Why I Chose to Invest in Sberbank Rossii PAO (SBER.MOEX)
In 2007/2008, when I started investing on the stock market, my strategy gravitated towards mining companies while avoiding the banking sector. Despite the allure of a system where money is virtually created from nothing, the sector’s balance sheets didn’t impress me. My approach hinged on identifying companies with equity-to-assets ratios of at least 0.5 (see this article for a deeper dive into the ratios that guide my stock selections).
However, I soon came to understand that sectors should be scrutinized individually and that valuation interpretations ought to commence at the sector level. This perspective shift made me more receptive to the potential of the financial sector. As I delved into the sector, one particular company emerged as a standout: Sberbank.
The appeal of Sberbank was not just a result of its strong balance sheet relative to its peers, but also its multifaceted operations. Besides being a bank and an insurer, Sberbank ventures into the tech sector, operating a digital TV and music business under the SberPrime label, an e-commerce venture, an e-grocery platform, a cloud service through SberCloud, and even a ride-hailing app known as CityMobil. Investing in Sberbank felt akin to buying into Bank of America, Amazon, Netflix, Uber, and more, all under one corporate umbrella.
Despite this enticing portfolio, I found Sberbank’s shares to be prohibitively expensive, even though they consistently boasted an impressive return on equity exceeding 15% annually. Consequently, Sberbank remained a fixture on my watchlist for years, as I awaited an opportune moment to invest. When the prices of Russian stocks collapsed as a consequence of the “conflict”, I knew I had a rare opportunity to buy Sberbank’s shares at bargain prices.
In hindsight, purchasing stocks during a period of conflict might not appear to be a wise decision. However, the essence of smart investing often lies in identifying and acquiring undervalued equity, even in the midst of crises.
Disclaimer: This is not financial advice. Always conduct thorough due diligence before making any investment decisions.
Financial Data Analysis
The following financial data were relevant when I made my initial investment in ‘s shares (further details about my trading activity is provided below). The calculated “Key Metrics” provide a window into my approach to valuation. For a deeper understanding of this approach, as well as comprehensive explanations on what these revealing ratios truly signify, I encourage you to read the following article.
For my due diligence, I primarily focus on the most recent annual Cash Flow and Income Statements to gauge the company’s performance relative to the previous years. However, when reviewing the Balance Sheet, I always refer to the most recent quarterly statements. This allows me to accurately understand the present state of the company’s assets and liabilities, essentially giving me a snapshot of what I’m investing in at that moment.
| Selected Quarterly Balance Sheet Data as of December 31, 2021 | Key Metrics | ||
|---|---|---|---|
| Total Inventory | N/A | Current Ratio | N/A |
| Total Current Assets | N/A | Quick Ratio | N/A |
| Total Goodwill | 52,800.00 | Book Value per Share | 5,638,600.00 / 21,456.70 = 262.79 |
| Total Intangibles | 237,800.00 | Tangible Book Value per Share | (5,638,600.00 – 52,800.00 – 237,800.00) / 21,456.70 = 249.25 |
| Total Assets | 41,165,500.00 | Price to Book Value | 35.63 / 262.79 = 0.14 |
| Total Current Liabilities | N/A | Price to Tangible Book Value | 35.63 / 249.25 = 0.14 |
| Total Equity | 5,638,600.00 | Total Equity / Total Assets | 5,638,600.00 / 41,165,500.00 = 0.14 |
| Total Common Shares Outstanding | 21,456.70 | Total Tangible Equity / Total Tangible Assets | (5,638,600.00 – 52,800.00 – 237,800.00) / (41,165,500.00 – 52,800.00 – 237,800.00) = 0.13 |
| Selected Annual Income Statement Data as of December 31, 2021 | Key Metrics | ||
| Diluted Net Income | 1,222,900.00 | Diluted Normalized EPS | 1,222,900.00 / 21,500.00 = 56.88 |
| Diluted Weighted Average Shares | 21,500.00 | Price to Earnings Ratio | 35.63 / 56.88 = 0.63 |
| Selected Annual Cash Flow Data as of December 31, 2021 | Key Metrics | ||
| Total Cash Dividends Paid | 419,400.00 | Dividend per Share | 419,400.00 / 21,500.00 = 19.51 |
| Dividend Yield | 0.18 / 1.81 * 100% = 9.94% |
Catalysts for Future Revaluation
Future revaluation could potentially be catalyzed by the spin-offs of subsidiaries, transforming them into independently listed entities.
It’s worth mentioning, however, that discussing catalysts is arguably futile as long as the current sanctions persist. Consequently, I plan to update this section in the future, once the prevailing circumstances have normalized.
Company Information
Sberbank Rossii PAO is a Russia-based company, which is primarily focused on the financial services industry. The Company operates as a commercial bank and provides services to individual and corporate clients. Its offerings for individual clients include deposits, credit cards issuing, money transfers, depositary cells, consumer loans, mortgages, utility payments, online banking, mutual funds, among others. The Company’s corporate products portfolio includes corporate loans, asset management, payroll projects, leasing, online banking, cash and settlement services, among others. In addition, the Company offers a wide range of services to financial institutions, such as correspondent accounts, custody services, and interbank lending, among others.
Company Website: https://www.sberbank.com/index
Trading Activity – When I Bought These Shares
- February 22, 2022 – RUB 101.41
- March 01, 2022 – USD 1.16*
- March 01, 2022 – USD 0.91*
- March 01, 2022 – USD 0.81*
- (Average price – RUB 35.63)
Note*: The initial purchase referred to Sberbank’s preferred shares (Ticker: SBERP.MM). Any purchases referenced in USD pertain American Depositary Receipt’s (ADR’s) of Sberbank where each ADR represents four ordinary shares (SBER). My broker, Interactive Brokers, was able to convert these to the original shares trading on the Moscow stock exchange at a conversion price of RUB 27.41 each and are now held at Interactive Brokers in an escrow account for as long as the sanctions last.
Due to imposed sanctions in relation to the Ukraine “conflict”, I am not allowed to buy or sell these Russian holdings for as long as the imposed sanctions last.
Dividend Activity – When I Received Any Dividends
- Ex-dividend date: May 11, 2023 – RUB 25.00 (Final dividend for the year ended 31 December 2022.)
Should I ultimately receive the dividend announced, my dividend yield would surge to 70.17% (calculated as 25.00 / 35.63 * 100%).
Due to imposed sanctions in relation to the Ukraine “conflict”, I am not allowed to collect any dividends on these Russian holdings for as long as the imposed sanctions last.
Trading Activity – When I Sold These Shares
- Not Applicable Yet
Recommended Resources to Start Conducting Your Own Research
Due to sanctions related to the Ukraine “conflict”, accessing information about Russian companies through western media resources is limited. This limitation also applies to the Reuters link mentioned above. Alternatively, you can use the Russian search engine Yandex.com to find better search results concerning Russian companies, including Sberbank.
Note: Although I have provided the following price chart for Sberbank from Stockdio.com, prices haven’t been recently updated. This discrepancy, I believe, may be attributable to the ongoing sanctions. Meanwhile, you can stay informed about the ongoing stock price by utilizing the Reuters link provided above.
