Page 88 - RusRPTAug21

that adjustable rate loans must exceed a certain threshold in size to be determined by regional income levels. They’re only giving the richest Russians able to hedge interest rate risks access to these loans, but it’s unclear why they need this financial innovation at this stage, particularly since adjustable rates introduce more risk. On the whole, it’s a positive development insofar as Russian financial markets and banks need to do more to develop these types of offerings. That so few will have access to it suggests there are serious concerns about the quality of consumer debt portfolios and the need to manage the “debt comedown” whenever we can really say a “post-COVID” recovery begins in Russia.
8.1.8 Sberbank news
In June 2021, Sber’s RAS earnings grew 4.8% m/m to RUB107bn and implied 27.2% ROE, given strong opinc growth and the net provision release on the back of a stronger RUB(1.7% m/m).
In 2Q21, earnings were up 10.6% q/q to RUB312bn and implied 25.7% ROE, mainly due to low provision charges. In our view, the strong RAS data creates a positive cross read for Sber’s IFRS numbers (due on 29 July). We expect another cut in the CoR guidance (currently at 100bp vs. 63bp in 1H21 and our forecast of 69bp). We are 8% above today's Bloomberg consensus on FY21 earnings. Our 12-month Target Price for ords is unchanged, at RUB390; Buy reiterated (37% ETR).
Solid operating performance. In 2Q21, NII grew 4.1% q/q, while NIM expanded 3bp q/q to 5.53% with the help of the low cost of funding and corporate asset repricing on the back of the CBR’s key rate increases. Net F&C income increased 15.4% q/q (vs. the FY21 guidance of approximately 10% y/y growth). Opex was up 10.6% q/q and 8.3% y/y, or broadly in line with the FY21 guidance of a 10-15% increase. The stronger RUB(1.7% m/m and 4.6% q/q) resulted in a net provision release in June 2021 and a 67% q/q decline in the provision charge in 2Q21. As a result, Sber’s 2Q21 earnings were up 10.6% q/q to RUB312bn and implied 25.7% ROE, while in June 2021, earnings were up 4.8% m/m to RUB107bn (27.2% ROE).
Balance sheet. Corporate loans grew 0.9% m/m, excluding the FX effect, while the 2.8% m/m increase in mortgages and a 2.6% increase in unsecured loans supported retail loan book growth. The strong inflow of corporate client funds kept the LDR ratio at 105%.
Asset quality. The share of overdue amounts increased to 3.2% due to the growth in the corporate segment. However, 3mo rolling CoR dropped to 31bp amid the net provision release in June driven by the FX effect. 6mo CoR was at 63bp which, in our view, signals a further reduction in management’s FY21 guidance (from 100bp at rpesent).
Capital adequacy. N1.1 was at 12.0% (up 5bp m/m) as 6mo21 earnings are yet to be audited, while N1.0 increased 35bp Mo to 14.6%.
88 RUSSIA Country Report August 2021 www.intellinews.com