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Moody's has upgraded the credit ratings for the ten largest Russian banks. In our opinion, this should not have an impact on the banks' borrowing costs, since the market was aware of the improvement in these issuers' financial health, and Moody's has just confirmed the information.
On June 16, Moody's rating agency raised its long-term credit rating to Baa1 for ten Russian banks: VTB, VTB North-West, VTB 24, Sberbank, Bank of Moscow, Deltacredit, Rosselkhozbank, Vneshekonombank, Gazprombank and Reiffeisenbank.
In our opinion, the upgrade in credit rating for the largest Russian banks should not affect the cost of credit resources drawn by the banks, since the market had already been aware of the improvement in the issuers' financial health, while the rating upgrade just states this fact. Russian banks attracted borrowings on international markets at lucrative rates as early as in 1H 2008. The creditors are focused more on the banks' current financial health than on formal credit ratings, and analyze the banks' financial conditions on their own.
In line with our estimates, the fair value of VTB is USD 0.0054 per share with a 54% upside, which corresponds to a BUY recommendation. The target price for Sberbank commons as of late 2009 is USD 5.26 per share, which implies a 67% upside and corresponds to a BUY recommendation. The target price for Sberbank prefs as of late 2009 is USD 3.15 with a 73% upside potential, which corresponds to a BUY recommendation. However, we believe that unfavorable conditions on the international financial markets could impair the stock valuations in the mid-term. Konstantin Romanov
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Sberbank
Capitalization: $36 026 725 240,00
Common shares:
Price: $1,63
Target price: $5,26
Recommendation: Buy
Delta week: 1,5%
Delta month: -24,4%
Delta year: -60,1%
Preferred shares:
Price: $0,84
Target price: $3,15
Recommendation: Buy
Delta week: -11,9%
Delta month: -28,7%
Delta year: -70,1%
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