Sberbank - Annual Report 2010 - Recovery and Development of the Economy

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# Recovery and Development of the Economy

Sberbank is the largest lender in the Russian economy: at the end of 2010, our share of this market amounted to 31.3%, or 10.1% of Russia’s GDP. Our clients include both the largest Russian companies that play a significant role nationally, and small- and medium-sized businesses that contribute to the stability of regional and local economies.

We offer our corporate clients a broad range of financial services ranging from payroll card programmes to project and export finance. At the same time we plan to considerably expand our operations in the investment banking sector, adding a number of new services to our product line.

We work with companies across all key sectors of the national economy, including in the oil and gas industry, the metals industry, the power sector and the chemicals industry. Sberbank supports sectors that have been identified as a priority for development; we work with high-tech companies, aircraft manufacturers, mechanical engineering firms and in agriculture. The spread of our corporate loan portfolio across industry sectors generally reflects the structure of Russia’s national GDP.

We provide payment services to customers across the country. Of all Russian lending institutions, we are the largest provider of payment services. Sberbank’s payment system is a critical component of the national payment scheme, comparable, in terms of the scale of operations, only to the payment system of the Bank of Russia.

In 2010, just within our own payment system (not including payments made through correspondent accounts held by institutions of the Bank of Russia or other financial institutions) Sberbank processed more than 250 million payments in rubles. This is equal to 25% of the total number of such transactions processed by the Bank of Russia’s payment system. In the same year, Sberbank also processed over 2.4 million foreign currency payments. The Bank is annually recognised with awards from its largest correspondent banks for the high quality of its payment services.

Sberbank is our largest financial institution, and it is its operations, it is your performance that to a significant extent determines the well-being of the financial sector, the economy as a whole and also the social sphere, since you provide a lot of funding to small- and medium-sized businesses and to the defence industry.

VLADIMIR PUTIN, Prime Minister of the Russian Federation, at a meeting with Herman Gref, Sberbank CEO and Chairman of the Management Board

## The Bank’s Activities in the Global Economic Crisis

At the height of the global economic crisis, Sberbank bore a special responsibility to support the national economy and help it return to normal, while working to ensure that any substantial negative outcomes were avoided. Throughout this period we took steps to support our customers in various ways, offering flexible loan repayment schedules and developing restructuring options. In addition, it was Sberbank that ensured the stability of the interbank market during the crisis.

Sberbank was active in implementing a number of programmes within the framework of the government’s anti-crisis stimulus package. We provided government-guaranteed loans for periods ranging between 10 months and five years to car and electronics manufacturers and food producers, as well as to construction, transport and petrochemical companies. In 2010, the total value of such loans provided by the Bank totalled RUB 90.9 billion. Today, despite the fact that the situation has generally stabilised, many companies have not yet returned to their pre-crisis performance levels. We remain committed to searching for mutually beneficial solutions and adopt an individual approach to each customer.

Another challenge faced by the Russian economy in 2010 was the summer fires and drought. Sberbank employed a number of anticrisis measures to help its borrowers save their businesses and make it through the period of anomalous weather conditions with minimal losses. The Bank reduced interest payments on loans to agricultural companies by a total of RUB 21.2 billion and allowed payment deferments. Overall, in 2010 Sberbank provided 48,300 loans totalling RUB 183.4 billion to agricultural companies and individual farmers. At the end of 2010, loans to the agricultural industry accounted for 7% of the Bank’s total loan portfolio.

## Agricultural Recovery after the Summer Fires

The Volgo-Vyatsky Regional Bank actively supported regional agricultural companies whose crops suffered because of the fires and drought. As a result of the extreme weather conditions, a number of the Bank’s borrowers (companies in the Talina Group, GUP RM Rural Development, GUP RM Lukhovskoye, CJSC Agro-Atyashevo and LLC MTS Romodanovskaya) faced difficulties in meeting their financial commitments to the Bank. After considering the situation, the Volgo-Vyatsky Regional Bank decided to extend loan terms by up to three years, which helped the companies to continue operating and saved jobs.

Similar steps were taken by the Altaisky Regional Bank to support customers that were affected by the uncharacteristic weather conditions. Agricultural companies and farmers were also offered the opportunity to obtain additional funding to finance seasonal work using the 2011 harvest as collateral under simplified requirements.

## Supporting the Development of Small Businesses

supporting the development of small- and medium-sized businesses is an important priority in Sberbank’s social activities. We work to improve access to bank financing for small- and medium-sized businesses. The key elements of our approach in this area include the creation of a network of Business Support Centres and cooperation with the state through infrastructure that has been set up to assist and support small businesses, such as guarantee and collateral funds, micro financing funds, business incubators and technology and science parks. Sberbank participates in government business support programmes by supporting subsidised loan programmes for certain categories of small businesses, including those that manufacture socially significant goods, small exporters, innovative companies, young entrepreneurs and small agricultural firms.

Sberbank’s regional banks work in close cooperation with regional bodies offering support for small businesses. Such cooperation is often not limited to simply providing loans guaranteed by regional governments. For example, the Vostochno-Sibirsky Regional Bank contributed to financing for a regional small- and medium-sized business support agency and a business incubator in Krasnoyarsk. Overall, in 2010 Sberbank cooperated with 64 guarantee funds, providing 2,510 loans totalling RUB 5.6 billion.

The Bank actively works to expand its line of loan products for small businesses. A prominent example of such a product is the Trust lending programme. This programme is convenient for borrowers as loans are provided without collateral and can be used for any purpose. By using an innovative scoring model to evaluate creditworthiness, the Bank was able to reduce the time taken to process loan requests to just two days. Sberbank began actively promoting the product in summer 2010 and by year end seven regional banks had provided 3,000 loans worth a total of RUB 1.86 billion. The product will be launched by the end of 2011 at the remaining regional banks.

Another example of a small business support programme is the Government Contract lending programme, which aims to help small- and medium-sized businesses secure and fulfil government contracts. Within this programme, companies contracted by the government are provided loans to finance working capital and refinancing costs incurred over the course of the contract. In 2010, 132 loans totalling some RUB 253.7 million were provided under the Government Contract programme.

## Best Mobile Business Project

In 2010, as part of an integrated small business support programme, Sberbank was the general sponsor of the Best Mobile Business Project awards, which were organised by the Opora Russia business association. The awards aimed to recognise small and medium-sized businesses, including individual entrepreneurs, that sell goods or provide services from mobile facilities such as vans or trailers.

The contest was held in three categories: Tyre Fitting Services, Shoe Repair Services and the Production and Sale of Baked Goods. The winning contestants were from the Perm and Krasnoyarsk regions and the Chechen Republic. They were awarded honorary certificates and new mobile facilities fully equipped for their respective businesses.

The award ceremony was held at the 9th International Sochi 2010 Investment Forum. Prizes were presented to the winners by Vladimir Putin, Prime Minister of the Russian Federation, Herman Gref, Sberbank CEO and Chairman of the Management Board, and Sergey Borisov, President of Opora Russia. In 2011, similar awards are planned and six trailers will be given to the winning participants.

## History

- Recovery and Development of the Economy
- 36 Operations with State-Controlled Entities and Government Bodies
- 35 Related Party Transactions
- 34 Fair Value of Financial Instruments
- 33 Derivative Financial Instruments

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