Good morning, dear investors, dear shareholders, dear analysts. Thank you very much for coming to this call today. We are beginning the call that is dedicated to Sber's performance in the 1st quarter of 2023. The call will be started by presentation by the Vice President and Director of the Finance Department of Sber, Taras Skvortsov. We're gonna have a Q&A session after that. We are using SberJazz platform today. We're gonna use the question line for those who want to ask questions. If you want to ask a question, you can use the web chat. Before we pass over to the main part, if I can draw your attention to certain compliance procedures. This call is gonna be recorded May 18, 2023.
Projections, expectations of management may be voiced during the call that may fall different from the actual values in the future. To be fully aware of the risks, please familiarize yourselves with the second slide of this presentation that fully sets out those risks. Thank you. Good afternoon, dear analysts, journalists, and everyone who's interested in the investment story of Sber. We continue to be transparent to you by regularly disclosing our results and sharing our forecasts. In the first quarter, the positive dynamics of client engagement continued. The number of active monthly users of SberBank Online increased by 1 million to 79.6 million people, with daily users exceeding 41.3 million. Our SberSpasibo loyalty program is already used by more than 69 million clients, in growth by 3.2 million over the quarter.
Sber ID, as one of the key integration elements enabling single sign-in for various applications and services, now they tally 160, that is used by over 60 million of our clients. Intervening party is claiming the floor. Intervening party is claiming the floor. Apparently, the speaker is reconnecting. Okay. If we are heard, then we are launching into the presentation. Thank you very much for the wait. There's been a small technical glitch. Hopefully, we are being heard right now. We're gonna set out our performance and projections. The vice president and the head of the finance department of Sber is gonna be delivering the presentation, Mr. Taras Skvortsov. A Q&A session will follow. Before we pass over to the main part, please note our compliance procedures.
This call is being recorded today on the 18th of May, over the call, we may voice projections that might fall short or long the actual performance figures in the future. Now, to be fully aware of the risks, please familiarize yourself with the disclaimer on the second slide. Passing over to the main part. Taras Skvortsov, you have the floor.
Thank you, Anastasia. Hopefully, we are being heard right now. Right. Good afternoon, dear analysts, journalists, shareholders, and anyone interested in Sber's investment story. We continue to be transparent to you by regularly disclosing our results and sharing our forecasts. On the performance track in the 1st quarter, the positive dynamics of client engagement continued.
The number of active monthly users of SberBank Online, MAU, increased by 1 million to 79.6 million, with daily users, DAU, exceeding 41.3 million. Our SberSpasibo loyalty program is already used by over 69 million clients, a growth by 3.2 million over the quarter. Sber ID, as one of the key integration elements enabling single sign-in for various applications and services, is used by over 60 million of our clients. These client metrics translated into strong financial results for Sber. In the first quarter of this year, Sber earned a net profit of RUB 357 billion for the group, which makes for a 25% return on equity. This allowed us to increase the equity by 5.8% to RUB 6 trillion.
Now, diving into the factors of this performance, we should mention the operating income at RUB 733 billion for the first three months, a significant growth versus last year. That includes the net interest income growth at double-digit rate of RUB 563 billion. Fees and commissions income amounted to RUB 171 billion, excluding the extremely volatile element income from foreign exchange transactions. Commissions performed better than forecast over 14% year-on-year. Bank card transactions and card management services have remained the core drivers. Three-fourths of Sber's income structure consists of interest income that depend two key parameters, the interest margin level and the dynamics of the loan portfolio. Net interest margin for the first quarter was 5.78%. A very high level indeed that is significantly above 2022 levels.
At the same time, because the funding remained stable in the first quarter at 4.1% due to the exceeding performance by demand accounts, both on the part of legal entities and individuals. The return on our loan portfolio for the quarter stood at 9.2%. It was supported by the high dynamic in the loans to small and medium businesses and retail lending. The share of retail loans in the portfolio exceeded 40%, including mortgage loans in the first quarter that increased by 4.7% to RUB 7.2 trillion. Now, despite a certain increase in the rates, we have seen good quality demand for mortgage loans for purchasing both primary and secondary market properties. About 30% of the portfolio of mortgages is supported by the government.
