Sberbank of Russia (SBER) Earnings Call Transcript & Summary

Good morning to the shareholders. Today, we are summing up the results of the annual meeting of shareholders on 2019 performance. This year, the voting is remote, and the meeting is held much later than usual. First, we planned to hold it in April, then due to the coronavirus, we moved it to June. However, the government of the Russian Federation decided to move the shareholder meeting of banks with state participation to the third quarter. So as to make decisions, including those related to dividend payout with the full knowledge of the crisis fallout. The Supervisory Board of Sberbank set the 25th of September as the date of meeting. I would now like to remind you of some of our key achievements in 2019. The number of active retail clients rose by another 3 million last year, reaching 96 million people, while the number of corporate clients went up to 2.6 million. We have made significant progress across all the areas of our strategy. First, we have launched our technology platform, a pivotal step in our entire history. This has radically decreased our time to market. Second, we have made significant progress in building Letidor system, expanding its industry presence and launching the integration of stand-alone companies based on common ecosystem elements from Sberbank ID to cloud services. Third, we continue to digitalize our core business. Sberbank online app came third in the number of downloads in Apple's App Store. At the end of the previous year, Sberbank online audience exceeded 27 million daily users, and 66 million monthly users. Last year, through our online channel, we disbursed more than half of all consumer loans, while DomClick is used to issue every fourth mortgage loan from Sberbank combination and every second home loan in Moscow. At the year-end, we earned RUB 845 billion of net profit. In terms of profit, we are the #1 bank in Europe, and we rank 10th, globally. Our return on equity exceeded 20%, which is the best result among the 50 largest banks in the world. Common equity Tier 1 adequacy ratio reached 13.4%, which is higher than the 12.5% set as the goal by our dividend policy. As I mentioned before, the main reason behind moving the meeting of shareholders to autumn falls the need to assess the full impact of the coronavirus on the dividends. The crisis was, obviously, a hit on us, too. Sberbank's 6-month profit under IFRS, contracted by 40%. But even in these challenging times, we have driven our common equity Tier 1 adequacy to 14.8%. Therefore, the Supervisory Board recommended that you pay out dividends amount at -- in the amount of 50% of the net profit for 2019. The dividend payout for one share will amount to RUB 18.7. And in total, we have paid out RUB 422 billion, a record-breaking figure, not only for Sberbank, but for all of Russia. No other company has ever paid out that margin dividends in Russia's entire history. Last year, Sberbank made it to the top 10 global companies with the highest shareholder returns over a 5-year period, largely thanks to that, the number of our retail shareholders in 1 year more than doubled to 570,000 people. By this measure, we are the largest listed company in Russia. Thank you, so much dear shareholders, for your trust and confidence in our team. Since we are meeting with you in the end of September, I would like to say a few words about the year-to-date. Sberbank was among those companies that continued to work during the lockdown. Therefore, we had to transition thousands of our employees as quickly as possible to remote work, while making sure that our branches have everything they need to safely provide services to our customers. I would like now to thank our colleagues who managed to promptly provide our employees with personal protective gear. During the hardest period, we gave half of our protective equipment to clinics, hospitals and law enforcement agencies. We have organized massive testing of our employees to avoid the spread of the disease and protect our customers. We have made around 2 million tests to date. This was achieved by our service block and SberHealth teams. Colleagues, thank you so much for your work. Due to the pandemic, many customers found themselves in a difficult situation. So supporting the hardest hit customers came up on the highest item on our agenda. Sberbank transferred over RUB 3 billion to support health care professionals at hospitals of this amount. And I'm particularly stressing this figure, RUB 193 million was donated by our employees and customers. This figure included the entire April's salary donated by the bank's Executive Board members. Some part of this contribution was transferred to the Gamaleya Research Institute for the vaccine development. Based on SberHealth, we created a COVID-19 hotline for the people of Russia. We received almost 500,000 calls. You could receive a doctor's consultation here, have your CT scan analyzed by the AI engine, listen to the recommendations of the leading experts. For the retirees, we delivered their pensions to their homes. When many people couldn't go outside, we automatically extended their expiring deposit contracts and bank cards. During the crisis, the school digital platform of our Contribution to the Future Foundation was in very high demand. In September last year, we -- was piloted only in 15 schools yet, in the face of the pandemic, we connected over 2,000 schools to it. Right now, the platform is used by hundreds of thousands of schoolchildren from 65 regions of Russia. During the crisis, we did our utmost to deliver the state support to our customers as quickly as possible. For instance, we offered an additional discount to state bank's subsidized mortgage program at 6.5%, and we are now offering home loans at 6.1%. By the 1st of September, we issued RUB 224 billion. Today, that is over 90% of all the disbursements for newly built properties. To help our borrowers, we restructured not only the loans that met the requirements of government decrees but expanded the range of customers who needed support. We restructured retail loans worth RUB 160 billion and corporate loans for over RUB 2.2 trillion. Another important area is reduced rate lending to companies. The volume of loans approved under these programs is on the screen. A loan to pay the salary was only 3 clicks away, available directly in Sberbank business online app. The pandemic gave a major impetus to the development of our ecosystem. We are grateful to all the teams of Sber ecosystem. Only thanks to your efforts, we were not only able to go through these times, but also to move to a whole new level. Let's watch a video. [Presentation]

Yesterday was a very important day for us. We launched a new tradition. We hosted the first Sber Conf conference. At the conference, we presented many new products and our new ecosystem brand. Please meet Sber, our new face and our new sense of self. For many people, Sber is the name they have always used, but our fundamental nature has changed. Not only did we removed the word bank from our name, but we also are on our way to become a universal services for everyday life. The clock on our new logo reflects our mission: Saving our customer's time. But that means not asking redundant questions, not making people do redundant things, recognizing them instantly, providing personalized service. You can watch the full Sber Conf conference by following the link on our website and in the Investor Relations app. [Presentation]

To conclude, I'd like to say that now we are putting some final touches to our 2023 strategy. We are planning to submit it for the consideration of the Supervisory Board already in November. After that, it will be presented to our shareholders and analysts. I'm inviting all of you to take part in the Investor Day. The link to the event will be shared on our website and in Sber IR app. I would like to close my remarks with another video. It is about the real heroes of the year, people who were on the front lines, fighting the pandemic, the people whom we cannot thank enough. [Presentation] [Statements in English on this transcript were spoken by an interpreter present on the live call.]