Sovcombank: quarterly net profit up fivefold, but the main driver is the rate cut, not the business

On August 14, Sovcombank released its Q2 2026 results: net interest income grew 69.1% YoY to RUB 64,775 million, and net profit jumped 410.8% to RUB 25,576 million. Net margin surged from 13.1% to 39.5%. This review examines what is behind the jump and why it does not fully reflect operating dynamics.

Key takeaways

— Net interest income in Q2 grew 69.1% to RUB 64,775 million, but this is an effect of the high base last year when rates were higher

— Net profit for the quarter jumped 410.8% to RUB 25,576 million, but the 39.5% margin versus 13.1% a year earlier is the result of lower funding costs, not a one-off gain

— Interest expenses fell 23.6% in the quarter to RUB 110,877 million, which drove the bulk of the margin expansion

— Fee and commission income rose 17.6% to RUB 16,999 million, but its share of revenue remains modest

— Net interest income for H1 was RUB 124,739 million, up 70.4% from a year earlier

— Group capital rose to RUB 450,341 million as of June 30, 2026, but ROE of 24.1% is below peak levels

— Dividend yield of 2.91% over the last 12 months is below the fair level for the sector, pointing to limited upside for holders

Key figures, RUB bn

Net interest income in Q2 grew 69.1% to RUB 64,775 million, but this is an effect of the high base last year when rates were higher

In Q2 2026, Sovcombank's net interest income reached RUB 64,775 million versus RUB 38,305 million a year earlier. The 69.1% growth is the strongest in the last four quarters, but it is largely explained by the fact that in Q2 2025 interest expenses were abnormally high at RUB 145,132 million versus RUB 110,877 million now.

The decline in funding costs is the main driver. Interest expenses on time deposits from legal entities fell from RUB 63,924 million to RUB 49,743 million, and on retail deposits from RUB 51,791 million to RUB 34,190 million. This is a direct consequence of the key rate cut cycle that the bank is passing through ahead of schedule.

Net profit for the quarter jumped 410.8% to RUB 25,576 million, but the 39.5% margin versus 13.1% a year earlier is the result of lower funding costs, not a one-off gain

Net profit for April–June 2026 reached RUB 25,576 million, the best quarterly result in two years. Net margin rose to 39.5% from 13.1% a year earlier. The key difference from last year is the absence of large losses from revaluation of financial instruments: in Q2 2025, the irregular result on FX and derivatives was minus RUB 21,314 million.

This quarter, irregular items contributed minus RUB 5,069 million, but operating profit grew so much that it did not prevent record net profit. Importantly, the 39.5% margin is not a new normal level but a reflection of the current rate environment.

Interest expenses fell 23.6% in the quarter to RUB 110,877 million, which drove the bulk of the margin expansion

Interest expenses in Q2 2026 amounted to RUB 110,877 million versus RUB 145,132 million a year earlier. The 23.6% decline is the main factor behind the growth in net interest income. The bank is passing the key rate cut to liability costs faster than to asset yields: interest income fell only 4.2% (from RUB 185,400 million to RUB 177,678 million).

As a result, the spread between asset yields and funding costs widened, producing record margins. However, this effect will gradually fade as assets are refinanced at lower rates.

Fee and commission income rose 17.6% to RUB 16,999 million, but its share of revenue remains modest

Fee and commission income for the quarter amounted to RUB 16,999 million versus RUB 14,454 million a year earlier. The main contributors were bank guarantees (RUB 6,913 million, +23.7%), settlement services (RUB 3,584 million, +18.2%), and income from electronic trading platforms (RUB 2,391 million, +18.0%).

However, the fee component remains secondary: it covers only about 15% of operating expenses. The business is still heavily dependent on net interest margin, making results sensitive to rates.

Net interest income for H1 was RUB 124,739 million, up 70.4% from a year earlier

For H1 2026, net interest income reached RUB 124,739 million versus RUB 73,193 million for the same period in 2025. The 70.4% growth was driven by both lower interest expenses (from RUB 292,047 million to RUB 228,769 million) and stable interest income (RUB 357,670 million versus RUB 369,184 million).

Net profit for the half-year was RUB 45,278 million versus RUB 17,543 million a year earlier. This is a strong result, but it should not overshadow the fact that Q2 2025 profit was abnormally low due to FX losses.

Group capital rose to RUB 450,341 million as of June 30, 2026, but ROE of 24.1% is below peak levels

Total group capital as of end-June 2026 stood at RUB 450,341 million, up from RUB 415,497 million at the start of the year. The increase was driven by net profit for the half-year (RUB 45,278 million), partially offset by dividends (RUB 10,210 million) and revaluation of perpetual subordinated bonds.

Return on equity over the last 12 months was 24.1%. This is a high figure, but it no longer looks exceptional against the bank's historical peaks when ROE exceeded 30%. If the current rate dynamics persist, ROE will gradually decline.

Dividend yield of 2.91% over the last 12 months is below the fair level for the sector, pointing to limited upside for holders

Over the last 12 months, Sovcombank paid no dividends, so the actual yield is 0%. However, the valuation model implies a next payment of RUB 0.56 per share, giving a forward yield of 5.9%. This is well below the fair yield of 10.5% that we consider adequate for this issuer.

The implied payout ratio is 0.18 of profit, which is conservative for a bank with 24% ROE. If the bank does not raise the payout, the shares will trade at a discount to the sector. The current P/E LTM of 2.69 is cheap, but without dividend growth the upside is limited.

Valuation on the latest reported figures

Bottom line

The report is strong: quarterly net profit grew fivefold, margin reached 39.5%, and capital increased. But the main driver is lower funding costs, not organic business growth. Interest income is essentially stagnant, and fee income is growing moderately. For holders, the key question is whether the bank can sustain margins as rates fall further and whether it will start paying dividends commensurate with its profitability. For now, a forward yield of 5.9% versus a fair 10.5% leaves the shares cheap but without a catalyst.