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Russia

VTB Bank: (E/W) – 7M21 IFRS results – MODERATELY POSITIVE

  • VTB (VTBR RX: E/W; TP RUB0.04) reported its July and 7M21 IFRS numbers

  • VTB continues to be on track to its 2021 net income target (RUB295bn), implying the required monthly net income run-rate

  • Operating costs grew 10% y/y in July, expectedly accelerating vs 9% y/y in Q2

Evgeniy Kipnis
Evgeniy Kipnis

Senior Banking/Consumer Analyst

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Alfa
30 August 2021
Published byAlfa

VTB (VTBR RX: E/W; TP RUB0.04) reported its July and 7M21 IFRS numbers. The bank generated RUB30.2bn net income (17.6% ROAE) in July, slightly exceeding its monthly run-rate during 2Q21 (RUB28.5bn). That is driven by a continued solid performance of core banking incomes (+21% y/y NII and +22% y/y F&C growth) amid loan growth (+7.2% YTD), the remaining effects of reduced funding costs, as well as increasing client transactional activity and credit-related insurance sales. The loan book quality remains healthy (90bp YTD improvement of NPL ratio), driving a CoR improvement (-4.1pp and -1.4pp y/y to 0.8% for July and 7M21, respectively). Operating costs grew 10% y/y in July, expectedly accelerating vs 9% y/y in Q2, and is likely to continue exhibiting accelerated growth in the coming months, driven by investment into business digitalization.

Overall, VTB continues to be on track to its 2021 net income target (RUB295bn), implying the required monthly net income run-rate of ~RUB18.8bn for the rest of 2021. which is realistic, we think. The stock gained 23% from its recent SPO level (vs +7% by MOEX Index and +10% by SBER RX), but remains 5% below its peak levels on 6 May. Currently, the stock trades at 0.58x P/TBV 2021F (10% discount to 2Y average), 3.3x P/E 2021F and c.12% dividend yield (the latter, however, subject to capital adequacy). At the same time, we note that overhang risk remains in the name, with another 5.7% of VTB (currently held by Otkritie Bank subsidiaries) might be offered to the market later, according to recent media publications.

Figure 1: VTB 7M21 IFRS highlights

Source: Company data, Alfa-Bank, consensus compiled by VTB