Russian giant Sberbank's profit slashed in weak economy

Russia's biggest lender Sberbank said Thursday that its first quarter net profit was slashed by more than half compared with a year earlier, as the country's economy slid into recession.

The net profit of the Moscow-based bank, descendant of the savings societies from the tsarist era, fell by 58 percent to 30,6 billion rubles ($584 million, 533 million euros) compared with the same period in 2014. Net interest income plunged by 16.4 percent to 200.3 billion rubles.

Still, Sberbank remained the only major public bank to post a profit, and its first quarter earnings beat the estimate of 22.3 billion rubles of analysts polled by Bloomberg.

The Russian banking giant also passed on financial aid the authorities offered the banking sector, which has been hammered by the economic crisis caused by Western sanctions over the Ukraine conflict and plunging oil prices.

"The strongest negative factors are the sanctions, the events in Ukraine and Russia's economic situation," said Sberbank chairman German Gref in an interview published Thursday in the Vedomosti newspaper.
He said the bank had seen "unprecedented withdrawals" during the financial panic in December when the ruble plunged in value against the dollar.

"We are working to reduce our costs as quickly as possible," he added, as the bank has already imposed massive job cuts in efforts to modernise the institution.

An influential member of the Kremlin's liberal faction, who has been critical of the government's handling of the crisis, Gref said that "2015 and 2016 will not be the easiest years for the economy and the banking sector."

Given the fall in buying power due to the current crisis the bank has been hit with massive delays in the repayment of loans.

Sberbank increased its provisions to cover bad loans to 115 billion euros, around 50 percent more than a year earlier.

The crisis has led to the closing of several Russian banks, and forced others to accept public funds if authorities considered them too big to fail.

Russia's second biggest bank VTB last week reported a first quarter net loss of 18.3 billion rubles.