Page 106 - RusRPTApr21

Cost of risk was at 1.5% in 4Q20, down from 1.8% in 3Q20, while its Stage 3 loan coverage ratio decreased 7ppts over 4Q20 to 87%, as the share of Stage 3 loans surged to 10.4% at YE20 from 9.4% in 3Q20. We think it is likely that some Stage 2 loans, which were mostly provisioned earlier, moved to Stage 3 as they became formally overdue.
Opex added 13% YoY in 4Q20 due to staff costs spiking 29% YoY. The latter was likely driven by management bonuses, as BSPB's FY20 net profit was at an all-time high despite the challenges of 2020.
We now estimate a FY20 DPS of RUB 4.55/ord, which implies a dividend yield of c. 8% based on an estimated dividend payout ratio of 20%.
Bank St Petersburg held an Investor Day on 19 March. Management presented the new strategy that the bank adopted at the end of 2020.
In 2021-23, the bank’s target is to develop its online services further with a focus on retail and SME clients, thereby driving ROE up to 15%. BSPB sees St Petersburg and Moscow as its core markets, but still plans to expand in other regions via remote channels. However, the tight competition in the sector and the pace of the economic recovery are going to be a challenge in the near term, in our view. Management said that delivering on the new strategy aims to increase the bank’s capitalisation, which is undemanding at the moment with 2021F P/BV of 0.3x, and to reach TSR above the market. The targeted financial performance implies upside risks to our forecasts amid higher volumes and revenues. However, we leave our forecasts unchanged and our 12-month Target Price of RUB 98 implies a 76% ETR. Buy reiterated.
Key strategic priorities. Bank St Petersburg has set five points for income growth. i) A leading position in EXIM operations (including growth in the number of clients and operations to double revenues). ii) Substantial growth in the mass and medium segment of the corporate business iii) Significant corporate loan growth of 30%, supported by a 30% increase in the number of clients. iv) An increase in revenues per active retail client of 15% and greater involvement of payroll clients in lending products. v) Attract new mass clients solely via remote channels that will help the bank to expand in other regions.
15% ROE target might be a challenge. In the next three years, the bank aims to reach 15% ROE, up from 13% in 2020, amid 31% loan growth, a 33% increase in revenues and good cost control. Partnerships are going to help the bank to offer non-banking products to clients, including insurance services. Earnings are to grow 57% to RUB 17bn to help management reach another target: above-market
106 RUSSIA Country Report April 2021 www.intellinews.com