The consumer loan and credit card portfolio exceeded RUB 5 trillion at the first quarter, increasing by 3.1 and 6.7% respectively during the first three months. The main driver of the corporate loan portfolio was financing the housing construction, which grew over 5% since the start of the year to RUB 3.2 trillion. Faster still, 6% over the quarter, was the growth of small and medium businesses. That's in excess of RUB 4.7 trillion. Overall, Sber's assets increased by 4.7% in the first three months. That was a very high and balanced growth. This is a very important factor that ensures not only our current but also future results, and allows us to seriously improve the forecast for the entire year. I will dwell on that in detail later.
Client funds also showed positive dynamics in the 1st quarter. Traditionally, this quarter, we saw a seasonal slowdown in the growth of retail deposits after a uptick in December. In 2022, that was a record. Therefore, we note a steady positive increase in deposits in February and March by 2.5% and 1.7% respectively. This dynamic for the key items allowed us to increase the market share in priority markets in mortgages by 0.5 percentage point to 54.3%. In consumer lending by 0.6 percentage points to 38.2%. In credit cards by 1 percentage points to 47.4%.
In lending to small and medium businesses in January through February gave us a growth by 0.3 percentage points to 46.1%. Sber has always given special importance to the efficiency of its expenses. In 2022 and in the first quarter, thanks to the implementation of a large-scale optimization program, we managed to reduce the cost income to 24.8%. All of its spending, remuneration, real estate, business expenses, procurement of IT equipment, software depreciation, and all other expenses in the first quarter as Sber spent under a quarter of income. Without high efficiency, it is impossible to break at breaking levels for profit and profitability. Cost of risk in the first quarter fully met our expectation amounted to 1.1%.
The higher level of provisioning, loan worker provisioning for the retail portfolio count is accounted by two factors, seasonality and Sber's proactive position to increase market shares in higher margin segments. The quality of the loan portfolio remained consistently high. The share of the first stage loan continued to decline and amounted to 3.8%, while provision coverage for these loans increased to 145%. Against the backdrop of a high profit, we managed to increase capital adequacy. It did increase by 0.4 percentage points to 15.1% in terms of the core capital. The group's capital adequacy ratio end point 20.0, which is a key one for us right now, increased by 0.3 percentage points to 14.5%.
We cannot but talk about our product launches, and we do not use any leniency from the regulator. In the first quarter, our profit came from the regular activities without any one-off effects. We must talk about our new product launches. In the first quarter, we introduced new smart devices to the market and TVs and speakers. We also made a breakthrough in development of solutions in AI. Our generative model, Kandinsky 2.1, has become one of the fastest-growing services in the world. Today, it is used by more than five million people. In April, we released our own version of GigaChat, a multimodal neural network. It is already available to users in testing mode. Further on, I would like to pass over perhaps to the most interesting part of this talk and the forecast for 2023.
Given the scale of Sber's activities, our performance is significantly impacted by the economic situation in Russia. Given the latest statistics, we improve our forecast for the growth of the Russian economy as a whole for the year to about 1%. Economic activity is recovering faster due to a revival of domestic demand against the backdrop of our improvement in consumer sentiments. According to the SberIndex, consumption grows by 10% year-on-year. That's in nominal terms and 6% in real terms. The main drivers are non-food products, a growth of 11% year-on-year in April, and services, including cafes and restaurants, that's +13% year-on-year. The construction sector, manufacturing industry, processing, transport, and a number of other industries have performed quite well. We also improved the growth forecast of banking segments. That's especially true for the retail deposit and lending segments.
Moreover, in the retail segment, we plan to grow faster than the market. Based on this forecast, we are also improving the forecast for our financial performance. Thus, the forecast for the net interest margin in general for the year was improved to about 5.5%. After a strong first quarter, we are also increased the forecast for the net fees and commissions income to the range from 10%- 12%. The main growth drivers will remain the bank card transactions and transaction business as a whole. Our spending will continue to grow at a rate lower than the revenue dynamics. That allows us to improve the forecast for the cost-income ratio to about 30%. Yet we confirm our forecast for the cost of risk at the level of 100-130 basis points.
