Equity Analysis /
Russia

Bank St Petersburg: Bank St Petersburg (O/W) - Undemanding valuation provides attractive entry point

    Evgeniy Kipnis
    Evgeniy Kipnis

    Senior Banking/Consumer Analyst

    Alfa
    1 October 2019
    Published by
    BSPB shares have not yet managed to close the dividend gap, underperforming Sberbank and VTB amid sluggish 1H19 results (mainly on the back of prop trading) and a delayed share buyback. At the same time, the underlying core business looks strong: an ample liquidity cushion makes its interest rates competitive vs state banks. That provides the bank with high-quality corporate pipeline, while payroll clients provide opportunities to grow the retail book with a limited impact of PTI regulation. The dividend yield of 7.3% does not look convincing for investors at first take, but together with c.2.5% of a stock buyback (which will likely continue going forward), the bank looks comparable to Sberbank and VTB on a cash return profile. The stock continues to trade at an undemanding valuation and the lowest stock level since February. That provides an attractive entry opportunity, in our view, ahead of strong 3Q19E results. However, we do not exclude a short-term correction post buyback (closing on 7 October). Seeing 61% upside, we reiterate our O/W rating on BSPB.