Rising rates help Sber regain its sparkle
A year ago, Sber’s stellar profitability looked to be under threat. This year, it has defied the doubters and has just unveiled record net profit for the first nine months of the year.
After four years of returns on equity of more than 20%, a combination of squeezed margins, hefty provisioning and ongoing investment in ecosystem development had taken a toll on Sber’s bottom line this time last year.
Then, the shadow cast by the pandemic was expected to be a long one. At the Russian group’s investor day last December, managers predicted a steady erosion of net interest margin through to 2023 and reduced the target for annual RoE for the period to just 17%.
Those forecasts proved unduly pessimistic. In October, Sber unveiled a record net profit of R978 billion ($13 billion) for the first nine months of 2021, 75% up on last year and equating to a RoE of 25.8%.
Much of this improvement has been due to external factors. Russia’s economy has recovered faster from the initial pandemic hit than expected, boosted by the global surge in commodity prices and rapid cuts in domestic base rates through 2020.