Page 57 - RusRPTOct19

8.1.8 Sberbank news
Russian Accounting Standards (RAS) net profit of Russia's largest bank Sberbank stood at RUB74bn, down 3% month-on-month in August and 3 6% year-on-year. In 8M19 net income increased by 10% y/y to RUB541bn ($8.2bn). BCS Global Markets estimated Sberbank's return on equity in the reporting month at 24%, seeing the results as "quite strong". "The last month of the summer revealed mostly the same trends with stable NIM [net interest income] and CoR [cost of risk]," BCS commented on September 6 while maintaining the Buy recommendation at target price of RUB310 per share for Sberbank's shares. "NIM remained stable at 5.3% and we expect some pickup into September, especially given another 25bp CBR’s key rate cut," the analysts argue, noting that retail lending remains strong with 1.7% m/m growth in August, supporting NIM. The CoR remained stable at +1.6% in August. Sberbank's operating costs grew 8% for 8M19 due to staff reallocation from Sberbank Technologies and also driven by annual wage increase and VAT change. Last week BCS GM has upgraded the target share price on Sberbank downwards from RUB330 to RUB310, incorporating the loss from the sale of Turkish Denizbank, but still seeing the name "as attractive on dividends and valuation."
In August 2019, Sberbank's earnings grew 2.9% y/y to RUB74bn, which implied 21.8% ROE. The solid performance came on the back of improving F&C growth and decelerating opex growth. In our view, in 3Q19 the negative trends, including lower asset yields, might prevent further NIM growth q/q. However, we see the bank staying on track to deliver on its FY19 guidance, despite the potential normalisation of CoR. We consider the results to be neutral and reiterate our 12- month Target Price of RUB390 for ords and Buy recommendation (78% ETR). Opex growth decelerates. For 8mo19, NII was down 1.4% y/y, affected by the increased cost of funding at the beginning of the year, lower money market operations yields as a result of dividend payments and lower floating rates filtering through, as the CBR cut the key rate, with 12-month rolling NIM down 5bp m/m to 5.9%. However, the bank said that client funding costs started to decline from June 2019, which is likely to balance negative trends that might prevent NIM growing in 3Q19. Net F&C growth improved to 5.0% y/y, from 3.6% y/y in July, as the negative effect from loyalty programme expenses started receding. The growth in operating expenses decelerated to 8.2% y/y as the effect from moving IT personnel faded, and only salary double indexation remains. Meanwhile, CoR stayed high in August (at 156bp, also due to the 20bp FX effect from the 4.7% weaker ruble) moving 3mo rolling CoR up 22bp m/m to 117. However, the 12mo rolling CoR continued to go down to 76bp, which is well below the FY19 guidance for the group (100-110bp), providing room for further CoR normalisation in 2H19. Earnings totalled RUB593bn (imply 22.1% ROE) supporting our FY19F forecast of RUB885bn. Loan portfolio continued solid growth. Retail loan growth accelerated to 1.7% m/m, but y/y growth decelerated slightly to 19.4%. Corporate loans were up 2.0% m/m (0.7% without FX revaluation). It declined 1.8% y/y, but management expects that strong growth in the remainder of the year will help to increase this to single digit growth by YE19. Customer accounts grew 6.6% y/y, with net LDR at 92%. Capital position. The bank's N1.0 ratio declined 2bp m/m to 14.7%, while the N1.1 ratio was down 18bp m/m to 10.2%. Yet they stayed well above the minimum capital requirements for the bank.
57 RUSSIA Country Report October 2019 ww.intellinews.com