Page 97 - RusRPTMar21

impairments on non-core assets and continued core asset growth in FY21, this should help VTB's net profit soar to RUB250-270bn in FY21, according to management’s guidance.
The other lines of the bank’s FY21 guidance are:
· Corporate loan growth of c. 5% y/y.
· Retail loan growth of c. 10% before any securitization.
· A 30% y/y decline in NIM.
· Net fee income growth of more than 10% y/y.
· C/I ratio of c. 40%, with opex growth expected to be above CPI but
below 10% y/y.
Mr. Pianov hinted that there could be some upside to the bank’s FY21 cost of risk/net profit guidance due to the current conservative approach to loan loss provisions and real estate valuation, as:
· The macro factor-driven provisions of RUB16bn have not yet been released.
· Leading indicators of retail asset quality are showing visible improvement.
· The current fair values of real estate objects are conservative.
Management once again confirmed the bank’s plan to increase its dividend payout ratio to 50% starting with the FY20 results-based distribution. This implies a dividend yield of 4.1%, on our calculations. Mr. Pianov also floated the idea of splitting the payment of the FY21 dividend into several tranches if there is pressure on capital adequacy ratios in mid-2022, as the FY21 dividend is expected to be much higher. However, the recent and planned sub-debt placements and favorable amendments to risk-weighted asset calculations in some asset classes are expected to allow VTB to pay the FY21 dividend in one go in the base case.
As a result, VTB remains one of our top picks for 2021, as we see the improvement in its profitability on the back of lower provision and impairment charges pushing up the share price. The next catalyst is the 2M21 IFRS results release in late March or early April.
8.2 Central Bank policy rate
The board of the Central Bank of Russia resolved to keep the key interest rate unchanged at 4.25% at the first policy meeting of 2021 held on February 12. This makes the fourth time in a row that the CBR keeps the rate flat, since September 2020, after a cutting cycle of 2 percentage points last year.
The CBR has expectedly defied the recommendations of the International
97 RUSSIA Country Report March 2021 www.intellinews.com