Page 89 - RusRPTNov20

8.1.8 ​Bank news
VTB CFO Dmitry Pianov announced an FY20 net profit guidance of RUB75bn, as well as plans for FY21-22 net profit to be RUB250bn and RUB300bn, respectively​. Pianov also reiterated the bank’s intention to resume paying out 50% in dividends starting with its FY20 results-based distribution.
Pianov updated the bank’s FY20 net profit guidance and FY21-22 net profit objectives:
FY20: RUB70-75bn
FY21: RUB250bn
FY22: RUB300bn
Pianov also reiterated the bank’s plan to resume paying out 50% of net profit in dividends starting with its FY20 results-based distribution. Assuming net profit of RUB75bn, this may imply a dividend yield of c. 4% for ords, based on our calculations.
As for capital use on top of dividends, VTB has started discussions with MinFin to reduce the amount of prefs that MinFin owns. We think the most likely way for this to proceed is for VTB to start gradually buying them back at par if the bank’s FY21 performance is in line with its updated guidance.
There were also comments on asset quality:
· The FY20 cost of risk is expected to be double the “strategic objectives”. In our view, this suggests that it could be close to 2.5%, the level already guided for in the FY20 retail loan cost of risk.
· The bank expects corporate cost of risk to spike in 3Q20.
· After this, cost of risk is seen as “normalizing” in FY21, thanks
in part to recoveries of some provision charges. This, we think,
implies a drop in cost of risk to the 1% area in FY21.
· VTB no longer views Mechel as a problem borrower after the
latter sold its Elga mine. The provision rate against the Mechel
exposure is in the low double digits.
· We view Pianov’s statements as positive for VTB, and we
maintain a BUY on the stock. The current FactSet consensus for FY21 net profit is RUB131bn, while management expects the bank to earn RUB250bn. We therefore expect a series of positive catalysts for VTB unless Russia sees full lockdowns in major regions. VTB is likely to report its 3Q20 IFRS results in early to mid-November.
89 ​RUSSIA Country Report​ November 2020 www.intellinews.com