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Russia

Sberbank: Strong December 2020 RAS results as expected – Neutral

  • Sberbank (SBER RX / SBERP RX: O/W; TP RUB309 / RUB285) reported its December 2020 RAS numbers

  • Corporate loan portfolio was up 0.3% m/m

  • December 2020 net profit excl. subsequent events came in at RUB63bn (+12% y/y) with 15.5% ROAE

Evgeniy Kipnis
Evgeniy Kipnis

Senior Banking/Consumer Analyst

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Alfa
15 January 2021
Published byAlfa

Sberbank (SBER RX / SBERP RX: O/W; TP RUB309 / RUB285) reported its December 2020 RAS numbers. The bottom line grew 12% y/y in December with 15.5% ROAE, resulting in 10% lower y/y 2020 earnings (16.6% ROAE). Continued NII growth and cost control was behind the strong earnings dynamics, compensating for elevated CoR. SBER RX stock jumped 41% from the 30 October lows (vs 30% / 24% / 29% / 32% by BSPB RX, VTBR RX, MOEX Index and MSCI Global Financials Index), supported by developments on geopolitical and Covid vaccine front, as well as a positive market perception of Sberbank’s 2023 strategy. The stock now trades at 1.12x P/TBV 2021F (3% discount to 2Y average). We think the pace of economic recovery and market sentiment are likely to remain key stock drivers for the near term. We thus believe pref. shares (SBERP RX) offer safer exposure to Sberbank at current levels, given the higher dividend yield (6% vs 5.4% on ord.shares for 2020F) and higher resistance to external-driven selloffs. SBERP RX currently trades at a 10% discount to SBER RX (vs 7% average YTD and 2-3% minimum discount levels reached during February-March and September-October 2020 market sell-offs). The 2020 IFRS (due on 4 March) and 2020 dividends recommendation are the next bottom-up catalysts.

  • Corporate loan portfolio was up 0.3% m/m (+1% m/m in real terms) and +16% y/y (+9% in real terms), getting support from low interest rates environment. The retail loan book was up 0.7% m/m and 17% y/y, driven mainly by mortgages (its share in the portfolio grew 2pp y/y to 58.2%). We note the slowdown in retail lending growth vs 2.1% m/m in November.

  • NII grew 14% y/y in December (+5% m/m) and for full year 2020, supported by loan book growth, lower funding costs and lower contributions to DIA. As a result, 3M rolling NIM (on total assets) grew 17bp y/y, but was down 4bp m/m (on the back of increasing pressure on the asset-side yields).

  • F&C income grew 9% y/y in December and 8% y/y for 2020, within management guidance, driven by settlement transactions, acquiring and brokerage fees. The bank highlighted consumer activity picked-up in December, driven partly by refusal from travelling abroad.

  • Opex declined 6% y/y in December and grew just 2% y/y in 2020 on the back of a cost optimisation program launched in 2020.

  • Provisioning reached pre-crisis levels – December 2020 FX-adjusted CoR was at an elevated level of 1.7% (vs.0.5% in November), likely reflecting the growing number of Covid cases in Russia and globally.

  • As a result, December 2020 net profit excl. subsequent events came in at RUB63bn (+12% y/y) with 15.5% ROAE, translating into 10% lower y/y 2020 earnings at RUB782bn (16.6% ROAE).

Figure 1: Sberbank December 2020 RAS Highlights

Source: Company data, Alfa-Bank; (*) we are approximating RAS interest-earning assets as gross loans plus securities portfolio; () includes both loans at amortised costs and at FV through P&L; (*) net income before subsequent events