Description
Based in Moscow, Sberbank of Russia is the largest financial services group operating in Russia. Its services include retail banking and commercial lending, export/import transactions, FX and SX-transactions, as well as trading in derivative instruments. The bank has about 20,000 branches across the Russia.
Sberbank’s business is driven by the banking sector’s implied growth opportunities. It has some international exposure through acquisitions e.g. the Turkish based DenizBank A.S, and the Austrian-based Volksbank, which was renamed Sberbank Europe AG. These two acquisitions are likely to serve as springboards for the company for further market expansion into CEE and Turkey.
Sberbank accounts for about 29% of Russia’s aggregated banking assets, it maintains about 33% of all corporate loans, and about 47% of all retail deposits. The Central Bank of Russia is the key shareholder with 50% + 1 share of the total share capital.
We very much like Sberbank’s capacity to sustain margins during difficult market conditions. It has a strong capital adequacy ratio of about 13% and a Tier 1 ratio (link) of just about 10%.
Strengths and weaknesses analysis / Fundamental analysis:
Strengths:
- Given its solid and well-diversified customer base, Sberbank performs well during difficult periods,
- Operating profit growth is stable,
- Management successfully develops the non-interest income side of the business,
- Sberbank is one of the best positioned to take advantage of the country’s economic revival.
Weaknesses:
- The principal shareholder is the Central Bank of Russia, hence it’s possible not all decisions have an economic rationale,
- Balance sheet growth has been negative for the past few quarters, hence the related operating metrics are also set to decline in the future,
- Regulatory and accounting risks are especially high in the Russian Federation,
- Fixed charges are above the competitors’.