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01.02.2008 - MDM Comment: RUSB (Ba2/BB-) not planning Eurobonds in 08

Reuters and Interfax have published the comments made by the CEO of Russian Standard Bank Dmitry Levin yesterday. He said that the bank's net income in 2007 under IFRS was around USD400m (which effectively means that the bank didn't make any money in 2H07 due to cancellation of commissions, rebalancing of products and related one-off charges). Mr. Levin also said that in 2008 the bank plans to increase assets by 35-40% and earn some USD500m in net income. We tend to generally believe the guidance (although perhaps some downward adjustment may be warranted down the road), since we think the bank is still best positioned in the Russian consumer finance marketplace in terms of market share, technologies/risk management and team.
Importantly, Mr. Levin said that the bank doesn't plan to issue plain vanilla Eurobonds in 2008 since they don't expect markets to improve. Russian Standard will shift its funding efforts onto deposits from individuals, securitizations, syndicated loans and local bonds. We believe the news about limited supply of bonds from RUSB may somewhat support the quotes on its outstanding issues.
Overall we continue to view RUSB as a solid credit with strong capitalization ratios, short asset structure and great business model. We prefer ruble bonds of the bank with a short duration (YTM around 11%), which can be repoed at the Central Bank at 6% rate. The latter gives fantastic opportunities for leveraged trades. This is though true for a large number of local short-dated issues, that are on the Central Bank's repo list (rated B1/B+ and above).

20.02.2008 15:59
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