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ATON - Daily Dashboard, Financials, Metals and Mining - May 31, 2012.

Financials

Sberbank 1Q12 IFRS Results - Solid but Fully Anticipated

Sberbank reported its 1Q12 IFRS financials yesterday (30 May), posting a net profit of RUB92bn with RoAE of 28%. Key takeaways include:

(To view the full document, please click on the link below:

http://reports.aiidatapro.com/brokers/AtonEN/2012_5_31.pdf)

Net interest margin (NIM) declined rapidly by 70 bpts QoQ to 6.5%, on our calculations. Most of the pressure on margins came from a funding cost increase of 30 bpts.

Earnings continue to benefit from low provisioning: in 1Q12 the bank reported an outright net provision release of RUB3.2bn after an essentially zero credit charge (the cost of loan book risk) in FY11. While this relates to older provisions being released in an amount greater than new provisioning, we believe that rapid loan book growth will eventually force Sberbank to create more provisions, which would strain midto longterm earnings.

Maturity assetliability mismatches (ALM) have worsened since YE11. Sberbank reported an ALM gap of 6% of total assets for maturities less than six months. This is a relatively new issue for Sberbank, which reported a balanced assetliability structure prior to the FY11 results. The bank increasingly relies on CBR funding, judging from its monthly RAS balance sheets: in its 1Q12 IFRS financials Sberbank did not disclose the amount due to the CBR, showing only that total debt to banks (including the CBR) had risen 54% to RUB821bn.

Loan book growth was impressive in 1Q12, particularly the retail loan portfolio which gained 15% QoQ. Consumer loans led the way with a 16% QoQ increase, while mortgages rose 12%. Corporate loans added 4% QoQ.

Bottom line

The results contained few surprises and are neutral for the stock, in our view. Sberbank continues to post high earnings which are heavily supported by low provisioning a or in this case by outright provision releases. Operating efficiency remains the best across traded Russian banks but seems to be declining. Going forward, we expect earnings to eventually reflect more provisioning.

Sberbank 1Q12 IFRS results (RUB mn) (table)

METALS AND MINING

TMK 1Q12 IFRS Preview

TMK is set to report its 1Q12 IFRS financials today (31 May). We expect the company to report revenue of $1.69bn, implying growth of 1% YoY and 6% QoQ driven by higher sales volumes, which TMK reported earlier as 2.2% softer YoY but 1.5% higher QoQ. Higher average prices in 1Q12 vs the same period last year should compensate for the weakness in sales volumes, in our view. We expect EBITDA at $250mn, down YoY but stronger QoQ. Net income should reach $93mn, representing declines of 9% YoY and 13% QoQ. We note that the 4Q11 bottom line was inflated by a $75mn paper gain from a P&P&E impairment reversal.

TMK: 1Q12 IFRS preview ($mn) (table)

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phone: (495) 777-66-77, (495) 228-38-99

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Publication:Russian Banks and Brokers Reports
Date:May 31, 2012
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