Page 107 - RusRPTJan23

with CFO seeing limited risks as no signs of unemployment growth as well as overleverage. We assume CoR is to normalize from current elevated levels, while macro add-ons is to stay with no provision release. TCS’ equity position in our view is also firm, given no losses reported in 2022 as well as low loan growth in 1H22 with CAR levels exceeding regulatory levels with buffers. Dividends payments are subject to infrastructure constraints, rather than ability to pay, with a possible return to dividends comparable to the relative size of previous payouts. Business diversification differentiates from previous crises, provides solid support for financials.
Spending growth to fund future profits. TCS’ strong investment point is flexibility in cutting costs, yet less visible in 2022 with 9M22 OPEX up 39% y/y. There are several factors influencing dynamics as well as some one-offs, such as growing amortization. OpEx growth is mostly attributed to a continuing customer base growth and non-banking businesses development, while the Cost-to-Income ratio levels are lower on credit businesses. As a fintech company, TCS attracts IT talent, thus requiring additional costs growth to compete for these employees. There are 10,000 employees in head office with 8,000 IT-related staff and the company’s further business expansion requires further IT staff growth.
Valuation: fintech play with undemanding valuations – BUY. We see TCS as a quite undervalued fintech company with diversified businesses (not only credit-related) with P/E 23e 11.6x and P/BV 23e 2.2x – well below historical levels. We note the company’s efforts to keep disclosure, obligatory payments (Eurobonds’ coupon), despite current market constraints, as well as its strong financial stance.
Moscow Exchange has posted its November trading update.
Trading volumes in the fixed income and money market segments were up m/m in November, contributing to an increase in total volumes. Other segments posted a drop in volumes. Trading in stocks, DRs and mutual funds fell 15% m/m and 73% y/y to R0.9 trln, the lowest level since July 2022. The absence of meaningful dividend payments and low volatility were largely to blame. Bond market volumes (excluding overnight bonds) grew 144% m/m and 59% y/y to R2.3 trln, due to a record R1.4 trln in government bond issuance and increased issuance of corporate bonds. Overnight bond issuance increased by 17% m/m and 362% y/y to R1.4 trln. Trading volumes in the money market segment grew 5% m/m and 25% y/y to R52.4 trln due to increased volumes in the credit market (+91% m/m). FX volumes were relatively stable m/m (down 1%) but down 43% y/y at R14.8 trln. Derivatives trading volumes fell 15% m/m and 83% y/y to R3 trln, continuing the trend of recent months. The total volume traded in November was up 4% m/m but down 17% y/y at R74.7 trln.The results look positive on the whole, as they demonstrate that the exchange is benefiting from government bond issuance. However, the declines in derivatives and equities are somewhat concerning -
107 RUSSIA Country Report January 2023 www.intellinews.com