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Uralsib - Russia Equity Research - Vozrozhdenie - Probably Last Sign of Weakness - Aug 13, 2010.

Probably Last Sign of Weakness

1H10 IFRS preview

Still pressured by taxes, but top line set to improve. Vozrozhdenie bank (VZRZ - BUY) is to release its 1H10 IFRS results on 18 August, kicking off Russian banks' 1H10 reporting season. We expect mixed results, with net income down 71% YoY to RUB186 mln ($6.2 mln) in 1H10 and down 8% QoQ to RUB89 mln ($2.9 mln) in 2Q10. While the bottom line is set to remain under pressure due to the still-high effective tax rate and opex growth, the top line is likely to rise. We expect total operating income to rise 8% QoQ to RUB2.5 bln ($83 mln) in 2Q10 as a result of almost flat NII and F&C income growth. We believe that expectedly weak results are priced in, and that management's 2H10 outlook during the conference call will be of greater interest.

(To view the full report please click here:

http://russianreports.aiidatapro.com/UralSibEN/100813_VZRZ_2Q10_Preview.pdf)

Buying opportunity remains. Despite gaining 22% since the beginning of July, the stock remains the main laggard in the sector, down 14% YTD. With weakness in the results already priced in, the stock is still undervalued, and we see upside of about 37%. Trading at 2011E P/BV of 1.1, Vozrozhdenie's shares still present a buying opportunity based on expectations of a brighter 2H10, with lending growth, NIM stabilization, and a lower effective tax rate. The management's 2010 net income guidance of RUB500 mln ($17 mln) is likely to be exceeded, and the outlook may improve. We retain our Buy recommendation and target price of $46/share.

www.uralsibcap.com

URALSIB Capital, 8, 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
Date:Aug 13, 2010
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