Page 90 - RusRPTNov20

Bank St. Petersburg published its 3Q20 standalone RAS results on October 12​. Quarterly net profit changed little q/q and remained at RUB2.2bn, although it added 52% in y/y terms since BSPB posted a trading gain of RUB3.7bn in 3Q20 compared to a trading loss of RUB0.4bn in 3Q19. However, a large part of the 3Q20 trading gain reflects the FX revaluation of loans and provisions, and the latter is simultaneously reflected as a loan provision charge.
Largely, but perhaps not entirely, because of the FX revaluation, cost of risk surged to 3.5% in 3Q20 from 2% in 2Q20, which was still below the 4.1% reached in 1Q20. The overdue loan coverage ratio increased to 2.06% in 3Q20 from 1.87% in 2Q20.
In 3Q20, NIM on total assets moderated by c. 20bps, on our calculations, despite the decline in market interest rates, which pulled down cost of funding. This might be because of BSPB's pivot to lending to large corporates at lower rates starting in 2019. As a result, quarterly NII was virtually unchanged y/y in 3Q20 despite gross loans surging more than 20% y/y. Growth was more pronounced in net fees and opex, which rose 12% y/y and 10% y/y, respectively.
The N1.1 (CET 1) statutory capital adequacy ratio lost 1ppt q/q over 3Q20 against the backdrop of the weak ruble and the double-digit growth of the loan book. We therefore keep our base case of a low probability that a sizable FY19 dividend will be distributed this year. A board meeting on capital distribution should take place in late October or November, according to previous statements by management.
Because of the high cost of risk, the y/y moderation in NIM and the q/q drop in the N1.1 ratio, we view the results as mixed despite the surge in trading revenue. A major driver for BSPB's investment case could be a significant drop in cost of risk (e.g. to below 2%) and a similarly forward cost-of-risk guidance, although we do not expect this until 1Q21.
8.2 ​Central Bank policy rate
The board of the Central Bank of Russia (CBR) at the second last policy meeting of 2020 on October 23 resolved to keep the key interest rate unchanged at 4.25%, in line with expectations.
As reported by ​bne IntelliNews,​ the CBR kept the key interest rate flat at 4.25% in its policy meeting of September 18.​ ​Inflation remains in check​, and the bank struck a ​conservative note due to rising geopolitical risks​. Mounting fears of impact of second wave of coronavirus (COVID-19) are also likely to keep the rate flat.
90 ​RUSSIA Country Report​ November 2020 www.intellinews.com