Page 81 - RusRPTJul20

· In 2020, the bank will not be able to reach its target of RUB1tn earnings given the additional COVID-19 related provisions in the last three months and lower income on the back of restructuring. Meanwhile, we read this as a sign that Sberbank took most of the hit in 1H20 and that, if there is no second wave of infections, we shall see a recovery in 2H20. As a result, we note a 10+% upside risks to our estimate of a 42% y/y decline in 2020F earnings.
· The cost-cutting programme was increased to RUB82bn (12% of opex), from a RUB40bn cut initially, by reducing management salaries (in addition to lowering the variable part of the compensation), while it has avoided a cut in the headcount and has frozen new hiring. The bank has also reviewed its capex programmes for repairs and delayed the launch of some new ecosystem products until autumn 2020 and 2021. However, IT capex is intact. In our model, we see 2020F opex down 3% y/y (having previously expected 12% y/y growth).
· Gref commented on the recently announced divorce from the joint venture with Yandex, saying that the increasing direct competition with the former partner’s ecosystem made both parties take this decision. In our view, the Sberbank / Mail.ru O2O JV directly competing with a number of Yandex products was the main reason for the drift.
· Management is upbeat about 2019 dividends, seeing the bank surviving the critical situation without a massive hit. The budget is to get the dividends needed to finance social expenditures, including healthcare. Management is to suggest the 2019 dividends to the BoD in August, and we see a 50% DPR as a base case scenario. The AGM is to take place in September.
· What are Gref's plans for 2030? Definitely not in Sberbank and he does not want a new, big corporate job. His current contract is for four years, expiring in 2023 (the end of the soon-to-be-presented Three-Year Strategy). Gref said that his worst nightmare would be a return to working in the government.
Bottom line. Overall, the interview is slightly positive. i) There is a high chance of the initially planned 2019 50% DPR materialising (implies a 9.25% yield). ii) Provisions are to peak in 2Q20 (in line with our model). iii) A milder crisis implies a moderate 10% upside risk to our 2020F earnings. We reiterate our Buy recommendation as our unchanged 12-month Target Price of RUB270 implies a 42% ETR.
8.1.8 ​Bank news
VTB released interim 4M20/Apr IFRS results​. NII slid 3% m/m, with 3.7% NIM in April – loans mostly unchanged – affected by ruble appreciation of 5% on the corporate side. Still, 4M20 NII growth looks strong at 16% y/y, with NIM of 3.6%, helped by key rate cuts Fees fell 50% m/m in April and remained high at 27% y/y in 4M20 – April was a full month of lockdown, affecting clients’ activity CoR declined to 1.7% in April after 5.4% in March, attributed to macro
81​ RUSSIA Country Report​ July 2020 ​ ​www.intellinews.com