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adjustment on IFRS9, providing expectations of normalized CoR in 2Q20. 4M20 CoR totaled 1.6% – still far below 2014’s level of 3.3%. OpEx growth stayed high at 10% m/m in April, albeit -24% y/y in 4M20, with CIR level of 42% Also, yesterday, the CFO commented on dividends for 2019, saying the decision on the size will be determined by CAR ratios as of 30 June and accounting for future forecasts. To remind, the AGM on 2019 results was postponed until September.
BCS Global Markets increased the target prices for shares of TCS banking group to $24 per GDR and RUB160 per share, helped by lower interest rates and updated forecasts. But the analysts still see -1% excess return and have maintained the Hold recommendation on the name. As reportedbybneIntelliNews, asinadditiontothecoronavirus(COVID-19) crisis, TCS shares were under pressure, the group's founder Oleg Tinkov is facing tax fraud charges in London and had to transfer its shares into a blind trust and step back from management after he was diagnosed with leukaemia. But TCS Group, which operates Russia's only online bank Tinkoff, reported net income of RUB9bn ($122mn) under IFRS for 1Q20, gaining 21% year on year and down by 18% quarter on quarter, and beating the consensus expectations by 27%. BCS GM notes that TCS was most negatively affected during the April-May lockdown by card transaction volumes, mostly in offline, and lower turnover of SME customers, but maintained stable online activity. "Already in late May, TCS reported a continued stabilisation or mild improvement across business lines, and a selective increase in approval rates in June. Despite the headwinds, TCS acquired 1mn new current account customers in 1Q20," BCS GM writes.
8.2 Central Bank policy rate
The board of the Central Bank of Russia (CBR) cut the key interest rate by 100bp from 5.5% to 4.5% at the policy meeting of June 19. The cut is four-fold larger than the minimum step of 25bp and was largely anticipated by the market, as the CBR has signalled it is ready to accelerate the monetary easing cycle.
As reported by bne IntelliNews, on April 24 the CBR cut the interest rate by a double step of 50bp to 5.5%, announcing a "shift to the soft monetary and credit policy cycle" and allowing for further cuts at subsequent meetings. The Governor of the CBR, Elvira Nabiullina, then guided for a cut of as much as 100bp in June.
bne IntelliNews had a lready suggested at the onset of the monetary easing cycle that the CBR could flip from its strict tight monetary policy to front-loaded interest rate cuts. The 4.5% key refinancing rate effectively is the cheapest borrowing rate in modern Russian history.
"CBR throws in the towel on their Fortress Rossiya monetary policy stance," Tim Ash of Bluebay Asset Management reacted on June 19, stressing that given the CBR's "past penchant for Uber Orthodoxy, doing a 100bp cut is a massive statement." Helping post-COVID recovery The lower rate is aimed at lowering the cost of credit for both the population and businesses, including mortgage loans. Over-credited borrowers would be able to refinance at lower rates, which would release funds for consumption and investment, the analysts surveyed by Reuters believe.
82 RUSSIA Country Report July 2020 www.intellinews.com
