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As Profits Surge 166 Percent, Russia’s Largest Bank Sets Record

As Profits Surge 166 Percent, Russia’s Largest Bank Sets Record
With banks booming while commodities companies suffered, Russia's corporations painted an accurate reflection of the state of their country's economy.
The net profit reached 145.4 billion rubles ($2.2 billion) in the second quarter of this year for Sberbank, the state-controlled lender and the largest in Russia by assets. According to Reuters, setting a new record and compared to the same period last year and a new record, this was a 166.3 percent increase.
"Despite still declining Russian GDP (Gross Domestic Product) dynamics in the first half of 2016 we have seen some signs of stabilization, such as the oil prices rising and the ruble strengthening, resulting in expectations of returning to positive GDP growth forecast for the second half of 2016," Herman Gref, president and chairman of the executive board, said in a press release.
Amid the deteriorating financial conditions in the country, there has been an increasing amount of worried savers shifting their cash to the bank, seen as a safer haven, which has benefited Sberbank, suggests reports. Due to international sanctions, the bank is currently under financial limitations in credit .
Up from 10.3 percent in 2Q 2015, its quarterly annualized return on equity (ROE) reached 22.8 percent, the group also reported. To measure the amount of a bank's income that is returned as shareholder equity, many investors look at ROE which is a profitability ratio. Many other lenders in the European region were dwarfed by Sberbank's lofty rate.
While Russia's VTB bank saw its shares slip 0.46 percent despite posting a return to profit for the seven months ending 31 July 2016, the Russian Micex-listed shares of Sberbank were up 0.5 percent by midday Thursday but have seen a rally of 31 percent already this year.
Against a net loss of 15.0 billion rubles last year, a net profit of 17.8 billion rubles during the period was made by the lender - another that's part-owned by the Russian government.
But the economy will see a decline in real GDP of 1.2 percent this year, according to the International Monetary Fund and has contracted by 3.7 percent in 2015.
Russia won't be heartened by the warning Thursday from Vladislav Soloviev, the CEO of Moscow-based aluminum producer Rusal even though commodities still play a big part for Russia.
"Looking forward to the second half of the year, we believe that the aluminum industry will remain under pressure," he said in a press release.
It said that from $568 million a year earlier, for the three months to June,  the adjusted earnings before interest, tax, depreciation and amortization (EBITDA) fell to $344 million. This was a 40 percent fall. An even greater fall was seen in its reported profit for the whole first half of the year. Compared to a profit of $879 million for the same period last year, its half-year net profit came in at 261 million and noted a plunge of 70 percent.

Christopher J. Mitchell

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