OREANDA-NEWS. August 18, 2010. Sberbank posted 7M10 RAS results revealing net profit of RUB76.7bn, including RUB16.1bn earned in July, reported the press-centre of OTKRITIE Financial Corporation.

View: Even though the net profit results were above the RUB10-12bn figure guided by the management for this month, we treat the results as mixed since most of July’s profits come from tax recovery – pre-tax profit for the month was reported at just RUB3.8bn. While this is partly a reflection of one-offs on RAS, we also note that the bank’s net interest revenues were down 2.3% MoM, which resulted in a drop in NIM from 7.4% in 1H10 to 7.2% in 7M10.

The bank’s balance sheet was in line with earlier management guidance as it continued to enjoy a very strong retail deposit inflow of +1.6% MoM (RUB66bn), while its lending portfolio was up RUB48bn. We believe the continued decline in NIM in the environment of strong deposits inflow was the main reason behind yesterday’s decision by the bank to decrease its ruble deposit rates by 0.6-1.5ppts. The cheaper funding should support the bank’s margins at our 7.1% forecast for FY10, while the net profit figure already seems to be ahead of our RUB85bn forecast.

Valuation and Action: Sberbank trades on a 2010 P/BV of 2x and on a 2010 P/BV of 1.6x. We like the stock at its current levels, and reiterate our BUY recommendation.