Due to the high dynamic of the loan portfolio and the weakening of the ruble, since the beginning of the year, we revised the forecast for core capital adequacy at the end of 2023 to the level of about 14%. The good dynamics of the core business in conjunction with the increase in efficiency allows us to improve the forecast for return on equity by 2 percentage points at once. That's above 22%. That concludes my presentation. I will be happy to take questions right now.
Thank you very much, Taras. We are now getting questions from the chat and my request to the analysts. If you are not able to put your questions on air, please write to us in the chat, we're gonna fill those questions there. The first question relates to the profit tax.
Hello. The excessively high profit tax in the first quarter. Yes.
Thank you very much for the question. Well, the effective rate of the profit tax has been changing quarter to quarter. It does change quarter to quarter, the deviation from the expectation of 20% is not that much. It is a peculiarity of the tax law, for various types of income and spending, different rates apply, a part of certain spending is not factored into the calculation of the profit tax. This is a story of the first quarter only. Going forward, the effective rate will normalize to the historic rates of what they were. Okay.
Next question, Elena Tsareva, BCS: What is your take on the dynamic of the net interest margin in the next quarters, given the certain increases in the deposit rates? Do you see that? Would you see a weaker dynamic in the deposits?
As I've said in my talk, we do not see a weak dynamic in the deposits from individuals. We are actually improving the projection here. The answer here is definitely no. As for the margin dynamic, in light of our forecast, in the next quarters, we are seeing a slight decrease in the margin that will primarily be affected by the decisions made historically. That's higher provisioning and the dividend payouts in May. That will bring the margin down a little bit.
There are many positive factors, enough of positive factors. That's an active position on the lending, retail lending, and SME lending. We do not expect a significant decrease in the margin that is reflected in our year, whole year projection.
Yeah, if you need any clarification, please use the chat. We're gonna answer there. Yeah. Let's take the next question. Ilya Usov, Frank Media. I'm gonna read one by one. Why the shrinking of the active retail clients?
Well, in the first quarter, we slightly calculated the methodology of calculation. This indicator in the report, it is visually lower. If you look at the actual numbers, there has not been a decrease in the client base. It actually has been increasing in retail as well as elsewhere.
How many tranches of cheap mortgages have been disbursed, and what are you gonna do with it?
Well, this is a very small share of this product that we have in the portfolio. We do not expect to do anything with it. These are the mortgages that we issued. Those mortgages are gonna be performing. We had not been an active participant in this kind of lending. We have always been trying to focus on the market environment and the government support program.
Thank you. Next question: What was the price at which you sold the Kazakhstan bank?
Well, actually, this question was told already when we disclosed the report. We did not disclose the details, the price made us quite happy.
Thank you very much.
The next question: What will be the influence of dividends on the capital adequacy?
In light of the amount, RUB 565 billion, the influence will be at about 1.5%. This is gonna be seen tomorrow, as early as tomorrow. Thank you very much. The payout is gonna be planned over the next months in May and in June. That's gonna be the last payout.
Yeah. Thank you very much. Mikhail Ganelin. Corporate loans grew 4.6% since the beginning of the year. Would that be a good expectation to see a 20% growth for the year? Your projection right now is a little bit below what you get arithmetically.
Yes, indeed.
In the first quarter, we have seen a dynamic that really exceeded our expectation, and that's the reason why we inject up the projection for the year entirely. We did not expect 20% for the year because, going forward, the dynamic of the first quarter might abate a little bit.
Yeah. Could you dwell a little bit longer on the corporate demand? What industries require financing more? What industries feature more prominent risks, perhaps?
Well, I touched upon that in some part. Private residences have been growing at a healthy pace. Lending to SMEs has been growing. As for the industry structure, our portfolio covers pretty much the length and breadth of the Russian economy.
