / Baa1
Russian Federation / BBB / Baa1 / BBB / Baa1
Rating of international liabilities
Loan participation notes issued as part of Sberbank's Financial and Logistic Support program / BBB / A3 / BBB / A3
RF Eurobonds / BBB / Baa1 / BBB / Baa1
On 8 April 2011, Fitch Ratings upgraded Sberbank's individual rating from C/D to C and later, on 25 January 2012, discontinued these ratings for all financial institutions by replacing them with the Sustainability Rating. Sberbank was awarded the Sustainability Rating of bbb. This rating describes the Bank's creditworthiness without external support.
Sberbank also ranked:
- ninth among the safest banks in Central and Eastern Europe published by Global Finance. The rating took long-term credit ratings from Moody’s, Standard & Poor’s and Fitch, and total assets of banks into account.
- fortieth in the rating of the largest global banks by Tier 1 capital and twenty-third in the rating of most profitable banks of the world by The Banker.
3.Income and Expense Analysis
Aggregate Profit and Loss Statement[6]:
mln rubles / 2011 / 2010 / Growth, %Net interest income / 575,826 / 502,833 / 14.5%
Total interest income / 837,888 / 796,993 / 5.1%
Total interest expense / (262,062) / (294,160) / (10.9%)
Change in reserves / 11,240 / (86,869) / -
Net income generated by securities transactions / 7,388 / 16,554 / (55.4%)
Net income generated by foreign currency transactions / 9,036 / 1,592 / 467.5%
Net fee income / 125,576 / 111,942 / 12.2%
Other operating income / 17,204 / 14,871 / 15.7%
Operating costs / (337,368) / (318,720) / 5.9%
Earnings before tax / 408,902 / 242,203 / 68.8%
Assessed (paid) taxes / (98,407) / (68,225) / 44.2%
Earnings after tax / 310,495 / 173,979 / 78.5%
The Bank increased its net interest income by 14.5% to 575.8 bn. rubles due to a growth in interest income and a reduction in interest expenses.
- Interest income[7]added 5.1% with a growth in income generated by client loans and reached 837.9 bn. rubles. The structure of interest income generated:
489.0 bn. rubles – interest income generated by loans to legal entities (a 0.7% growth in the context of a 34.1% loan growth);
215.5 bn. rubles – interest income generated by loans to retail clients (a 20.9% growth in the context of a 36.6% loan growth);
100.4 bn. rubles – interest income generated by investments in securities;
32.9 bn. rubles – income from the sale of insurance products[8], income from previous years, fines, penalties[9], income generated by depositing funds in banks.
- Interest expenses declined by 10.9%, mainly due to expenses related to funds of retail clients, and amounted to 262.1 bn. rubles, including:
187.5 bn. rubles – interest expenses related to funds from retail clients (a 12.1% reduction in the total cost of deposits with their total number growing by 17.8%);
43.1 bn. rubles – interest expenses related to funds from legal entities;
28.3 bn. rubles – interest expenses related to funds raised from other banks;
3.2 bn. rubles – interest expenses related to issued debentures.
Net income generated by securities transactions[10] fell 55.4% to 7.4 bn. rubles. Largest income was generated by stocks and corporate bonds.
Net income on foreign currency transactions[11] increased from 1.6 bn. rubles to 9.0 bn. rubles. The difference in income amounts results, to a large degree, from net income on conversion operations that include the financial result for fixed-term transactions (currency SWAP transactions).[12] Currency SWAP transactions were made by the Bank to maintain liquidity in different foreign currencies required to conduct business.
Net fee income rose 12.2% to 125.6 bn. rubles. Growth was based on fee income generated by transactions with bank cards, acquiring, bank guarantees, salary projects, cash and settlement operations. Fee income related to budget funds, maintenance of accounts and securities transactions fell.
In 2011 the Bank generated income from release of provisions[13] in the amount of 11.2 bn. rubles, while in 2010 the Bank's expenses incurred in creating reserves amounted to 86.9 bn. rubles. Dynamics of reserves is based mainly on loan reserves: income from release of provisions in 2011, as part of planned arrangements with troubled assets, amounted to 16.4 bn. rubles as compared to expenses of 80.6 bn. rubles in 2010. The Bank also continued to create reserves for newly issued loans.
Operating costs of the Bank grew 5.9% to 337.4 bn. rubles. Growth of operating costs was mostly affected by a scheduled growth of the cost of maintaining personnel; administrative and business expenses that accompany development of a business; charges transferred to the Fund of Deposits’ Mandatory Insurance and increased as a result of larger deposits. Growth of operating costs was checked by lower expenses in 2011 related to assignment of own claims.
In 2011 Sberbank produced a financial result that exceeded results of the previous year:
- Earnings before tax amounted to 408.9 bn. rubles (in 2010: 242.2 bn. rubles)
- Earnings after tax amounted to 310.5 bn. rubles (in 2010:bn. rubles).
Sberbank's performance indicators in 2011 also improved noticeably:
- return on equity was 26.2% (18.4% in 2010).
- return on assets was 3.4% (2.3% in 2010).
4.Assets and Liabilities Analysis
Aggregate balance sheet:
1 January 2012 / 1 January 2011balance / balance
mln rubles / share, % / mln rubles / share, % / change, %
Cash / 492,881 / 4.7% / 322,303 / 3.8% / 52.9%
Funds in the RF Central Bank / 151,197 / 1.4% / 128,925 / 1.5% / 17.3%
Funds in lending institutions / 38,444 / 0.4% / 61,888 / 0.7% / -37.9%
Net investments in securities / 1,580,627 / 15.2% / 1,851,423 / 21.7% / -14.6%
Net loans receivable / 7,658,871 / 73.5% / 5,714,301 / 67.0% / 34.0%
Fixed assets, stocks / 370,948 / 3.6% / 317,379 / 3.7% / 16.9%
Other assets / 126,452 / 1.2% / 127,028 / 1.6% / -0.5%
Total assets / 10,419,419 / 100.0% / 8,523,247 / 100.0% / 22.2%
Funds from the RF Central Bank / 565,388 / 5.4% / 300,000 / 3.5% / 88.5%
Funds from lending institutions / 477,467 / 4.6% / 291,094 / 3.4% / 64.0%
Funds from clients / 7,877,198 / 75.6% / 6,666,978 / 78.2% / 18.2%
Issued debentures / 87,223 / 0.8% / 111,983 / 1.3% / -22.1%
Other liabilities / 84,730 / 0.8% / 76,992 / 1.0% / 10.1%
Reserves for other losses / 26,771 / 0.3% / 26,313 / 0.3% / 1.7%
Sources of own funds / 1,300,642 / 12.5% / 1,049,887 / 12.3% / 23.9%
Total liabilities / 10,419,419 / 100.0% / 8,523,247 / 100.0% / 22.2%
Assets of the Bank added 22.2% in 2011, or almost 2 trillion rubles to reach 10.4 trillion rubles. Such growth was based on loans to clients[14] that added 2 trillion rubles by year's end.