Daily analyst comments

Sberbank publishes financials for 5M2010


	Sberbank

Capitalization: 59 382 012 957,76 $

Common shares
Price	2,66 $
Target price	4,62 $

Price changing
week	month	year
5,8%	-4,0%	59,2%

Preferred shares
Price	1,89 $
Target price	2,73 $

Price changing
week	month	year
4,8%	-7,3%	97,5%

17.06.10 10:42

The financial report for May shows renewed growth in lending operations by the bank, its ability to withstand pressure on net interest income from cheapening assets and its strong results on net profit. According to our estimates, the financials reported could lend support to the bank’s equity prices in the short term.

On June 16, Sberbank published financials results audited to RAS for 5M2010. Net interest income before provisions for loan impairment climbed 7.5% y-o-y (RUB 192 bn), operating expenses increased 17% (RUB 87 bn) and provision charges dropped by over 5x (RUB 26 bn). Net income advanced to RUB 58 bn.

On the upside, we point out the following key points:

Growth of the retail and corporate loans portfolio, reflecting improving economic conditions in the banking sector.
A rise in net interest income m-o-m. In May, the bank saw net interest income climb 2% over April, despite the persistent trend towards cheapening assets.
Despite the partial repayment of a subordinated loan, Sberbank retains a high capital adequacy ratio, put at 19%, nearly twice the CBR minimum requirement, which opens up good prospects for business growth.

In our opinion, the following trend gives cause for alarm:

Continuing growth in non-performing loans and provisions, which shows the continuing, although slowing, trend towards asset quality deterioration.

The report for May has revealed renewed growth in lending operations by the bank, its ability to withstand pressure on net interest income from cheapening assets and the strong net profit result. Our 12-month target prices for Sberbank are USD 3.89 per common share and USD 2.18 per pref.

Vladimir Sergievskiy

Other comments of the day