Alpha-Bank suggests selling URALSIB’s stock due to poor performance in 2006 and large share of securities in asset portfolio

Alpha-Bank’s Chief Analyst Natalia Orlova and Analyst Olga Naidenova commented on the accounts and reports for the year 2006 drawn up by URALSIB in compliance with the International Accounting Standards.

'The bank’s performance seems to have been quite poor last year; its net profit, for instance, decreased by 61%. The report also indicates that the bank now owns fewer shares of LUKOIL, whereas having a share holding in this company used to be viewed as their great advantage. URALSIB only had $534m worth of LUKOIL’s shares at the beginning of 2007 against $776m in 2005. Trying to create an independent banking business is a good growth strategy, but as a result, the bank might face acute shortage of financial resources. Besides, the bank still heavily depends on the securities portfolio, as 22% of URALSIB’s assets are made up of financial credit instruments (one-third of which are shares). We believe that since the stock price has remained almost the same at Russian Trading System since the beginning of the year, this dependence on bonds and shares means the bank is not likely to do very well in 2007,’ they say.

‘Due to our concerns regarding URALSIB’s low profitability this year and its unclear future, we think it best to lower the 12M price from $0.035 to $0.027 and recommend that the stockholders sell rather than keep their shares.’

This information was reported by Finam.Ru.

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