Page 94 - RusRPTAug21

To recap, in 2018-20, monthly TPV also grew at a 50% CAGR and in 1H21 at 81% YTD. In FY21, TCS targets its TPV to double to roughly RUB1.2bn.
Bottom line. TCS is developing its acquiring business by offering SME clients a more tailored range of services, including payment acquiring, installment plans (BNPL, that started in April 2021) and value-added services (such as analytics, merchant dashboards and fiscalisation). That approach brings the group to such peers as Shopify, Square, Stripe and Afterpay. In our view, TCS has good prospects to increase its market share in Russia further by providing technical expertise and value-added services for merchants. International expansion offers additional positive optionality.
Credit Bank of Moscow provides strong exposure to Russia’s bank sector – #2 largest ‘private’ bank (i.e., non-government owned) and #6 by assets in the industry with a 5.5% market share in corporate lending (under RAS, including reverse REPO) and over 20k active corporate and 900k active retail banking customers – Strategy 2023 target is 3mn.
MKB’s 2023 Strategy also targets corporate loan growth at 10-12% (above industry) – acceleration from 2018-20 CAGR at 8.2%. Retail loan growth goal is 20-25% vs 2018-20 CAGR at 15%.
Above industry loan growth, 2021-25 net income CAGR at 10%. In the next 5 years, we expect MKB’s loan growth to exceed the industry average with total gross loans CAGR at 11% 2021-25e, led by retail with a 19% CAGR. By 2025, we expect further growth – we expect NIM to rise 2.6% (vs 2.3% now), and for 2021-25, we see F&C CAGR at 2.2%, CoR to moderate to 1.0% (c1% per Strategy 2023) and CIR to average 31% (30-35% per Strategy), delivering net income CAGR of 10% and strong average ROE of 13%. Strong profitability allows MKB to fill capital organically, given low RWA density of 60% with a CAR buildup to 20.1% by 2025, allowing for a 25% dividend payout for 2021-23 (per new policy) and 30% rise in payout for 2024-25e.
Russia’s baking sector – Tighter NIM, yet low penetration
After the COVID-19 fallout in 2020 (real GDP of -3.1%), 2021 brings a stronger economic environment – GDP growth is forecast at +4.0%, which is solid ground for loan growth, as current penetration is relatively low, especially for mortgages – at 9% of 2020 GDP. The CBR’s monetary policy turned hawkish in 2021, yet, on BCSe, 6.5% for 2021 looks sufficient to spur further loan growth, slightly supporting banking NIMs, dampened by low interest rates. Sector consolidation – the number of banks more than halved in the past 10 years – allows large players, including private ones, to capture market share. On the regulatory front, focus is on retail’s debt burden – even stricter RWs on unsecured loans may be expanded over secured products if risks of a bubble arise.
Valuation: Attractive 2021e P/E of 5.9x for 14% ROE
At a 2021e P/E of 5.9x and P/BV of 0.8x, CBOM offers a 51% and 35% discount to EMEA peers, respectively – attractive for a 14%
94 RUSSIA Country Report August 2021 www.intellinews.com