Bloomberg News

Russian Stocks Rise, Led by Banks on Sberbank Earnings Gain

August 27, 2007

Russian stocks climbed, led by OAO Sberbank after Russia's biggest bank reported a 34 percent increase in quarterly profit.

The ruble-denominated Micex Index (INDEXCF) rose 1.4 percent to 1,656.32. Twenty-four stocks advanced and six retreated. The dollar-denominated RTS Index (RTSI$) added 1.7 percent to 1,895.71.

Net income at Sberbank jumped 34 percent in ruble terms, to 26.8 billion rubles ($1.04 billion) in the first quarter compared with the year-earlier period, the bank said in a statement on its Web site late on Aug. 24. It was the first time the bank reported quarterly financials under international accounting standards.

``The reported results are strong, highlighting Sberbank's improved cost control and still-high profitability,'' Dmitry Dmitriev, a banking analyst at Deutsche Bank AG in Moscow, said in a note to investors today. ``The current market turbulence creates an excellent buying opportunity in Sberbank.''

Sberbank climbed 1.7 percent to 95.20 rubles on the Micex Stock Exchange. The shares have fallen 15 percent since their high on July 23 on investor concern that a credit crunch triggered by U.S. subprime mortgage loans could spread through the world's financial system.

Sberbank liabilities

Analysts said the global credit crunch is unlikely to dent Sberbank's earnings because 90 percent of the bank's liabilities are made up of customer accounts and deposits, rather than local and foreign debt.

``The bank is clearly less prone to shocks on the global credit markets,'' wrote Leonid Slipchenko, an analyst at Moscow- based UralSib Financial Corp., in a research note today. ``We believe that investors are overvaluing risks in pushing the quotes of the bank down by more than 15 percent.''

VTB Group, Russia's second-biggest publicly traded bank, added 0.7 percent to 12.09 kopeks. A kopek is one-hundredth of a Russian ruble.

OAO GMK Norilsk Nickel, Russia's biggest mining company, rose 1.4 percent to 5,511.19 rubles on higher metal prices. Copper for November delivery gained as much as 2.5 percent to 66,110 yuan ($8,742) a ton on the Shanghai Futures Exchange.

OAO Surgutneftegaz, Russia's fourth-biggest oil producer, jumped 6.5 percent to 32.484 rubles on renewed speculation that it may be bought by a state-controlled energy company. The company has denied reports of a merger or takeover.

``Speculation continues to mount over the future of the company,'' Renaissance Capital analysts including Alexander Burgansky said in a research note today. The Moscow-based investment bank said buying Surgut shares was its ``key trading idea this week.'' The stock has gained 12 percent in the last month, compared with a decline of 2.7 percent for the Micex Index.

`Waiting for Years'

``Surgut has been waiting for years to start working more closely with the state,'' said Chris Weafer, chief strategist at UralSib Financial Corp., in an e-mailed interview. ``The shares have been a bad investment during the previous waiting game, but might now benefit from any closer ties with the state or the state oil majors.''

OAO AvtoVAZ, Russia's biggest carmaker, climbed 3.6 percent to 3,952.73 rubles. Russian President Vladimir Putin nominated AvtoVAZ Chief Executive Officer Vladimir Artyakov as governor of the Samara region, the Kremlin press service said.

To contact the reporter on this story: William Mauldin in Moscow at

To contact the editor responsible for this story: Balduin Hesse at

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