Sberbank saw its fourth-quarter earnings tumble 80 percent to 7.5 billion rubles ($224 million), largely in line with analyst projections, driven mainly by increased provisions for nonperforming loans.

Sberbank, the country's biggest lender, saw its 2008 net income fall 8.3 percent year on year to 97.7 billion rubles, it said on its web site.

The results come after VTB, the country's second-largest lender, announced its results on Thursday, beating expectations of a loss by posting a $349 million gain in the fourth quarter on bond repurchases.

Year-end results saw the bank's operational income reach 449.5 billion rubles, up 27 percent from the year before. The bank attributed this growth to increased interest income from lending, higher margins and larger fees.

The bank's net interest income rose 50 percent year on year, from 253 billion rubles to 378 billion rubles, while its interest spread grew by 1.1 percentage points and its loan portfolio increased 31 percent.

"One of the main factors causing the drop in profits in 2008 was the fivefold increase in provisions compared with 2007," the bank said, adding that losses in trading operations also played a role, costing the bank 37.3 billion rubles.

Chief financial officer Anton Karamzin said in a conference call Monday that the bank's trading losses were "relatively smaller than at other banks with more speculative portfolios.

"Our securities portfolio serves its main purpose as a liquidity cushion for the bank," Karamzin said.

Provisions for nonperforming loans reached 98 billion rubles from 17.6 billion rubles the previous year, with growth in the fourth quarter alone reaching 40.8 percent.

Karamzin said the fourth quarter exposed only the tip of the iceberg for growth in delinquent loans at the bank and the country's banking sector as a whole.

"While the nonperforming loan numbers did not show a significant growth trend in 2008 ... they have started to pick up in 2009 as the Russian real sector and our borrowers begin to feel the impact of deteriorating economic conditions," Karamzin said.

Sberbank's nonperforming loans have already grown from 1.8 percent at the year-end to 2.8 percent at the start of April. Delinquent loans for the sector as a whole, however, stand more than twice as high, at 7.5 percent of the total loan portfolio, Finance Minister Alexei Kudrin told Vedomosti a week ago.

By the end of the year, CEO German Gref expects overdue loans to reach 7.5 percent to 9 percent of the lender's total credit portfolio. Gref has also said most of Sberbank's fourth and first quarter profits are being funneled into provisions for the overdue loans.

Banking executives and some government officials are forecasting that rising credit default rates are likely to bring on a second round of the banking crisis.

At a conference on April 8, Gref said nonperforming loans in the banking sector are increasing at a rate of 20 percent a month, making it impossible for lenders to grow their loan portfolios.

Kudrin has said that if bad loan levels in the system exceed 10 percent of total loans, the government may have to dip into the federal budget for additional funds to recapitalize banks.