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bne Invest
May 31, 2019 www.intellinews.com I Page 10
Shares of Russia's second-largest bank VTB jump on game changer dividend move
Russia's second-largest state-controlled
bank VTB Bank said it has included a switch to a new dividend strategy for 2019-2022 that would see dividend payments rise to 50% of IFRS net profit, Interfax reported on May 23 citing the un- published presentation to investors and analysts. The company’s stock soared 10% on the news.
This would make a major boost in dividends as for 2018 the bank paid 15% of IFRS profit. Rus- sia's largest bank and investor darling Sberbank said in April it would pay 43.5% of IFRS net profit in dividends for 2018, which was still shy of the 50% mandated by the Ministry of Finance for all state-owned enterprises.
As of the announcement the shares of VTB on
Moscow Exchange jumped by 10%, beating the maximum share value since November 2018 and bringing the bank's capitalisation to RUB502bn.
The new dividend payout of 50% already for 2019, is a "game changer for VTB, given attractive DY [dividend yield] and thin positioning of the inves- tors," BCS Global Markets commented on May 24, estimating that the 50% payout implies DY for ordinary shares of 9% for 2019 and up to 11% for 2021 on expected net profit of RUB200bn.
VTB expects to see its bottom line at RUB200bn in 2019, RUB230bn in 2020, RUB270bn in 2021, and RUB300bn in 2022. However, BCS GM notes that "the history of VTB’s divi payouts is volatile – 61% for 2017, 15% for 2018 and execution is the risk."
Russia's Sberbank targets new dividend policy for 2021, to cut mortgage rates
At the annual shareholder meeting the CEO of Russia's largest state-controlled bank German Gref unveiled the plans to introduce a new dividend strategy beyond 2021, which will target payout at over 50% of IFRS net profit and possibly pay interim quarterly or semi-annual dividends.
Under current dividend strategy of Sberbank for 2018-2020, the bank said it would pay 43.5% of IFRS net profit in dividends for 2018, which was still shy of the 50% mandated by the Ministry of Finance for all state-owned enterprises.
"[Dividend] payout growth is a logical development given solid profitability and capital build-up," BCS Global Markets commented on May 27, noting that the BCS valuation model already accounts
for 55% payout from 2021. At the same time "interim payments may be a positive development, reducing share volatility."
Last week the shares of Russia's second-largest bank VTB Bank jumped on the announcement of switching to a new dividend strategy for 2019-2022 that would see dividend payments rise to 50% of IFRS net profit.