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Goldman Sachs Research
Commentary: Sberbank 4Q15 IFRS results review and conference
call key takeawaysBy Anton Farlenkov and Igor GerasimovPublished 16
Mar 2016 12:24:10 am MSK
Sberbank reported 4Q15 IFRS results and hosted a conference
call. Net income (before minority and prefs) came in at Rub73 bn
(Rub223 full 2015), 4%above our estimate and 10% above the
company-compiled consensus, implying 13% ROE for the quarter.
Key highlights:
Significantly better-than-expected net interest income and
provisions have fully offset elevated opex in 4Q15, which resulted
into strong 27% beat vs. consensus on theprofit before tax
line. However, given the negative bearing of the
higher-than-expected effective tax rate (36%), net income beat was
more moderate.
Conference call key takeaways:
NIM. Management confirmed that 2016 should be the year of
the strong recovery in net interest margins, primarily driven by
the decline in funding costs. The CFO statedthat SBER prioritizes
profitability over market share, and the bank now is in the
position to be highly selective when it comes to lending. NIM
should peak around 2Q-3Q16.
Opex. Sberbank has provided updated efficiency guidance,
expecting its cost-to-income ratio to decline by roughly 400 bp yoy
to c.40% vs. the previous guidance of 'C/Ibetter than in 2015',
which should be driven by the continued cost-optimizing
efforts.
Asset quality. NPL ratio decreased by 40 bp qoq to 5%, as
company managed to restructure big troubled exposures in
transportation and mining space, whichimproved the coverage ratio
to 123% (from 110% in 3Q15). Mechel exposure still is classified as
non-performing. However, 2016 cost of risk guidance was
maintained(c.250-300bp), implying no decrease yoy, as management
prefers to keep monitoring the a ctual developments.
Capital and dividends. Management highlig hted that
there're potential upside risks to the capital adeq uacy target,
coming from (1) potential implementation of the IRBapproach that
could come into effect in July 2016 and (2) possible conversion of
the Rub500 bn subdebt from the CBR into Tier-1 instrument
(classified as Tier-2currently). The CEO has also stated that
Sberbank should return to a 20% dividend payout this year, which is
subject to BoD approval.
Tax rate. In 2016, the effective tax rate should go down to
low-mid twenty's from the current levels, but will likely remain
above 20% given the impact of the foreign
subsidiaries' losses. the CEO mentioned that Sberbank is not
changing its view with respect to the development of foreign
subsidiaries.
We believe that results should be supportive for the stock,
given strong operational performance in 4Q15, operating efficiency
guidance revision andupside to the budgeted capital adequacy
target.
We value SBER on capital-adj ROE/COE. Our 12-month price target
is Rub152.00; we are Buy rated on Sberbank (on CEEMEA FL; last
closeRub108.84). Key risks to our views are: downside: (1)
slower-than-expected loan growth; (2) weaker operating execution;
(4) NIM pressure from tighter than expected liquidity and
funding conditions; (4) weaker loan quality; (5) further escalation
of sanctions.
Anton Farlenkov - OOO Goldman Sachs Bank+7(495)645-4019
[email protected]
Igor Gerasimov - OOO Goldman Sachs Bank+7(495)645-4012
[email protected]
Legal and Certification Disclosures
We, Anton Farlenkov and Igor Gerasimov, hereby certify that all
of the views expressed in this report accurately reflect our
personal views about the subjectcompany or companies and its or
their securities. We also certify that no part of our compensation
was, is or will be, directly or indirectly, related to the
specificrecommendations or views expressed in this report.
Unless otherwise stated, the individuals listed on the cover
page of this report are analysts in Goldman Sachs' Global
Investment Research division.
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covered in its research reports. As a result, investors should be
aware that the firm may have aconflict of interest that could
affect the objectivity of this report. Investors should consider
this report as only a single factor in making their investment
decision.For Reg AC certification, see above. For other important
disclosures go to www.gs.com/research/hedge.html. Analysts employed
by non-US affiliates are notregistered/qualified as research
analysts with FINRA in the U.S.
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Prepared on 9 May 2016 11:10 pm
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