WOOD Flash – Sberbank: potential Deniz exit – our take

This morning (30 January), Sberbank and Emirates NBD confirmed that they are holding preliminary talks on the potential sale of Sberbank’s Turkish unit, Denizbank. We believe that the sanctions may call for the end of the expansion out of Russia’s hinterland, and it could make sense to exit Deniz at a reasonable price. On a ballpark basis, we calculate that the acquisition could add 60-100bps to Sber's CET1 ratio. There has been no decision made on the sale or sale proceeds; however, we believe the increased capacity to pay dividends could outweigh Deniz's diversification benefit, which is not that significant. The combination of the IRB (internal ratings based approach, a 70bps CET1 contribution expected in 2018E) and the capital benefit of a Deniz stake sale could be major support for paying out 50% of the 2018E net income. If Sber pays out 50% of its 2018E net income, the commons would get a 7.4% dividend yield, according to our current estimates. We rate Sberbank's common shares a BUY, with a RUB 232 price target (PT). On our 2018E estimates, the group is trading at 6.7x P/E and 1.5x P/TBV.