Page 83 - RusRPTJun20

consensus expectations by 27%. TCS had a difficult quarter, as in addition to coronavirus (COVID-19) crisis, its shares were under pressure as the group's founder ​Oleg Tinkov is facing tax fraud charges in London​ and had to transfer its shares into a blind trust and step back from management after he was diagnosed with leukaemia. While Fitch Ratings saw ​no immediate effect from Tinkov's indictment​, Tinkoff bank was one of the 15 Russian banks that had its outlook revised to Negative​ by the agency on COVID-19 and weak oil prices. But in 1Q20 the bank's performance made a strong beat versus expectations, supported by securities gain of RUB3.4bn and provision charge of RUB15.6bn (cost of risk 16%), BCS Global Markets commented on May 13 seeing the results as positive. While the cost of risk (CoR) is high, it was driven by precautionary provision with adjusted CoR of 9.9%, BCS GM notes, while reiterating a Hold recommendation on the name. Net interest income came strong with 40% y/y growth to RUB25.3bn, beating expectations by 3% and driven by yet strong 43% y/y gross loans growth and cost of funding further reduction to 4.8%. Thus, net interest margin stayed strong at 20% level. TCS also announced interim dividend of $0.14/GDR (making a 4% dividend yield) that proves strong stance of the Group, yet future payments are subject to the changing situation. The bank has withdrawn the 2020 guidance, but provided performance indicators such as steady gross loans portfolio, still elevated CoR, declining cost of borrowing, maintaining the profitability of Group as well as adequate capital adequacy ratio (CAR) levels.
One of Russian top 10 banks in terms of assets ​Financial Corporation Otkritie​ saw its net profit slashed 28-fold in 1Q20 to RUB0.8bn under IFRS. ​As reported by ​bne IntelliNews​, the Central Bank of Russia (CBR) previously ​planned to IPO the bailed and restructured bank in 2021​, but the plans are now likely to be postponed. ​Kommersant d​ aily on May 13 reminds that analysts previously flagged a high share of securities on Otkritie's balance, the sharp revaluation of which in 1Q20 led to a drop in bottom line. In March Moody's Investors Service flagged that the securities portfolio accounts for over 250% of bank's IFRS capital. Nevertheless, the capital adequacy ratio was stable at 13.9%. Adjusted for this revaluation operational profit was down by RUB9bn to RUB29.4bn, and the bank maintained positive net interest income of RUB18.2bn and fees and commissions of RUB7.9bn. FC Otkritie was ​the most expensive bailout during the CBR 2017 sector clean-up​, costing close to $8bn in capital injections, deposits and other support measures that were ​only partially recovered​. The CBR has completed the restructuring of FC Otkritie and has sued the founder of the bank, Vadim Belyaev, while the ex-cofounder Russian billionaire ​Boris Mints and his sons have been put on the international wanted list​.
8.2 ​Central Bank policy rate
The central bank cut the key interest rate by half a percentage point to 5.5% in May​. The central bank also signalled it might continue to cut interest rates at its next meeting in June.
The emphasis has shifted from controlling inflation – which remains low – to boosting growth. There will be some feed through from the fall in the value of the ruble to inflation, but at will be mitigated by the collapse in demand.
At the same time the CBR has received some RUB2 trillion from the National Welfare Fund (NWF) in payment for its 50%+1 in Sberbank from the Ministry of
83​ RUSSIA Country Report​ June 2020 ​ ​www.intellinews.com