Daily analyst comments

On October 21 Sberbank released its 9M 2008 financials audited to RAS. Net profit rose 26.7% to RUB 102.9 billion. Lending operations picked up 23.1% and the aggregate loan portfolio surpassed RUB 5 trillion. Equity capital hit RUB 783.5 billion.

On the positive side, we point out further growth in the bank’s profits in the reporting period, notwithstanding the complicated conditions in the Russian financial sector. For September, the bank posted a net profit of RUB 10.2 billion, which is just 12% down on the average profit growth figure for the previous eight months. The amount of corporate funds in Sberbank accounts rose by more than 6% over the month and the bank’s share of aggregate banking assets rose from 24.4% at the start of the year to 24.9%. We expect this tendency to continue for the next several quarters. The cost/income multiple decreased to 45% in 9M, the bank’s management reported.

On the downside, we primarily point out a low rise in the bank’s household deposits in September, which only slightly surpassed 0.5%, at a time when market conditions were conducive to ensuring a larger inflow of personal deposits. The way we see it, more rapid growth in the bank’s household deposits is prevented by the aggressive policy pursued by its rivals in the sector.

The crisis in the financial sector in September has had practically no effect on the financial statement released by the bank. We do not expect destabilization in financial markets to prevent the bank from reinforcing its market position, enabling it to boost its market share in the key market segments. The main risk the bank could face is the deteriorating quality of its loan portfolio: This could happen as the social burden on the bank, connected with ensuring the normal functioning of the financial sector, increases. Our target price for the bank and recommendation on its shares are currently under review.