OREANDA-NEWS. April 30, 2010. According to business media reports of April 27, Sberbank is set to return to the Central Bank the subordinated loan released in the fourth quarter of 2008. The RUB 500 bn loan was extended to Sberbank for 11 years. Management expects to take several weeks to settle this issue.

Management refers to a subordinated loan as the bank’s most expensive liability. The loan carries an annual interest rate of 8%, compared to the average interest rate of slightly above 5% on all of the credit resources.

If Sberbank gives the loan back to CBR, its capital adequacy will decline to about 13% under RAS and IFRS. Given fairly conservative forecasts for the pace of growth in lending operations, the ratio at this level will suit Sberbank in the near future (the CBR minimum requirement for capital adequacy is 10%). However, should a scenario for the recovery of demand for credit resources be realized, Sberbank may need additional capital as early as 2011.

Firstly, this decision shows the bank’s ability to raise cheap credit resources in large amounts and secondly, brings forward the date of an SPO (another source of capital) by the bank, which may elicit a positive response on the market. Our 12-month target prices for Sberbank are USD 3.89 per common share and USD 2.18 per pref.