Bank St. Petersburg released its unaudited 1Q 2008 financials to IFRS on June 10. The statement says that revenue rose 9.3% to RUB 138.5 bn and total loans increased by 14.5% to RUB 105 bn. Equity capital expanded by 4.3% y-o-y to RUB 15.6 bn.
Table 1. Basic financial results for 1Q 2008, mn RUB
| | 1Q2008 | 2007 | Change |
|---|
| Assets (as of the end of the quarter) | 138.5 | 126.7 | 9.3% |
| Total credits (as of the end of the quarter) | 105.0 | 91.7 | 14.5% |
| Equity capital (as of the end of the quarter) | 15.6 | 15.0 | 4.3% |
| ROAE | 16.7% | 20.6% | -3.9% |
| ROAA | 1.9% | 2.1% | -0.2% |
| Net interest margin | 5.2% | 5.5% | -0.3% |
| Cost / Income multiple | 37.9% | 40.2% | -2.3% |
Source: company data
We are moderately upbeat about the published financials which indicate robust growth – stronger than the average growth rates in the sector, and a strong regional position. The bank pressed ahead with expansion in the quarter, opening another four branch offices. The bank's assets broadened by 9.3%, up 75% compared to the average sector growth of 5.3%. The bank's loan portfolio rose by 14.5%, marginally above the sector average of 12.3%.
Table 2. Profit and loss statement for 1Q 2008, mn RUB
| | 1Q2008 | 1Q2007 | Change |
|---|
| Interest income | 3395 | 1703 | 99.3% |
| Interest expenses | 1773 | 769 | 130.6% |
| Net interest income | 1622 | 935 | 73.6% |
| Commission income | 444 | 208 | 113.3% |
| Commercial expenses | 79 | 37 | 111.9% |
| Administrative expenses | 1580 | 770 | 105.1% |
| Net profit | 640 | 235 | 171.9% |
Source: company data
Growth of interest expenses outpaced that of interest income, which was caused by a temporary gap between the cost of the credit resources attracted and the price of the loans issued.
The decrease in the profit margins on capital, assets and net interest was due to the growing cost of credit resources and the bank's active operations on the interbank repo market where the rates are substantially lower than those on corporate and retail loans. The bank's entry into the interbank credit market makes its loan portfolio less risky and gives the bank access to short-term financing if needed. It also took time for the bank to begin making profit on the capital drawn in 2H 2007.
The decrease in the Cost/Income ratio from 40.2% to 37.9%, indicative of the growing effectiveness of the bank's business, is another positive result.
Our estimates show that the fair value of one common share in the bank should be USD 6.2, with a downside potential of 14.1%, which corresponds to SELL recommendation. The fair value of one preferred share in the bank is USD 2.09, with an upside of 30.4%, which corresponds to BUY recommendation.
3.888
11.862