The key industries are oil and gas, metallurgy and machine building, agro, transportation. They all contribute to the growth, we cannot say that some of them is really making up the day for everyone else. This is a balanced growth, actually, because that really allows us to diversify our risks in the business.
Thank you very much. Passing over to the retail lending, and again, a question from Elena Sakhnova by BCS. Are you seeing a slowdown in retail loan disbursements? What is the dynamic in the new mortgages? How are the real estate market affecting prices affecting the demand? Are you seeing a price pressure? Yes.
As for the mortgages, in the past months, the rates in the market have ticked up a little bit. Over the past couple of months, and you have seen that in our regular reporting, we have seen very high disbursements and a healthy growth of the, of the portfolio. Right now, the higher rates have not really dramatically affected the dynamic. We have disbursed a lot of mortgages because we have seen a good quality, healthy demand.
Yes, staying on the retail lending and mortgages, Svetlana Aslanova is asking the question: What risks of non-performance are you seeing in the mortgages portfolio? How high is the demand versus the approval rate? What about those 80% and 90%?
How high is the demand for the loans at market rates as opposed to preferential rates? Well, I have mentioned that the government-supported loans are about 30%. Everything else is market rates, mortgages. The parameters for the approvals, LTVs, et cetera, they are pretty much the same that we had seen before the crisis. We have not really seen much change in the consumer behavior, and our models in this sense are performing quite well. Yes. Going back to our performance, our own performance, we have been disbursing record amounts month on month, and that really confirms the fact that it has been a very healthy demand.
There's continuous talk mooted around that prices in the retail market have been going down for individuals. We monitor the risks continuously. We factor those analyses in the approvals, we think that the risks are quite low under any scenario. We think we're gonna be doing the business with confidence.
Yes. Maria Stepanova is asking a question in the chat. Good afternoon. Have you reviewed the projection for the profit for 2022? Can the profit hit a higher levels than pre-crisis levels?
Yes, obviously. We have reviewed the forecast for the profit, you see that in our slide. ROE was increased to 25% by 2 percentage points at once.
If you recalculate that figure through our equity volume, it would be quite apparent that we have a very high probability to exceed the pre-crisis level of net profit this year. Yeah, a very good projection.
Thank you very much. Let's take the next question from the chat. How much are you lending in yuan, in renminbi? How much have you boosted the portfolio? What share of the corporate loan portfolio accounted for renminbi? How much did it change since the start of the year?
Our portfolio in renminbi comprises two parts. That's the new deals, and this has been a developing market. We have not really seen a very dramatic in volume here. The second is the conversion of the loans that had been issued in dollars and euros to yuan.
Here, clients are showing much more demand, but the absolute volume of the portfolio, I cannot disclose right now. I'm not in a position to do so. Yes, that's entirely so.
Thank you very much. The next question came from the analyst, Olga Naidenova, Sinara. How do you explain the historically high cost of risk in the retail sector following the first quarter of 2023? Where do you see the normalized risk level in the current environment?
Yes. Thank you very much for the question. As for the first quarter, the main factor is obviously the seasonality. The cost of risk in this sector is historically high in the first quarter versus other quarters. Also, we are entering segments that are higher in terms of margin, and higher margins imply higher risks.
The average here is, yes, above the pre-crisis levels, but this is entirely in line with our forecasts. That's why we maintained our overall guidance for the cost of risk for the year intact.
Thank you very much. We have a whole chunk of questions dedicated to the net interest margin and yields and the cost of funds. Now let's start with the assets. What is going to support the income on the active operations in the next quarters? Would you say that there may be higher yields on the loans, securities, et cetera?
Well, right now, the level of rates in the loans market and if you take the G-curve, that's a pretty high level.
We certainly factor that into our credit policy, but you cannot exclude the possibility that the yields might increase a little bit. There is a reverse factor. You will remember that last year, the same period, the rates on loans were quite considerably higher, and right now they are being repaid. This really affected our projection for the margin. We are projecting margin to go down a little bit. That will factor into the yields of the portfolio, but the decrease in the yields is gonna be marginally low.
