Sberbank Hits Two-Month High on Fitch Rating: Russia Overnight

OAO Sberbank (SBRCY) climbed to a two-month high in New York and Russian equity futures rose after Fitch Ratings reaffirmed its investment grade on the nation’s biggest lender and as data showed retail sales accelerated last month.

American depositary receipts of Sberbank gained 0.6 percent to $11.46 yesterday, capping the longest stretch of gains in a month. Futures expiring in September on the dollar-denominated RTS index (RTSI$) added 0.4 percent to 138,795. The Bloomberg Russia-US 14 Index (RUS14BN) of Russian companies traded in New York dropped 0.2 percent to 90.70, declining for the first time in four days. OAO Surgutneftegas (SGTPY) fell the most in a month.

Sberbank is benefiting from “strong performance” and credit underwriting that is “generally better” than other Russian banks, Fitch said. The state-controlled bank was buoyed by retail sales that advanced 6.9 percent in June from a year ago following a 6.8 percent increase a month earlier, said Ilya Kravets, a portfolio manager analyst at ED Capital in New York. The company trades at 5.35 estimated earnings, a 37 percent discount to peers.

“The Fitch reiteration combined with a better outlook on retail sales helps Sberbank here because this bank has such a huge exposure to the Russian consumer,” Kravets, who helps manage about $100 million in assets, including Russian stocks, said in a phone interview. “Sberbank has no exposure to Europe, is cheaply valued, and has a great opportunity to deliver solid performance.”

The Market Vectors Russia ETF (RSX), a U.S.-traded fund that holds Russian shares, fell for the first time in four days, losing 0.4 percent to $26.78. The RTS Volatility Index, which measures expected swings in the index futures, dropped for a third day, declining 0.5 percent to 30.27 points.

‘Pretty Firm’

Sberbank’s 28 percent return on equity last year as well as its 35 percent loan growth were reasons Fitch cited for a “stable outlook” while reaffirming a BBB rating, the ninth highest investment-level grade.

Russian retail sales climbed in June as unemployment remained at 5.4 percent, and real wages advanced 12.9 percent, exceeding the median forecast of 10 economists for a 10.5 percent increase. Consumer spending, which accounts for half of Russia’s economy, is encouraging companies to maintain headcounts which has helped balance slowing industrial-output growth as the economic outlook dims in the country’s biggest trading partners, the European Union and China.

“Domestic growth in Russia is pretty firm,” Jose Morales, who oversees $1.6 billion in emerging market equities at Mirae Asset Global Investment in New York, said in a phone interview. “Yet external factors -- growth in the U.S., Europe and China - - remain the drivers for Russian stocks.”

Further Easing

The Standard & Poor’s 500 (SPX) Index gained 0.7 percent to 1,372.78 as U.S. Federal Reserve Chairman Ben S. Bernanke told a Senate committee the central bank is studying options for further easing, adding that he won’t allow consumer prices to rise in return for faster economic growth.

Sberbank’s advance in New York extended its 2012 gain to 15 percent compared to the Bloomberg Russia-US 14 Index which has added 0.2 percent this year. Sberbank shares gained 0.5 percent in Moscow to 91.61 rubles, or the equivalent of $2.84. One ADR represents four ordinary shares.

The lender’s estimated earnings ratio traded at a discount to the 8.5 average multiple for companies on the Bloomberg Europe 500 Banks and Financial Services Index.

Brent crude for September settlement rose to seven-week high, increasing 1.1 percent to $105.16 a barrel on the London- based ICE Futures Europe exchange. Crude traded on the New York Mercantile Exchange climbed 0.7 percent to settle at $89.87 a barrel, exceeding $90 for the first time since May. Urals crude, Russia’s chief export blend, gained 1.2 percent to $105.69.

Choke Civil Society

Surgutneftegas, Russia’s fourth largest oil producer, fell the most since June 22, tumbling 3.6 percent to $5.89 after shares in Moscow dropped 1.1 percent to 18.92 rubles, the equivalent of 59 cents. One ADR equals 10 ordinary shares.

Yandex NV (YNDX), the operator of Russia’s most popular Internet search engine, jumped 3.8 percent, the most in two weeks, to $18.69. Shares have risen 12 percent since touching a record low on June 14.

The head of President Vladimir Putin’s human-rights council criticized lawmakers for giving approval to three laws that he warns will choke civil society.

Russia’s upper house of parliament yesterday passed bills tightening controls over the Internet and foreign-funded non- government organizations and making libel a criminal offense. The measures, which must be signed into law by Putin, were approved by the lower chamber last week.

Uzbekistan

OAO Mobile TeleSystems (MBT), Russia’s largest mobile-phone operator, retreated 0.5 percent to $17.69 after a government agency in Uzbekistan suspended the license of the company’s local unit. Shares of MTS, as the company is known, declined 1.3 percent in Moscow to 225.33 rubles, or $6.99. One ADR is equivalent to two ordinary shares.

The RTS Index in Moscow gained for a fifth day, adding 0.2 percent to 1,393.01 while the 30-stock Micex (INDEXCF) Index fell 0.3 percent to 1,426.29.

The Micex has gained 1.7 percent in 2012 and trades at 5.3 times analysts’ earnings estimates for member companies. That compares with a 3.8 percent decline for Brazil’s Bovespa (IBOV) index, which trades at 10.2 times estimated earnings, according to data compiled by Bloomberg. The Shanghai Composite Index (SHCOMP) trades at 9.7 times estimated earnings, and the BSE India Sensitive Index (SENSEX) has a ratio of 13.5.

To contact the reporters on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at Tbarak@bloomberg.net

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