Russia's largest bank Sberbank reported IFRS net profit increase of 38% year-on-year to RUB748.7bn ($13.3bn) in 2017 or RUB34.58 per ordinary share, the bank said on February 28. The annualized return on equity (ROE) reached 24.2%, up from 20.8% a year ago, while return on assets (ROA) reached 2.9%, up from 2.1%.

In the end of February Sberbank became the second most valuable bank in Europe after HSBC on February 26, when its market capitalisation of €91.73bn overtook Spain's Banco Santander. The bank is the main creditor of the Russian economy and holds the largest share of the deposit market.

The group's gross loan portfolio increased by 6.6% in 2017 to RUB19.9 trillion, with retail loans growing by 13.6% to RUB5.7 trillion, led by mortgages portfolio growth of 16% for the year. 

Client deposits increased by 3.4% to RUB19.8 trillion as of end of fourth quarter of 2017. Retail deposits grew by 4.9%, while corporate deposits were up by 0.5% in the reporting quarter. 

VTB Capital on February 28 commented Sberbank's numbers in the fourth quarter were "particularly solid" due to fees and commission income going up by 21% y/y (6% ahead of the consensus), with normalised fourth-quarter cost of risk of 83bp "implying upside risk to management guidance", and strong capital generation of 40bp, with the first-tier capital ratio reaching 11.4%. 

The analysts see next catalysts for Sberbank stock in dividend recommendation due on March 20 (VTB expects a 40% payout) and the sale of Turkish DenizBank, which is estimated to unlock another 70bp of capital for distribution. 

VTB reiterated a Buy recommendation for Sberbank shares with 12-month target prices of RUB400 for ordinary and RUB340 for preferred shares, implying an estimated total return (ETR) of 49% and 53%, respectively. 

“While many peers are still focused on addressing past problems, Sberbank’s business model has relieved it of such focus. Rather, the bank is still benefitting from attractive point in the cycle and reduced competition. In addition, Sberbank has been impressively pursuing digital transformation that should secure better efficiencies and improve its risk profile – C/I ratio should decline to 30%, whereas CoR should moderate to 1.3-1.4%. The bank is also building up new revenue streams in the financial and non-financial space potentially contributing c10% by 2020,” Olga Naydenova, a bank analyst with BSC Global Markets said in a note on the bank.