Page 100 - RusRPTMay21

charges declined 85% y/y, driven by revaluations and a net provision release. As a result, the bank posted earnings of RUB305bn (up 153% y/y), implying a 23.7% ROE.
Balance sheet. Mortgage growth accelerated to 24.1% y/y. However, the expansion of the corporate portfolio decelerated to 5.7% due to significant repayments. The share of term deposits was up again, to 65%, driven by the corporate segment.
Asset quality. The share of 90D+ NPLs stayed flat q/q at 4.3%, but CoR declined to only 40bp due to a repayment of loans and a net provision release in mortgages as the quality of borrowers improve. In our view, this result is unsustainable, but we still see CoR below the targeted 100bp in coming quarters.
Management FY21 outlook. SBER has increased its guidance for FY21 ROE to more than 20% by cutting its CoR outlook to 100bp. Its target for revenues from the non-banking business is up to more than RUB200bn and for opex to 10-15% y/y growth. CET1 CAR is to be around 14%.
Capital position. RWA density improved to 91.8% from 94.7% at YE20, which, together with higher capital, helped CET1 CAR to improve 47bp q/q to 14.3%, or in line management’s FY21 target.
Bottom-line. We saw the conference call as reassuring, and the guidance as reasonable. In our view, CoR will remain below 100bp in coming quarters amid good asset quality. So far, the target of more than RUB200bn revenue from the non-banking business seems to have been too aggressive, or to imply an aggressive investment in customer and market share acquisition to achieve top line targets and scale in a highly competitive sector.
Changes in forecasts. Our 2021-22F EPS forecasts are up 3-4% and our 2023F estimate is down 3%, due to changes in our assumptions for CoR and loan growth.
Valuation and risks. The bank is trading at 6.5x 2021F P/E and 4.3x P/PPP, which is undemanding given the 19% ROE. Risks stem from macroeconomic development and M&A activity.
In March 2021, Sberbank’s earnings grew a robust 66% y/y to a record RUB103bn and implied 24.6% ROE. In 1Q21, earnings were up 29.2% y/y to RUB283bn (implied 23.6% ROE). The major support came from loan portfolio growth and the lower provision charge, as the bank does not see a reason to create an additional provision. We see its strong start to the year as a positive cross read for the 1Q21 IFRS results that Sberbank is to publish on 29 April.
100 RUSSIA Country Report May 2021 www.intellinews.com