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Uralsib - Bank St Petersburg: 2Q11 IFRS review - Sep 13, 2011.

Mixed Bag of Results

2Q11 IFRS review

ROAE above 30% though partially driven by one-off gain. Bank St Petersburg (BSPB RX - Buy) released mixed 2Q11 results with net income 10% above consensus and in line with our estimates at RUB2.4 bln ($86 mln), up 15% QoQ. Net interest income rose 8% QoQ, reflecting a stabilization in NIM and providing stable core income growth (8% QoQ and 13% YoY). In addition, though not releasing provisions, the bank reduced its provisions charge by 70% QoQ, driving COR down to 0.4% versus 1.4% for 1Q11. Also, as we expected, the bank posted a one-off gain of RUB879 mln on the revaluation of MICEX shares. However, opex growth slightly exceeded our expectations with cost/income climbing to 39% from 26% in 1Q11. The bank posted around 31% ROAE in 2Q11, setting a new record, however, removing the revaluation one-off leaves it at only 19%. Nevertheless, we see the results as moderately positive, and during the conference call scheduled for later today we will focus on management's outlook on 2H11, including potential trading losses, lending growth and a possible provisions release.

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Better asset quality; CAR yet to improve. The bank posted around 2% QoQ lending growth, which led NIM to rise

marginally to 5.1% in 1H11 from 5% in 1Q11. NPLs dropped 9% QoQ in absolute terms, reducing the NPL ratio 60 bps

QoQ to 4.6%. Provisions also contracted 3% QoQ, despite the provisions charge, and the LLP ratio lost 50 bps QoQ to

9%. This increased the coverage ratio to 196% from 182% in 1Q11, and we still do not rule out the bank will release some provisions in 2H11. Tier-1 CAR remained flat at 9.7%, despite the strong ROAE as in 2Q11 the bank declared RUB794 mln ($28 mln) in dividends for 2010. We expect the additional share issue to support CAR in 3Q11.

Discount unreasonably wide. The stock has lost more than 20% since the beginning of August with only Nomos Bank

being hit worse. It is currently trading with a 2011E P/BV of 1.1, offering a 29% discount to EM peers. It has also underperformed Vozrozhdenie Bank recently and is currently trading in line with it on 2011E P/BV and 2012E P/BV. We

see this as unjustified given Bank St Petersburg's 2011E ROAE of 26% versus only 11% for Vozrozhdenie and believe some premium would be more reasonable. We reiterate our Buy recommendation for Bank St Petersburg with a target price of $7.0/share and 89% upside.


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For further Information please contact: URALSIB Capital, Efremova St, Moscow, Russia,119048

phone:+7(095)788-0888 , fax: +7(095)785-1206
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Publication:Russian Banks and Brokers Reports
Geographic Code:4EXRU
Date:Sep 16, 2011
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