Daily analyst comments

Citing Bank St Petersburg CEO Alexander Savelyev, the Vedomosti newspaper reported the bank's plans to hold an SPO in the autumn of 2008. The issue is aimed at raising USD 400 mn. The company is to put on offer newly issued shares. The planned scheme resembles the one used in late 2007 when global depository receipts were released, after which the program was shot down and trade in the securities was moved to Russia.

The placement is planned at about 19.3% of the company's current capital. The main goal is to raise funds for the company's further development. In 2007, the bank boosted its assets by 109%. This year, the bank has maintained its high growth rates and expects its assets to increase by a further 60%. The bank could use other ways to raise capital given that its capital adequacy ratio markedly exceeded the 10% limit set by the Central Bank at the end of 2007. In our view, the decision to hold an SPO amid the global financial crisis testifies to the management's certainty about the fundamental appeal of the bank's shares and the news will likely trigger a positive reaction on the market. For all that, we believe that the overly optimistic assessment of the bank's shares on the market is one of the main reasons for the placement.

We estimate the fair value of one common share in the bank at USD 6.28, with a downside potential of 13% which corresponds to SELL recommendation. The fair value of one preferred share is USD 2.11 per share, with an upside of 30%, which corresponds to BUY recommendation.