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34 I Special focus bne October 2018
state backing, means the bank’s shares have become something of a “tourist stock” – if you are going to Russia and have to invest into something because Russia is in your index, then you buy Sberbank before you buy anything else.
Sberbank reported a whopping 38% year-on-year increase in IFRS net profit in 2017 to RUB748.7bn ($13.3bn)
and another RUB202bn in the second
quarter of this year for a strong 23% return on equity. And Gref said earlier this year he wants to bring the bank’s profits up to RUB1 trillion a year soon.
Dividend payments have been
rising even faster than profits. The bank made a record-high dividend payment of RUB271bn ($4.4bn) for 2017, doubling the 2016 payout of RUB135bn in absolute terms. "I think
[Sberbank shares] were one of the
most profitable investments of last year," Gref boasted, as cited by Interfax. That’s a dividend yield of 36% for 2017, up from 25% paid in 2016.
Analysts are speculating that Sberbank could start paying a 50% of profits dividend yield as soon as next season.
Despite the more than doubling of the bank’s share price from a low of $4.17 in 2015 to $10.89 as of the end of August, analysts still have Sberbank marked as
a buy and 102% upside potential on its target price of RUB360.
But there is another name that has attracted investors’ attention in the banking sector: Tinkoff Bank is a minnow to the Sberbank whale. The bank was set up as Russia’s first pure online-only bank by serial entrepreneur Oleg Tinkoff, and it has flourished. The idea was that by eschewing the Central Bank of Russia (CBR) regulated bricks and mortar of a traditional bank the bank could significantly cut its costs
and so undercut every bank on the high street. Starting out by just offering credit cards that carried lower rates than the rest, the bank has grown fast as Russia’s retail sector increasingly goes online.
The bank IPO’d in 2013 raising $1.1bn
at a start price of $17.2 per share, but
it was caught up in the firestorm that followed the Kremlin’s annexation of the Crimea in 2014 when its stock fell to $1. Since then as frayed nerves repaired themselves investors have come back from looking at Russian banks as just “Russian” and are focused again on the “bank” bit. The share price is one of the very few that has made back all its losses from 2014 and reached an all time high of $21 in the summer.
The appeal of Tinkoff is it is part Russian consumer bank and part tech play. Russians are embracing online banking and without infrastructure costs, Tinkoff is very profitable.
Analysts also have Tinkoff marked up as a buy, although with a target price of $28 the potential return is a more modest 39% at the time of writing.
INTERVIEW:
Tinkoff Bank builds a virtual lifestyle bank
Vadim Dumesh in Paris
Tinkoff Bank is the new kid on Russia’s banking block. At only 11 years old it is a relatively late entry into the sector, but analysts have already made it one of their “high conviction” stock tips for this year.
Russia’s only purely online bank, Tinkoff claims to be the biggest pure internet bank in the world.
Hot for tech, investors ploughed into its London October IPO in 2013 when the bank raised $1.1bn, floating at $17.2 at the top of the range, valuing the bank at $3.2bn. It was the last IPO before Russia annexed the Crimea the following May and abruptly brought the party to an end. As the political crisis morphed into an economic “perfect storm”, the bank’s share price fell to close to $1.
It's been four years since then but by last November the share price had recov- ered all the ground lost and was trading at more than $21 at the time of writing at the end of January – one of the few Russian stocks to have listed since the recession started that is trading ahead of its IPO price.
Read the rest of this interview on bne here:
www.intellinews.com/interview-tinkoff-bank-builds-a-virtual-lifestyle- bank-135974/?source=russia
Maxim Evdokimov, VP, Chief Digital CX Officer, Tinkoff Bank
www.bne.eu