Equity Analysis /

Sberbank (O/W); VTB (O/W) - Dividend story supported by near-term tailwinds

    Evgeniy Kipnis
    Evgeniy Kipnis

    Senior Banking/Consumer Analyst

    26 September 2019
    Published by
    We believe the Russian state banks are high-beta plays on improving macro and geopolitics. Meantime, we see near-term tailwinds from ruble interest rates and credit quality. Next year, a healthy slowdown in consumer lending will likely be offset by an acceleration in corporate lending (driven by national projects funding), and we expect Sberbank and VTB to become key beneficiaries here. Despite long-term banking business returns set to decline from current levels, we believe the dividend stories in both names (8.3-9.4% yields) and near-term tailwinds have not yet fully played out. We thus recommend using any local sell-off to increase positions in both names. We do not exclude VTB delivering relative outperformance, with its investment story improving in a minority-friendly way. Seeing 23-48% upside, we reiterate our O/W on both names.