SBRCY - Sberbank

[Spekulatius]

what brazilian stocks pique your interest?  TIA

 

For banking, I like ITUB.

[John Hjorth]

looking tasty to me. anyone buying

 

Now back to SBRCY. I'm in, but not right now. Most likely, it'll be next month, because of basic practical issues. I simply need a secondary broker to buy this thing [and a couple of other stocks]. For me, it'll be Saxo Bank as secondary broker [no real alternative available for me here right now, as I see things, after doing quite some work on that over the last few months]. No way I'm going to buy and sell stocks by the use of a phone at my primary broker.

 

If one look at the financials, it's simply shooting out the lights [much better than i.e. the major four US banks - on about any metrics at your own personal choise]. So, in short, the issue at hand - call it just the whole bunch of raised red flags, if you want - with this bank is its operational environment in general. From there, it gets complicated [- at least to me].

 

I have now spent months studying on/off what has been going on in Russia since the dissolution of the USSR. There are still red flags here, there and everywhere, telling me to stay away. So I'm not going to go crazy here in any way - it'll be a relatively small position, built up over time, exactly how much and how, I cannot tell right now. What happens inside my head and in my gut while buying it the first time will be guiding. -I may even abort the whole thing after just having started the position.

[petec]

John, what reading (on Russia, not Sberbank) would you recommend?

[John Hjorth]

Thank you for asking, Pete,

 

I simply started with the Wikipedia english [the best] pages for Vladimir Putin, Sberbank, the Russian Oligarchs, the history of Russia, the history of the USSR and its demise, to its dissolution, the Russian default on its debt, and so on, reading it all as some kind of newspaper. The most important thing has been following the links from Wikipedia articles to Wikipedia outside sources.

 

The whole studying and learning process about what has been going on has been such a heartbreaking experience to me, that I can hardly explain it. Somehow, it's difficult to phatom, that Russia has not fallen totally apart. From what I have read so far, only the history of North Korea "tops" it.

 

About now a bit more than three weeks ago, I read Bill Browder's book "Red Notice", after receiving it from Amazon, based on recommendation from Liberty here on CoBF in the Books forum. It took me about 48 hours to read and digest the book - I was in some kind of state of shock underway ... I found it inappropriate to post about it in the books topic, when I was not in personal balance, so I was mute at then. The book somehow tied it all together for me.

 

No doubt that what has been going on hasen't been pretty.

[Spekulatius]

My general feel is they the biggest near term risk is a decline in the Rubel. just from the numbers in the Ir sexontrion of their website, Sberbank looks fairly cheap - 35 Rubel earnings/share for a 173 Rubel stock. verily low efficiency ratio (~30%) and strong profit metrics. It’s a great bank, except they it’s located in Russia. The appropriate discount for the latter is something I have difficulty to wrap my head around. I feel that currency risk and volatility of exchange rate over long periods of time relative to USD is a proxy for country risk for EM and on they quanitiative meaure, Russia scores pretty bad.

 

I think this is something I would  buy when things go really nuts.

[John Hjorth]

... Verily low efficiency ratio (~30%) and strong profit metrics. It’s a great bank, except they it’s located in Russia. The appropriate discount for the latter is something I have difficulty to wrap my head around. I feel that currency risk and volatility of exchange rate over long periods of time relative to USD is a proxy for country risk for EM and on they quanitiative meaure, Russia scores pretty bad. ...

 

Very well phrased, Spekulatius,

 

This is the key question, and certainly hard to quantify.

[John Hjorth]

Sberbank 2018 Financial Report was released a few days ago.

 

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2018 ROE at 23.1 percent [p. 21].

Cost/income ratio at 34.2 percent [p. 21].

 

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To me, it still looks like a major US bank, investing heavily in the future with digitalization etc. - naturally it's primary geographical footprint is Russia.

 

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I think it's important to understand that this bank is not a puppy of Vladimir Putin, but a vehicle controlled by Elvira Nabiullina. If interested, please try to google her by her name and read about her.

 

Edit:

I know this bank is considered controversial here on CoBF, so I have no intention to engage in deep discussions about it being Russian [a bit like stated in this topic earlier by TwoCitiesCapital]. It's for sure an outlier for me personally, and I'm not going to go crazy here.

[TwoCitiesCapital]

U.S. announced another round of sanctions on Russia. Sberbank has tanked over the last two days - my guess in anticipation because earnings were strong.

 

It's back down to a 5x P/E and just a hair above book despite a 25% ROE.

 

I'm tempted to buy more, but it is already one of my largest positions and my experience with the name in the past encourages me to wait. These dips with Sberbank are rarely quick  and it doesn't look like there's much support until we hit $10 now that we're below $14.  It was there as recently as September.

 

For those who don't already have a massive position, $13.75 may prove a phenomenal price on the long run.