OREANDA-NEWS. February 15, 2010. The premature repayment of a USD 1 billion subordinated loan is unlikely to have any notable negative impact on Sberbank’s capital adequacy; instead, it should offer the bank additional opportunities for the acquisition of debt financing.

On February 12, Sberbank reported that it had successfully repaid a USD 1 billion subordinated load. Sberbank borrowed the funds in February 2005 with the help of a loan-participating bond with a 6.23% annual coupon, for a period of 10 years, with the possibility of premature repayment in five years.

Premature repayment of the loan is unlikely to have any notable negative impact on Sberbank’s capital adequacy. As of January 1, Sberbank’s capital adequacy ratio was 23.2%, which was significantly above the CBR requirement of 10%. Moreover, Sberbank has gradually excluded this subordinated debt from its capital adequacy calculations. However, even if Sberbank had taken the whole size of the subordinated debt into account, its repayment would have lowered the bank’s capital adequacy ratio by just 2.5-3%. In our opinion, the premature repayment of the loan could positively affect Sberbank’s ability to acquire debt financing.

Our target price for Sberbank on 31 December 2010 is USD 2.42 per common share (RTS: SBER) with a HOLD rating and USD 1.14 per preferred share (RTS: SBERP) with a SELL rating.