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higher provisions under prudential requirements limited total capital growth.
Bottom line. Unlike in 2014, the state support for banks is to be limited, with restructuring costs a significant burden on earnings. While Sberbank is still on track to pay a 2019 dividend (likely to be delayed until YE20), we think the market discounts the downside risk to its 2020 earnings/dividends, as well as the negative operating leverage amid ongoing IT investments. Based on 2020F P/PPP’- of 3.5x, Sberbank trades in line with the across the cycle average only, pricing in a V-shape recovery, offering little margin of safety.
8.1.3 Bank news
Russian banker Oleg Tinkov, who is currently fighting an extradition request from the US from the UK on allegations of underreporting his income, has announced he will resign from the board of directors of Tinkoff, the bank he founded, RIA Novosti reported. Tinkov said he would leave the board of the Tinkoff Bank in the coming weeks and explained his decision by his wish to “focus on his health.” Earlier, the 52-year-old banker revealed that he was suffering from an acute form of leukemia. “I have always considered my stake in Tinkoff as a long-term strategic asset that my family and I want to keep for the future,” the statement reads. “This will keep the shares in the family under any possible circumstances, even in the event of my death,” Tinkov said, adding that the transfer of ownership rights came into effect on March 19. Last month, Tinkov was detained and released on bail in London pending extradition hearings to the United States. The US Department of Justice (DOJ) accuses the Russian businessman of failing to report and pay taxes when he renounced his US citizenship in 2013, right after the initial public offering of his bank’s shares on the London Stock Exchange. According to the DOJ papers, the banker allegedly concealed $1bn in assets and income as he reported his income that year was less than $206,000, and his net worth as $300,000.
8.2 Central Bank policy rate
The Central Bank of Russia (CBR) has followed its Emerging Markets peers' suit and delivered on its guidance to start cutting the key interest rate to support the economy in the unprecedented coronavirus (COVID-19) crisis.
The board of the regulator resolved at the policy meeting of April 24 to cut the interest rate by a double step of 50bp to 5.5%, announcing a "shift to the soft monetary and credit policy cycle," allowing for further cuts at the next meetings (the next one is scheduled for June).
Inflation in check, despite weak oil and ruble The inflation-minded CBR commented that the anti-COVID-19 measures will have a "significant and prolonged" disinflationary effect.
At the same time, for three days leading up to the CBR's policy meeting the regulator has been selling record-high volumes of foreign currency in daily interventions to support the ruble (over $300mn on April 23, $220mn on April 22 and $200mn on April 21).
But the CBR still believes that the plunge in demand will overwhelm even the
80 RUSSIA Country Report May 2020 www.intellinews.com
