OAO Sberbank, Russia’s largest lender, will extend this year’s rally by a further 26 percent as loan growth outweighs concern that profit is falling, according to JPMorgan Chase & Co.
Shares of Sberbank, which slumped today after posting a drop in net income, is set for a fourth quarterly gain, the longest stretch of advances since March 2010. The stock tumbled 2.4 percent at 12:50 p.m. in Moscow and 2.7 percent in London, after losing 1.6 percent in New York yesterday. The Micex Index fell 1.8 percent.
While Sberbank’s net income attributable to shareholders slid 3.9 percent to 88.6 billion rubles ($2.8 billion) by international accounting standards, that beat the mean estimate of eight analysts surveyed by Bloomberg for an 8 percent decline. Retail loans increased 6 percent in the first five months of the year compared with a year earlier, while corporate loans fell 0.1 percent, according to a May 14 financial report.
“We remain buyers as loan growth may be recovering and valuations continue looking compelling,” Alex Kantarovich, the head of Russian equity research at JPMorgan in Moscow, who has an overweight rating for Sberbank since August and predicts the shares will rise to 131.13 rubles by year-end, said by e-mail yesterday. “The size and market share owing to the massive footprint remains the main source of the bank’s competitive advantage.”
Kantarovich’s prediction is 1.8 percent lower than the mean of 19 analysts that updated price estimates within the last three months. On average, they predict the stock will rally 28 percent to $133.59 over the next 12 months.
Sberbank was poised for the lowest level since May 2 at 101.48 in Moscow today. It has risen 9.2 percent in 2013, compared with a 7 percent decline in Russia’s benchmark Micex Index. The London stock retreated to $12.88, while the shares in New York slumped to $13.06 yesterday. The ADR, which represents four shares, trades at a 30 percent discount to the MSCI Emerging Markets Banks Index, according to data compiled by Bloomberg based on estimated earnings.
For 2013, the lender’s net income will rise 4.2 percent to 363.5 billion rubles, according to the mean of 10 estimates compiled by Bloomberg.
Sberbank will narrow the discount to its emerging-market peers if economic growth accelerates, according to analysts including VTB Capital’s Mikhail Shlemov, and Ruslan Yunusov at Olma Investments in Moscow. While the economy grew 2.1 percent in the fourth quarter, the least since contracting in 2009, the trend may reverse, with expansion set to exceed 3 percent in the second half of the year, Economy Minister Andrei Belousov said May 16.
Sberbank expects corporate lending will increase as much as 14 percent in 2013, after expanding 18 percent last year, Deputy Chairman Anton Karamzin said in an interview in New York April 5. Consumer loans will increase as much as 25 percent after expanding 40 percent in 2012, he said.
Chief Financial Officer Herman Gref said May 23 that the bank may lower lending rates this year. Sberbank is cutting rates on some of its deposit accounts by May 31, Kommersant reported on May 22, citing an interview with director Dmitry Oguryaev.
The net interest margin, a gauge of the profitability of lending, may have shrunk by as much as 6 percent in the first quarter, BCS Financial Group said.
“Net interest margins would be under further pressure given ongoing rate cuts,” Shlemov, at VTB in Moscow, said by phone yesterday. “Slower economic growth leads to less demand for funding. Sberbank is trying to stimulate the demand by cutting the cost of lending. That is the beginning of a new trend.”
The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in the U.S. lost 0.7 percent to 91.38 yesterday and RTS stock-index futures decreased 0.9 percent to 138,590. The RTS Volatility Index, which measures expected swings in the stock futures, climbed 10 percent to 24.83 today. The Market Vectors Russia ETF, the largest exchange-traded fund dedicated to Russian equities, slipped 0.6 percent to $26.76.
Crude for July delivery dropped 0.7 percent to $94.33 a barrel on the New York Mercantile Exchange today. Brent for July settlement retreated 0.4 percent to $103.82 a barrel on the London-based ICE Futures Europe exchange today. Urals crude, Russia’s major export blend, fell 0.5 percent to $103.33.
The ruble fell 0.2 percent to 31.5655 per dollar today and declined 0.2 percent to 35.6806 against the dollar-euro basket used by the central bank to manage swings that erode exporter competitiveness.
United Co. Rusal, the world’s largest aluminum producer, dropped 2.1 percent to HK$3.68 in Hong Kong today.