OAO Sberbank will extend gains, eliminating the discount that makes Russia’s biggest lender the cheapest of its peers, as rising profit lures investors, according to JPMorgan Chase & Co.
State-backed Sberbank jumped the most in almost three weeks in New York yesterday to trade at 5.5 times estimated earnings, a 36 percent discount to the average valuation of lenders in the MSCI Emerging Markets Banks Index. The Bloomberg Russia-US Equity Index of the most-traded Russian stocks listed in the U.S. added 0.6 percent yesterday, while futures expiring in December on Russia’s RTS Index rose 1.4 percent to 149,500.
Sberbank’s valuation was at parity with the bank gauge in May before the government initiated a plan to sell a minority stake. The $5.1 billion sale, which was completed Sept. 19, limited gains in Sberbank, leaving it with the lowest price-to-earnings ratio among similar-sized banks tracked by Bloomberg. The bank, which posted a 5.9 percent profit jump in the first nine months of the year today, will boost 2012 net income by 5 percent according to the mean of seven analysts’ estimates compiled by Bloomberg.
“Sberbank remains significantly undervalued against regional peers in spite of a better growth outlook and top-of-the-range profitability,” Alex Kantarovich, head of Russian equity research at JPMorgan in Moscow, said by e-mail yesterday. “The placement is now behind us and, subject to benign market conditions, we would expect Sberbank valuations to realign with peers.”
Russia ETF Gains
The Market Vectors Russia ETF, the biggest U.S.-traded exchange-traded fund that holds Russian shares, rose 1.2 percent to $29.38 yesterday, the highest level since Sept. 24. The RTS Volatility Index, which measures expected swings in the index futures, slid 1.5 percent to 27.67. The Bloomberg Russia-US Equity Index rose to 100.15, the highest level since Sept. 21.
Sberbank, which has the third-biggest weighting in the Micex, has climbed 15 percent in Moscow this year and 21 percent in New York.
American depositary receipts of the lender added 1.7 percent to $11.98 in New York yesterday, gaining by the most since Sept. 14. The ADRs settled at a 1.3 percent premium versus the bank’s Moscow-traded shares, the widest gap in a week. Sberbank stock slumped 0.6 percent to 91.44 rubles in Moscow.
“Sberbank is a safe haven amid global instability,” Vladimir Savov, an analyst at Otkritie Financial Corp. in Moscow, said by phone yesterday. “It must cost much more than what it is now, because it has no problems with liquidity and is fundamentally very strong.”
Sberbank traded at a price-to-earnings ratio of 6.2 in New York yesterday, compared with 18.3 for OTP Bank Nyrt., Hungary’s largest lender, and 11.3 for Denizbank AS, the Turkish bank whose sale to Sberbank was completed last week. VTB Group, Russia’s second-largest bank, has a so-called P/E of 8.2.
“We attribute Sberbank’s cheapness to the government showing its cards well before the recent privatization placement,” JP Morgan’s Kantarovich said yesterday. “This visible risk prevented valuation recovery to the levels enjoyed by Turkish and global market peers.”
Commodities climbed the most in two months and the euro advanced to a two-week high against the dollar after European Central Bank President Mario Draghi said the common currency is “irreversible” and tension between Syria and Turkey fanned concern that Middle East oil output will be disrupted.
The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 2.5 percent to 665.19 in New York yesterday, the biggest jump since Aug. 3.
ADRs of OAO GMK Norilsk Nickel, the world’s largest producer of nickel and palladium, climbed 0.8 percent to $16.09 yesterday. Norilsk stock fell 0.9 percent in Moscow to 4,904 rubles, or equivalent of $158.59 yesterday. One share equals 10 ADRs.
JP Morgan recommended investors buy Norilsk in a research report yesterday, upgrading the stock from hold.
Crude for November delivery gained 4.1 percent to $91.71 a barrel on the New York Mercantile Exchange. Futures have risen 21 percent in the past year. Brent oil for November settlement also advanced 4.1 percent to $110.58 on the London-based ICE Futures Europe exchange.
Urals crude, Russia’s chief export blend, rallied 4.2 percent to $110.57 per barrel yesterday, gaining by the most since July 3.