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March 1, 2019 www.intellinews.com I Page 4
Rosneft was until recently briefly Russia’s most val- uable stock on the back of outsized profits in 2017, but the appeal has fallen back now and it is out
of favour, as investors are concerned about pos- sible write-offs connected to the Venezuelan crisis, where the company has significant projects.
Sberbank retakes Russia’s equity King of the Castle title
Sberbank’s CEO German Gref can take a lot of credit for that. The former economics academic drew up the so-called Gref Plan in 2000 and was tasked by Russian President Vladimir Putin personally to put it into action. Gref had mixed results, but the now forgotten episode was
the first attempt to systematically reform the workings of the Russian economy since the fall of the Soviet Union. Gref’s predecessor Yegor Gaidar did big things like free prices, as recommended by the International Monetary Fund (IMF), but Gref started on the little things like reducing the number of permits needed to start a business.
Gref brought the same thinking to Sberbank, which was the epitome of a Soviet institution when he took over. The bank had tens of thousands of shabby branches across the entire territory of the country, with famously surly staff. Gref cut the number of branches by two-thirds, introduced
one of the most sophisticated IT systems in all
of Europe, spruced up the bank’s office and put the bank into handsome profit. Sberbank now regularly earns over 20% return on equity – one of the highest in the sector – and made RUB811bn ($12.4bn) in profits, a massive 78% increase y/y. Gref is confident this year the bank will easily clear the trillion rubles ($15.3bn) of profit mark and no one really doubts him.
The bank’s stock has soared along with the trans-
Gas producer Novatek has also become the fo- cus of investors as its investments into LNG go from strength to strength. The company is again on investors’ radar, according to BCS, ahead of the anticipated sale of a stake in its Arctic LNG 2 project.
formation, making Sberbank the most valuable company in Russia. But as bne IntelliNews report- ed in its cover story in October 2018 “Who’s king of the castle?” the bank was overtaken by Rosneft, which took the mantle of “most valuable company in Russia” in the last quarter of 2018.
Oil prices surged in the second half of last year and Rosneft was on a roll. The oil major is also widely profitable, making more money in just the first quarter of 2018 than it made in all of 2017 as oil prices surged.
And adding to the dynamic, the US government has threatened to impose “crushing” sanctions
in Russia that autumn raising speculation these would target Sberbank directly and could cut it off from the western financial system entirely. Many investors decided to play safe and take profits.
Nothing happened in the end as the debate on the sanctions was delayed because of the mid-term elections, but now the elections and holidays are over the draft bill was reintroduced last week.
Despite the fears Sberbank overtook Rosneft again at the end of January as equity investors drift back into the Russian market. The leading dollar denominated Russia Trading System (RTS) index is currently up by 10% YTD and the ruble denominated Moscow Exchange Index (MOEX) up by about 6% as fresh funds arrived on the back of improving sentiment for emerging market stocks since the start of this year.
The capitalisation of the state bank exceeded RUB4.51 trillion against Rosneft’s market cap of RUB4.46 trillion as of the end of January.