(Adds details on earnings, share price)
MOSCOW, May 24 (Reuters) - Russia's largest bank Sberbank made record quarterly profit of 167 billion roubles ($2.97 billion) in the first three months of the year, helped by cheaper funding and risk management costs as the economy improved.
State-controlled Sberbank has consistently outperformed since 2014, when the Russian economy fell into a deep slump as oil prices plunged and the West imposed sanctions on banks and companies over the Ukraine conflict.
Sberbank holds around a third of total banking sector deposits in Russia, meaning it is less dependent on more costly central bank financing than other Russian banks.
Its pricing power on loans is also unmatched, putting it in a strong position to defend its market share and revenues.
Sberbank's first-quarter net earnings slightly exceeded analysts' forecasts for profit of 160 billion roubles and were more than 40 percent higher than the 118 billion roubles it earned in the same period last year.
Its Moscow-listed shares had risen 0.5 percent by 0812 GMT, outperforming the broader MICEX index which was 0.3 percent lower.
Sberbank - whose access to international capital markets is restricted by the Ukraine sanctions - said its return on equity rose to 23.1 percent in the first quarter from 19.3 percent a year earlier.
Its loan-loss provisions fell to 67.3 billion roubles from 83.9 billion roubles in the first quarter of 2016, reflecting improved loan quality as the Russian economy has emerged from recession.
The bank's interest expenses dropped to 215 billion roubles from 276 billion roubles, helped by lower central bank interest rates.
It said its cost of risk fell to 146 basis points from 170 basis points a year earlier. ($1 = 56.2543 roubles) (Reporting by Alexander Winning; editing by Susan Thomas)