Thank you. Right now, the loan-to-deposit ratio is around 100%. Would you think that this level might negatively affect the margin? Where do you see the future dynamic of this indicator?
Well, we always are trying to ensure the balanced growth of our SSN liabilities. In the first quarter, the seasonality of funding is generally low because a lot of growth is historically featured in the fourth quarter, and especially in January, there's a dip. This year, we have seen a situation considerably better than the trends and histories. As for the LDR, loans-to-deposit ratio, we are quite happy with this with the current level. We're not building up the level of government funding. We are trying to fund all the loans from client deposits, and we are going to stick to this policy. Yes.
Thank you very much.
The last question on this block about the sensitivity of our interest margin to the changes in the interest rates and the key rate. Now, if there's a shift, a parallel shift of the curve, by 100 basis points, the sensitivity of the margin, annualized is gonna be 2 basis points. It's a small basis. It's pretty much around zero. This is again a very good achievement of us, of ours.
Y es, Anastasia Savelieva, Interfax, the next question.
What is your assessment? Is that still RUB 10 billion? Are you gonna be paying that ahead of deadline? If yes, then would that be correct to expect RUB 20 billion here?
Yes. Thank you very much for the question.
The reality right now, we are seeing a bill, a draft law that is being agreed by the government. We have not seen a publicly aired final version, the assessment that we gave when we disclosed our performance for 2022 at under RUB 10 billion , we maintain that. Depending on the final draft, we will make the decision on the final contribution, we will certainly abide by all the provisions of the law once it is adopted.
What accounted for the growth of equity in the first quarter? Did that growth of equity come from the profits end?
Yes, all the previous years, we boosted equity from profit, the first quarter was no exception. Equity grew from profit.
Yes, another question from Anastasia Savelyev of Interfax.
Loan loss provisioning costs and cost of risk reverted to the normal values. Is that so? Would you expect any upticks in the future?
Well, as for the factors that played into the provisions over the crisis period in 2022, as we have said in our full year reports, we provisioned for all the risks in 2022. Right now we are looking at the running performance. Because our portfolio is very highly diversified for the industries, for companies, we do not see significant oscillations if the economic situation is stable. Also, back in 2022, in light of the uncertainties in the economy, we stashed away a certain cushion, a macro cushion, and we can tap into that if, uh...
We can unwind that if we see a better than expected performance of the economy.
Another question about the provisions and the cost of risk. The provisions of the non-performing loans in the first quarter exceed to 147 percentage points with the NPL loans share decreasing. How do you assess this dynamic? What can you say about 2023 as a whole year on this track?
As you noted, the third stage loans really decreased. That was accounted by new disbursements, new issuance of good quality, so that accounted for the decrease. As for the projection for the year, well, this is a portfolio quality issue, and we do not expect any deterioration of the portfolio here. You know, both on stage three and on overall coverage.
It is stable, it is consistent, and it is in line with our risk assessment profile that we see for the portfolio.
Thank you. Going back to the mortgages, another question from Fedor Naumov, PFL Advisors. The mortgage lending has become much livelier. You are already having over 54%. What trends are you seeing in residential construction? Do you have any room to grow in the market share? Is there any deterioration on coverage in escrow loans, and how does that affect your portfolio?
As for the mortgages, we do not try to build up our share. We are actually looking at the demand, and if the demand meets our criteria, then we approve the loan applications, and we expand the portfolio this way. As for the coverage of escrow market, then yes.
Early in the year, there was a slight decrease, over the last month, we have seen a discontinuation of the decrease, and we actually expanded the coverage. That gives us reason to rejoice and tells us that the market is close to a stabilization point. Yes, we actually here performing internal stress tests for this about how much we can afford to lower the coverage. As for the stress tests, we are very far away from the critical levels.
Thank you very much. A question from Svetlana Aslanova. How can the development of payments and transfers using the central bank system, how can that affect the growth of the fees and commissions income?
