OREANDA-NEWS. May 21, 2010. Sberbank reported 4M10 RAS net income of RUB 47.4 bn, implying RUB 4.3 bn of profit in Aptil. Also, the bank announced that it had repaid RUB200bn (USD6.6bn) of a RUB500bn subordinated loan that it took out from CBR in late 2008 (at 8% interest), reported the press-centre of OTKRITIE Financial Corporation.

View: The April net profit is the lowest monthly profit year-to-date, but this was driven by high effective tax rate because of 1Q10 tax liabilities payment. Apart from that, the loan book was flat, with retail lending resuming growth, while corporate loans sliding. Deposit generation was strong - RUB 102 bn new deposits in April. We vew the numbers neutrally.  

Concerning the loan repayment, management had guided that the bank would only repay a portion of subordinated loan at present time if the interest rate was not significantly reduced. At 8%, rather than the 5.3% average funding rate, this loan is one of the most expensive funding sources for Sberbank. Thus, repayment will likely decrease the bank's effective funding rate and thereby support its net interest margin, which we forecast at a still very strong 7.4% in 2010. From our standpoint, this repayment underscores the bank's high liquidity position. We also note that the bank's capital adequacy ratio, which was strong at 18.1% in 2009, will not suffer, as this loan was not fully included into the bank's tier-2 capital.

Valuation and Action: At the current levels of 2011E P/BV of 1.5x the stock is very attractive. We remain buyers.