| Alfa Bank did not appreciate the growth of Sberbank shares Ahead of the publication of Sberbank's preliminary results for 2003, which are expected early this month, its main pursuer in the retail market, Alfa Bank, noted a deterioration in Sberbank's "fundamental position." This, according to Alpha analysts, is evidenced by “a decrease in Sberbank’s share in the retail loan market to 43% and an increase in costs by 35%.” Nevertheless, they expect that Sberbank's profit for the year will not be less than last year and will amount to about $980 million.
Sberbank remains the only representative of the banking sector actually listed on the stock market; recommendations for its shares are given by all leading investment analysts. However, Alfa Bank’s reports on Sber are of particular interest: Alfa is the largest private retail bank, the head of its board of directors, Mikhail Fridman, has more than once publicly criticized Sberbank’s monopoly position and actively lobbied for the inclusion of the “monopoly” in the deposit insurance system on general terms .
In the middle of last year, Alfa Bank expressed concern about the delay in the publication of Sberbank’s IFRS reports - “according to rumors, the new auditor (Ernst & Young became the auditor of Sberbank - Ed. ) had problems calculating the level of necessary provisions.” Yesterday, the bank announced another unofficial information: “There are rumors that Mikhail Kasyanov will become the new president of Sberbank instead of Andrey Kazmin. We do not consider this plausible, since Kasyanov is more likely to qualify for the post of chairman of the Central Bank."
Commenting on the growth of Sberbank shares in late February and early March (from February 27 to March 2, they grew by 4% and fell only yesterday against the backdrop of a general market decline), Alfa Bank chief economist Natalia Orlova does not share the optimism of investors. “The banking services market is entering a period of intense competition, and Sberbank, unfortunately, has not yet adjusted its policies in accordance with changing conditions,” she says. According to Alpha, “unlike in previous years, Sberbank can no longer cut rates to reduce the cost of its financial resources,” since its rates are “not only below market rates, but have also reached extremely low levels, given ongoing inflation.” Meanwhile, Sberbank’s income from the revaluation of securities “is also declining as the spread narrows” between Russian and US Treasury bonds.
At the same time, the report says, Sberbank is “missing a number of opportunities to maintain and increase profitability” - in particular, by cutting costs and increasing income from extremely profitable retail lending. The increase in the number of branches (from 20,142 to 20,203), as well as personnel costs (35%) in the first nine months of last year (year-on-year), worsens the ratio of total costs to profit, writes Alpha. Sber's retail loan portfolio, according to Alfa Bank, over the nine months "increased by only $1.5 billion (compared to the growth of the retail market as a whole by $6 billion)." “At the end of 2003, Sberbank controlled 43% of the retail loan market (versus 46% in 2002),” analysts conclude.
Experts had different assessments of the report. Aton senior analyst Alex Kantarovich notes: “In general, our estimates are similar to Alpha’s.” However, in Aton’s report on Sberbank, also published on Tuesday, the company raises its forecast for Sberbank’s net profit by 25%, to $908 million. “We have significantly increased our forecast, but in the long term we do not see prospects for growth in net profit,” says Mr. Kantarovich. “In three or four years the competition will become more intense.”
The head of the analytical department of Zenit Bank, Sergei Suverov, recalls that Sberbank’s share in the retail market is declining for objective reasons, and the promotion of this product by Sberbank is not going so badly: “They are expanding the product range in this direction and have good potential, this could become the main driver growth of Sberbank shares. There is also hope that improved management will lead to lower costs.” And an analyst at one of the rating agencies, who wished to remain anonymous, believes that Sberbank “still has the potential to reduce rates on private deposits.” According to him, the difference in interest rates between Sberbank and other credit institutions is falling along with the fall in rates. “And clients are reluctant to take greater risks for the sake of an additional 2-3% per annum,” says the expert.
Vadim Kleiner, a member of the supervisory board of Sberbank, believes that there is no talk of a deterioration in Sberbank’s position in the market yet: “The income of the banking business is declining - margins are falling, income from working with securities is declining. In these conditions, it is really necessary to reduce costs.” Although information about the growth in the number of Sberbank personnel based on the results of last year, he emphasizes, there is “no evidence at all” of cost reductions. Yuri VERETENNIKOV |
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