We are one of the active participants of the quick payment system, CBR Faster Payments System, just as any other banks. This new payment system is another instrument in increasing the share of non-cash transactions in the economy. This is a positive for the banking, for the bank as a player in the banking sector. As for the factor in the fees and commissions, we are seeing all kinds of dynamics here. We are using all kinds of, and launching all kinds of new payment means. Couple of dozen million clients have been using our new innovative payment tools as SberPay, biometrics, QR code payments. SBP, the quick payment system, is just an opportunity for us, just as it is for any other banks.
We don't really see material risks for our fees and commissions income stemming from the development of the SBP.
Another question about the quality of the restructured portfolio. Could you tell us about the dynamic in the restructured loans portfolio both on the individuals and on the corporate tracks?
As for the individuals, we have seen a slight increase in restructuring applications last year. This year, the share of restructuring applications is pretty low, and we have not really seen material deviations here. On the corporates, the same thing. The share of the restructured clients, restructured loans has been decreasing. Because all of them have been amply provisioned, we have not really seen special risks or deviations from our projections. Thank you.
The next question: What pressure on the asset density, risk-weighted assets have you seen from the new currencies, renminbi, et cetera?
Well, as I've seen, these transactions exhibit a pretty weak impact, and their influence is weaker still on RWA. It is pretty microscopic. Not really worth mentioning.
Okay. Thank you. We are now passing over to the questions relating to strategic development areas as Sber as an ecosystem. Could you tell us about what has been happening with Sber developing as an ecosystem? How have the companies been doing? How has SberMarket been doing?
The question covers the rest of the ecosystem companies. Thank you very much. The key element in the system is SberPrime. You will see that we disclose our performance with respect to SberPrime regularly.
We are using it in various ways. We are connecting all kinds of partners here that want to give preferential terms to SberPrime subscribers. As for everyone else, we do not publicize the data for other companies, so I cannot really comment in the form of a breakdown by companies of the ecosystem.
Thank you very much. Another question relating to the dividends, the dividend payout for 2023.
Yes. Well, right now, we are in the process of developing the strategy, reaching into 2026. We expect it to be finalized by the end of the year, and it will certainly be brought to the attention of our shareholders and clients, et cetera.
The dividend policy is gonna be an inherent part of this policy, and once the strategy is finalized, we will give a very clear indication of how the dividend policy is gonna be playing out, including 2023 when we have the strategy. We expect that to be ready by the end of the year in December.
Thank you very much. There are no further questions in the chat. We'll ask the journalists which are present at this call. We'll give them the opportunity to ask them. No questions from the analysts. That's the question from Yulia Koshkina, RBC. When will Sber be ready to continuing disclosing information on ecosystem, revenue, EBITDA, non-financial services, this information?
Actually, the format of disclosure today is set by the regulator, the information on the or other companies is actually prone to sanctions risks, our ecosystem companies, I mean. We're in the dialogue, but, getting a real forecast in what form and when we will return to that, I can't give it to you right now, unfortunately.
All right, good. Next, the question on the efficiency.
The growth of expenditure in the first quarter that you've seen in the report allowed the analysts to ask the question, which are the further forecasts when you see the target levels of cost to income, and due to which initiatives you plan to achieve such efficiency?
Thank you very much. In terms of cost-income ratio, it's all evident our target level, about 30% in general. About the initiatives, of course, on a weekly, even daily basis, we are working out a couple of dozens, even hundreds of initiatives, and we're implementing them all the time, and in this format. Only in this format, I think we can achieve to raise efficiency. I can't just name one or two or three initiatives. We have a lot of opportunities for that, including our automated process mining system, which we are offering today on the market.
It's just one of the tools that allow us to analyze our expenditure in a deeper way and to find the opportunity for optimization.
All right. Thank you very much. I think we have covered all of the questions. There were a lot of them. I'd like to thank you for using the chat intensively to ask those questions. I now pass the floor to Taras for the concluding words.
Thank you very much for everyone who visited this call. I hope that you are satisfied with our performance. We can see how the number of shareholders has been growing in the recent months, and I hope that this trend will continue, just like the growth of capitalization. We'll continue to try to make our clients and shareholders happy with our performance, and we'll return with our performance for the second quarter. Thank you very much.
See you in one quarter. Goodbye.