5/9/2016

GS360

Goldman Sachs Research

Commentary:Sberbank4Q15IFRSresultsreviewandconferencecallkeytakeaways
ByAntonFarlenkovandIgorGerasimov
Published16Mar201612:24:10amMSK

Sberbankreported4Q15IFRSresultsandhostedaconferencecall.Netincome(beforeminorityandprefs)cameinatRub73bn(Rub223full2015),4%
aboveourestimateand10%abovethecompanycompiledconsensus,implying13%ROEforthequarter.Keyhighlights:
Significantlybetterthanexpectednetinterestincomeandprovisionshavefullyoffsetelevatedopexin4Q15,whichresultedintostrong27%beatvs.consensusonthe
profitbeforetaxline.However,giventhenegativebearingofthehigherthanexpectedeffectivetaxrate(36%),netincomebeatwasmoremoderate.

Conferencecallkeytakeaways:
NIM.Managementconfirmedthat2016shouldbetheyearofthestrongrecoveryinnetinterestmargins,primarilydrivenbythedeclineinfundingcosts.TheCFOstated
thatSBERprioritizesprofitabilityovermarketshare,andthebanknowisinthepositiontobehighlyselectivewhenitcomestolending.NIMshouldpeakaround2Q
3Q16.
Opex.Sberbankhasprovidedupdatedefficiencyguidance,expectingitscosttoincomeratiotodeclinebyroughly400bpyoytoc.40%vs.thepreviousguidanceof'C/I
betterthanin2015',whichshouldbedrivenbythecontinuedcostoptimizingefforts.
Assetquality.NPLratiodecreasedby40bpqoqto5%,ascompanymanagedtorestructurebigtroubledexposuresintransportationandminingspace,which
improvedthecoverageratioto123%(from110%in3Q15).Mechelexposurestillisclassifiedasnonperforming.However,2016costofriskguidancewasmaintained
(c.250300bp),implyingnodecreaseyoy,asmanagementpreferstokeepmonitoringtheactualdevelopments.
Capitalanddividends.Managementhighlightedthatthere'repotentialupsideriskstothecapitaladequacytarget,comingfrom(1)potentialimplementationoftheIRB
approachthatcouldcomeintoeffectinJuly2016and(2)possibleconversionoftheRub500bnsubdebtfromtheCBRintoTier1instrument(classifiedasTier2
currently).TheCEOhasalsostatedthatSberbankshouldreturntoa20%dividendpayoutthisyear,whichissubjecttoBoDapproval.
Taxrate.In2016,theeffectivetaxrateshouldgodowntolowmidtwenty'sfromthecurrentlevels,butwilllikelyremainabove20%giventheimpactoftheforeign
subsidiaries'losses.theCEOmentionedthatSberbankisnotchangingitsviewwithrespecttothedevelopmentofforeignsubsidiaries.

Webelievethatresultsshouldbesupportiveforthestock,givenstrongoperationalperformancein4Q15,operatingefficiencyguidancerevisionand
upsidetothebudgetedcapitaladequacytarget.
WevalueSBERoncapitaladjROE/COE.Our12monthpricetargetisRub152.00weareBuyratedonSberbank(onCEEMEAFLlastclose
Rub108.84).Keyriskstoourviewsare:downside:(1)slowerthanexpectedloangrowth(2)weakeroperatingexecution(4)NIMpressurefromtighter
thanexpectedliquidityandfundingconditions(4)weakerloanquality(5)furtherescalationofsanctions.
Sberbank4Q15IFRSresultsreview

Companydata,GoldmanSachsGlobalInvestmentResearch.
AntonFarlenkovOOOGoldmanSachsBank
+7(495)6454019anton.farlenkov@gs.com
IgorGerasimovOOOGoldmanSachsBank
+7(495)6454012igor.gerasimov@gs.com
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recommendationsorviewsexpressedinthisreport.
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Preparedon9May201611:10pm
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