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UPDATE 1-Russia's Sberbank Q2 net profit up 16.3% on higher interest income, smaller provisions

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MOSCOW, July 31 (Reuters) - Russia's largest lender Sberbank reported a 16.3% jump in net profit in the second quarter to 250.3 billion roubles ($3.95 billion), helped by higher interest income and smaller provisions.

Sberbank said on Wednesday that its net interest income was up 1.2% in the second quarter, commissions income was up 4.2% and provisions for the non-performing loans were down to 9.2 billion roubles compared with 12 billion roubles a year ago.

The bank, which is transforming itself under Chief Executive German Gref to a banking-to-online services company, said that its return on equity, a measure of a lender's profitability, stood at 24.9% in the second quarter, up from 24.4% a year ago.

Alexander Morozov, Sberbank's deputy chief executive, said that the results were supported by expansion of the retail business, its focus on small and medium companies (SME) lending as well as "sustainable growth in the number of digital users".

The bank's loans to the companies were down 3.6% in the second quarter from the end of March, as demand from the large clients slowed. At the same time, loans to small and medium enterprises and retail lending rose by over 5% and 4.2%, respectively.

Sberbank shares were up 0.11% at 0753 GMT, giving it a market capitalisation of $83.6 billion, second to Russia's top gas producer Gazprom with $88.5 billion.

($1 = 63.4125 roubles) (Reporting by Tatiana Voronova; Writing by Tom Balmforth/Katya Golubkova; Editing by Maria Kiselyova and Louise Heavens)