OREANDA-NEWS. October 27, 2009. Sberbank 9M09 RAS numbers released showed net interest income rising 41.3% YoY, operating expenses decreasing by 4.2% YoY, and provision charges climbing 7-fold YoY. Net profit totaled RUB9.1bn vs RUB102.9bn for 9M08 and RUB 5.5bn for 6M09, reported the press-centre of OTKRITIE Financial Corporation.

View: The results are in line with our forecasts, and reveal a continuation of the trend exhibited in 1H09. The core business of Sberbank remains in good shape: corporate loans have expanded 9.4% YTD (6.6% for 6M09).

Its retail loan portfolio shrank by 6.9%, though signs of stabilization have been observed, as the decline was a mere 0.3% QoQ in 3Q09. Net interest margin stood above 7%, and Sberbank continues to keep overhead under control. However, its provisioning policy remained conservative: for 9M09, the Bank allocated RUBN282bn in provisions - (RUB181bn in 6M09), thereby nearly erasing the operating profit, and booking a marginal net income. Overdue loans were at 3.7% of the loan portfolio (2.8% for 6M09). Loan loss provisions amounted to 8.9% of gross loans (versus 6.9% in 1H09). The capital adequacy ratio stood at 23% - Sberbank is well capitalized.

Valuation: With P/BV of 2.4x for 2009E, but 1.8 for 2011E, Sberbank is attractively valued given a return to normalized profitability in two years. Our target price is US3.3.

Action: We think the market will take the results neutrally, as they confirm earlier trends.