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than 22% vs. the previous estimate of more than 20%. A more detailed, line-by-line guidance update is likely to be released prior to today’s conference call.
We expect SBER's strong results and FY21 ROE guidance upgrade to act as a positive catalyst for the stock. We keep SBER on our list of top picks, as it trades at 2021E-22E P/BVs of 1.2-1.1x despite the updated management guidance for its FY21 ROE being above 22%
SBER announced that it had closed a deal to sell Eurocement for RUB 161bn, with the gain from the sale to be booked in SBER’s 3Q21 IFRS results. SBER had earlier foreclosed upon and become the sole shareholder of Eurocement, one of Russia's largest cement manufacturers. Eurocement’s net book value in SBER’s 1Q21 IFRS accounts was RUB 81.6bn. SBER highlighted in its press release that “the deal will have a positive impact on the Group's financial performance and will be reflected in Sber Group's IFRS Report for Q3 2021.” However, the total positive P&L impact will likely be smaller than the gain from the sale itself, which should be c. RUB 80bn before tax based on the announced deal value and the net book value of Eurocement's holding in SBER's books outlined above. The gain from the sale will likely be partially offset by loan loss provision charges on the debt financing provided by SBER to the buyer. Earlier press reports estimated the amount of such financing at c. RUB 120bn. We think that SBER could follow a conservative approach to provisioning, taking into account the fact that its entire credit exposure to Eurocement was an NPL before it was foreclosed upon, suggesting that it would also lead to loan loss provision charges. Consequently, the total positive P&L effect from the sale could be c. RUB 40bn before tax, we think, if accounting for these provision charges.
Sber has published its Environmental, Social, Governance and Sustainability Policy. The document enshrines the key framework elements for Sber’s sustainable development, including its main goal, areas, principles, action lines, and targets where Sber’s business has most significant impact, and makes basis for management of ESG activities and engagement with stakeholders.
The Policy describes Sber’s contribution to the achievement of relevant UN Sustainable Development Goals.
The Policy was prepared in line with expectations of the key stakeholder groups (investors, shareholders, clients, employees, NPOs), as well as expert community, recommendations from rating agencies, Russian legislative norms, and regulatory requirements. An extensive consultation process with engagement of all stakeholders was organized during the drafting stage of the Policy.
Sber’s main goal in sustainable development is to be at the forefront of systemic changes in ESG on the national and international levels in order to foster an economy of prosperity that is effective for society and the preservation of the environment and is founded on the interest, cooperation, and creativity of Sber’s employees, clients, investors, shareholders, partners, and the state.
The achievement of this goal is based on seven principles:
90 RUSSIA Country Report August 2021 www.intellinews.com