Page 101 - RusRPTMay21

We maintain our 12-month Target Price of RUB420 for ords. Buy reiterated (56% ETR).
Operating results. NII grew robustly in both March (12.5% y/y) and 1Q21 (13.4% y/y) amid loan growth, the lower cost of funds, lower DIA payments and an increase in the securities portfolio, coupled with the positive effect of the CBR key rate increase on floating coupon securities. Still, NIM continued to decline: in 1Q21, it was down 16bp q/q to 5.5%. Net F&C income growth decelerated amid the one-off in March 2020. Meanwhile, in 1Q21 management estimates net of one-offs opex growth at less than 3% y/y vs. the 10% y/y target under IFRS. The 1Q21 earnings of RUB283bn (up 29.2% y/y) implied 23.6% ROE, which is in line with the FY21 IFRS target of more than 18% ROE.
Balance sheet. Corporate loans were flat m/m (net of the FX effect) amid large repayments. Meanwhile, retail loans posted record growth, driven by cash loans increasing 3.0% m/m and the 1.9% mortgage growth. However, net LDR stayed below 100%, at 98%.
Asset quality and risks. In 1Q21, CoR (net of the FX effect) totalled 80bp vs. the reported 97bp, or significantly below management’s FY21 guidance of 120-140bp. That is in line with our view that management conservatively estimates CoR. The share of overdue amounts stayed flat q/q, at 3.2%.
Capital position. The audit of the FY20 financial results boosted N1.1 up 2.2pp to 13.3%, while N1.0 grew 11bp m/m at 15.0%
Bottom line. In 1Q21, Sberbank’s banking business got solid support from strong loan growth, stable asset quality and tight cost control, which in our view will be reflected in IFRS results too. We continue to see downside risks for management’s FY21 CoR outlook. Meanwhile, during the 1Q21 IFRS results presentation on 29 April 2021, we expect the main focus will be on the performance of the bank’s non-banking business and management’s outlook for core income growth.
8.1.8 Bank news
VTB has published 2m21 IFRS results. Overall, the numbers support the management's guidance of markedly improved earnings this year, with a good showing across the board on the P&L in the first two months. They should be supportive for the stock as well. Net income for 2m21 was R58 bln, up 51% y-o-y with 20.4% ROE, backed by strong revenues and cost control and low risk costs. NII was up 24% y-o-y in 2m21, with NIM up 10 bps y-o-y at 3.7% (running above VTB's 2021 guidance of around 3.5%). Fee income was strong, up 36% y-o-y. On the balance sheet, gross loans grew 0.4% over
101 RUSSIA Country Report May 2021 www.intellinews.com