OREANDA-NEWS. February 17, 2010. Sberbank posted RAS results revealing net profit of RUB11.7bn. Assets were down 1.7% to RUB7.0 trillion, with its retail and corporate portfolios decreasing by 1.5% and 0.4%, respectively, reported the press-centre of OTKRITIE Financial Corporation.     

View: We believe the three-fold YoY profit growth primarily reflects lower provisioning charges, which dropped from RUB384bn for FY09to just RUB20bn in January. While a lower cost of risk is expected this year, data from only one month data is insufficient to ascertain whether this will be sustained, and therefore we view the results neutrally.

The decline in lending is somewhat disappointing from a macro perspective as it indicates that the demand for loans is still weak. However, we would not overestimate the importance of these January results because this is the slowest month due to the 10-day vacation period. Sberbank itself has been deploying the liquidity inflow it enjoyed in December into securities markets, while accounts and deposits were declining as a function of seasonality.

Valuation and Action: Sberbank trades on a 2010E P/BV of 2.0 - a 24% premium to emerging markets. From our standpoint, this is justified because the bank provides the best exposure to Russia's improving macro story, and the bank's ability to post a strong NIM of 7.4%. We reiterate our BUY rating with a target price of US3.6/share.