Sberbank on top form, but in the future capitalization could be affected

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Russia’s largest Bank submitted the financial statements for the fourth quarter of 2017 under IFRS. Total operating income before allowances for impairment of assets for the quarter was up 13.4 per cent year-on-year and amounted to 501 billion rubles.
Interest income before the write-downs formed of 76.4% operating income (+7.8% year-on-year to 383 billion rubles). The state Bank had reduced interest rates on loans after inflation and falling the key rate of the CBR: the return on assets decreased by 0.5 percentage points to 9.6%. However, unlike many other banks, the trend is still possible to compensate for the aggressive reduction of interest rates on deposits against the background of instability in the banking sector: the cost of liabilities for the quarter decreased by 0.6 p. p. year-on-year to 3.9%.
Subject to the foregoing interest margins even moderately grew by 0.1 p. p. year-on-year to 6.1%. Besides, it is worth noting that on the background of economic recovery is increasing the size of assets: +6.9% year-on-year to 27.1 trillion rubles (credit portfolio of legal entities before provisions was up 4% year-on-year to 14.2 trillion portfolio of physical persons (mortgage, credit cards, consumer loans) rose 13.6% year-on-year to 5.7 trillion rubles.).
Fee and Commission income of the savings Bank after deduction of Commission expenses brought with 23.5% of operating revenues (+21.1 per cent year-on-year to 118 billion rubles) in the background of the growing popularity of cashless payments and increase market share.
Net profit shareholders due to local cost increases under the provisions (+20.6% year-on-year to 72.7 billion rubles) and an unexpected rise in operating expenses (+1% year-on-year to 204 billion rubles.) added modest by the standards of previous reports a 21.6% year-on-year to 172 billion rubles return on equity increased by 0.2 percentage points year-on-year, to 20.6%. Return on assets rose by 0.4 percentage points year-on-year to 2.6%.
At the end of this year, the management promised to pay 35% of the net profit, which in the case of state-owned companies minority shareholders is always perceived with great enthusiasm.
In General, the reporting is neutral with a bias in a negative light. The company is very expensive priced market, and the first signs of a slowdown in net profit growth amid growing risks of stagnation or even decrease in the net interest margin in terms of reaching the “ceiling” for cost reduction and reduction of delay can have a negative impact on market capitalization, in spite of generous dividends. At the moment we have no open-ended investment ideas for common or preferred shares of Sberbank. However constantinum a good time to close long positions.
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Timur Nigmatullin,
Analyst
“Opening Broker”