Page 79 - RusRPTMay20

was set up in April that year and is a mechanism to impose a Chinese wall between the regulator and the banks it controls.
In February CBR governor Elvira Nabiullina ​repeated plans​ that the CBR intends to start selling the shares in Otkritie and Trust banks off in 2021 to interested parties. However, due to the current crisis – the largest since 2008 – those plans are likely to be delayed now. The CBR is hoping to recoup the RUB2 trillion it injected into these banks to prevent a banking sector systemic meltdown.
The CBR has not made up its mind on how to dispose of the banks, but according to a Russian banker who spoke to Reuters, the central bank is leaning towards an initial public offering of Otkritie and does not want other state lenders to buy Otkritie.
Sberbank has reported March 2020 RAS earnings of RUB62bn ​(-16.5% y/y, 15.8% ROE) with 1Q20 earnings at RUB219bn (+0.2% y/y, 19.5% ROE).
The March data shows the first impact of the crisis, with RUB falling 14% m/m and 17% y/y, and the impact of COVID-19 to be reflected from 2Q20. Given the increased uncertainty over the outlook, we see the 1Q20 numbers as largely irrelevant and put the stock Under Review. After its recent bounce, Sberbank is down 23% YTD, pricing in earnings to contract only 12% (vs. the 17% y/y drop in March).
Operating performance​. In 1Q20, core income grew a robust 13.3% y/y amid asset growth and the transfer in demand due to increased customer activity. Meanwhile, NIM was down 13bp q/q. Opex went up 3.7% y/y as there were fewer working days and lower business activity, but we do not think this growth is sustainable.
Provision charges grew notably amid the FX factor (RUB64.5bn in March) and the reassessment of some loans. Thus, earnings stayed flat y/y at RUB219bn, implying 20.7% ROE.
Balance sheet​. The significantly weaker RUB(14% m/m and 17% y/y) fuelled corporate loan growth to 5.4% m/m (excluding the FX factor, the growth was only 0.4% m/m). Customer accounts went up 4.7% m/m, but their FX-adjusted growth was at 0.7% m/m for corporate accounts and 0.5% m/m for retail deposits. The spike in consumption related to a weaker RUB, expectations of an interest rate hike and the coronavirus lockdown fuelled demand for retail loans, which grew 1.1% m/m (of, which mortgages 0.6%, consumer loans 1.9% and credit cards 1.3%). We expect growth to decelerate in April amid the lockdown and demand shifting to March.
Asset quality​. In 1Q20, CoR reached 363bp although the share of overdue amounts increased only 6bp q/q. The main effect came from the weaker RUB. Meanwhile, a reassessment of loans started in March, mainly on the corporate loan book and we expect provisioning to remain elevated, at least for 2Q20, as the restructuring effect is to be reflected. As a result, we might see CoR go up to 2014-15 levels, which under IFRS was at 250-300bp.
Capital position​. The bank’s N1.1 improved 2pp m/m to 12.4% amid the inclusion of audited earnings. N1.0 slid 20bp m/m as RWA grew 1.8% m/m amid the FX revaluation and the annual recalculation of operating risk, while
79​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com