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Saturday, November 27, 2021

Sberbank Stock Price Forecast: Sberbank’s financial results look very confident, without any obvious weaknesses

Sber’s net profit for the 4th quarter of 2020 amounted to 201.7 billion rubles, a decrease of 4.9% compared to the 4th quarter of 2019, follows from the bank’s statements

The Sberbank Group’s net profit amounted to RUB 760.3 billion. (-10.0% y / y). Earnings per ordinary share amounted to 34.36 rubles. (-10.9% y / y)

Sberbank presented a fairly strong financial report for the IV quarter and all of 2020, which showed the high resilience of the bank’s business to the crisis phenomena provoked by the coronavirus pandemic. Net profit in October-December decreased by 4.9% on an annualized basis to RUB 201.7 billion, and by the end of last year the figure reached RUB 760.2 billion, exceeding the consensus forecast of RUB 738 billion. At the same time, the return on equity (ROE) for the year amounted to a significant 16.1%. A good result was due to the positive dynamics of indicators in all main areas of activity.

Sberbank: key financial results for Q4 and all 2020 (RUB bn)

4 quarter 20
4 quarter 19
Change
2020
2019
Change
Net interest income
426.5
371.0
15.0%
1 608.2
1,415.5
13.6%
Net fee and commission income
158.5
148.3
6.9%
552.6
497.9
11.0%
Reservation costs
108.1
41.2
162.4%
493.8
149.5
230.3%
Operating expenses
242.7
238.0
2.0%
759.8
724.6
4.9%
Net profit
201.7
212.0
-4.9%
760.3
845.0
-10.0%
Net interest margin
5.3%
5.5%
-0.2%
5.5%
5.4%
0.1%
Return on equity
16.6%
19.4%
-2.8%
16.1%
20.5%
-4.4%
Return on assets
2.2%
2.8%
-0.6%
2.3%
3.1%
-0.8%
C / I ratio
42.1%
43.4%
-1.3%
34.6%
35.8%
-1.2%

 

Net interest income in Q4 increased by 15% yoy to RUB 426.5 billion. thanks to the growth in lending and the maintenance of the net interest margin at a relatively stable level. Net fee and commission income grew by 6.9% to RUB 158.5 billion. thanks to good results in the payment business, where settlement operations remained the main drivers, as well as the brokerage business. Meanwhile, operating expenses grew at a more moderate pace, which was facilitated by the implementation of the program to improve business efficiency in a pandemic, and increased by only 2% to 241.7 billion rubles. As a result, the operating efficiency indicator (the ratio of operating expenses to operating income, C / I) decreased by 1.3 pp compared to the same indicator of the previous year and amounted to 42.1%. The main factor in the decline in profits was the sharp rise in reservation costs, up to 108.1 billion rubles. against 41.2 billion rubles. in Q4 2019, with an increase in the cost of risk to 1.71% from 0.8%.

Sberbank: key indicators of the statement of financial position (RUB billion)

12/31/2020
09/30/2020
31.12.2019
Rev. k / k
Rev. YTD
Assets
36,016
35124
29960
2.5%
20.2%
Loan portfolio
25,009
24,546
21749
1.9%
15.0%
   Corporate loans
15,700
15,664
13 865
0.2%
13.2%
   Retail loans
9308
8882
7 884
4.8%
18.1%
Deposits
25,766
25152
21,574
2.4%
19.4%
Share of problem loans (NPLs)
4.3%
4.7%
4.3%
-0.4%
0.0%
Capital Adequacy Ratio ( CET 1)
13.8%
13.4%
13.4%
0.4%
0.4%

Source: company data

Sberbank’s assets at the end of Q4 2020 reached 36 trillion rubles, an increase of 2.5% compared to the previous quarter and 20.2% since the beginning of the year. The retail loan portfolio increased by 4.8% over the quarter to RUB 9.3 trillion, largely due to strong demand for mortgage loans. At the same time, the share of retail loans in the total loan portfolio increased to a record 37.2%. The volume of corporate loans rose by 0.2% to RUB 15.7 trillion. (excluding currency revaluation, the growth was 3.5%). Meanwhile, asset quality improved and returned to pre-crisis levels – the share of non-performing loans (NPLs) decreased by 0.4 pp to 4.3%. The capital adequacy ratio (CET1) increased by 0.4 p.p. and is at a very comfortable level of 13.8% (1.3 p.p. above the target for paying out 50% of net profit in dividends).

Sber also said that the number of active individual clients in 2020 increased by 3 million people and approached 99 million people. At the same time, the number of active monthly users (MAU) of the SberBank Online mobile application has grown over the year by 10.6 million people, to 65.3 million people. The number of active corporate clients grew by almost 200 thousand and exceeded 2.7 million.

In addition, Sberbank has disclosed some financial details regarding its non-financial business. Thus, revenue in this business in 2020 jumped 2.7 times to 71.4 billion rubles, which is consistent with the strategic goal of the bank, according to which the average annual growth rate of non-financial services in the period up to 2023 should be over 100% in year. In particular, in the FoodTech & Mobility segment, which combines food delivery services, taxi and car sharing, sales grew to 4.8 billion rubles. from 500 million rubles. in 2019, however, negative EBITDA jumped to RUB 10.4 billion. The turnover of the E-commerce segment, which includes e-commerce and logistics services, amounted to 12.9 billion rubles. with negative EBITDA of 6.4 billion rubles. These figures confirm our opinion that it is not yet possible to expect financial returns from Sberbank’s non-financial services.

In general, we can state that Sberbank’s financial results for Q4 and the whole of 2020 look very confident, without any obvious weaknesses. With the cost of funding dropping to a record low, Sberger managed to maintain good net interest margins despite the overall decline in rates in the economy. Fee and commission income demonstrates good dynamics. In addition, the provision for loan impairment, although slightly increased compared to the previous quarter, is still significantly lower than the peak recorded in the first quarter of last year.

Sberbank’s management has improved its 2021 cost of risk and ROE forecasts. ROE this year is now expected to be “above 18%” versus the previous estimate of “above 17%.” And the forecast for the cost of risk was reduced to 1.2-1.4% from 1.4-1.5%. In addition, Sberbank expects to increase loans to the population by 13-15% in 2021, corporate loans – by 7-9% (both indicators are planned at the level of the entire banking sector of the Russian Federation).

The head of Sberbank, German Gref, also said that the bank’s management will propose to the Supervisory Board to pay in the form of dividends for 2020 the same amount that was paid at the end of 2019 – 422.38 billion rubles, or 18.7 rubles. per share of each type. As a result, the dividend yield could reach a significant 6.7% for common shares and 7.3% for preferred shares.

We continue to view Sberbank as the best choice in the Russian banking sector. We keep our mid-term target prices for common and preferred shares of the bank at RUB 326.9 per share. and 294.2 rubles. accordingly, the recommendation “Buy” for them.

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