Financial results of Belarusian banks in 2021
Bank size
As always, Belarusbank was by far the largest bank by assets, equity and profit. Eight banks had assets of more than USD 1 billion. Absolutbank, Zepter Bank and StatusBank close the list by asset size.
Profitability
Alfa-Bank led by a wide margin in efficiency: return on assets was 4.3% and return on equity 28.5%. TK Bank's very high return on assets is explained by the very low level of liabilities on its balance sheet (see the “Leverage” section for details).
Only 3 banks had ROE of 20% or higher in 2021. On average, banks returned 9.6% on equity. Zepter Bank and Bank Reshenie showed the worst return on assets and equity.
Leverage
Total liabilities relative to total assets were at 80–90% at the end of 2021.
Interestingly, the correlation between financial leverage and return on equity was 0.293. So additional borrowing by no means always guaranteed a higher return on equity.
Changes in 2020–2021
In 2021, total assets of banks grew by 10% to USD 37 billion.
Total equity of Belarusian banks grew by USD 769 million to USD 5.5 billion. The largest nominal increase was at Belarusbank: USD 446 million.
Net profit grew by 26%, from USD 401 million in 2020 to USD 507 million. None of the 23 banks had a net loss for the year.
Bank valuation
In the past we have valued Belarusian banks quite successfully (for example here). The situation has changed dramatically, and the multiples have changed with it. Previously our valuation range was 0.4 to 0.8 P/BV, based on listed banks in Eastern Europe and historical offers and deals on the Belarusian market (more on the assumptions of our bank valuation model here).
Since early February, Russian banks — Sberbank, VTB, Uralsib, Bank Saint Petersburg and others — have lost 40% or more of their market value. There is no reliable stock market in Belarus, and the Russian market was subjected to significant restrictions almost immediately and is no longer truly free. So I would venture that the valuation multiples for Belarusian banks have also fallen roughly by half. We will therefore use the following multiples:
A brief explanation: for example, if a bank's ROE is below 5.0%, the new model values it at 0.24 of equity.
This gives the following bank values:
Summary
2021 was a successful year for the banking sector: total profit of all banks grew by 26% in nominal US dollar terms. As usual, the large private banks were the most efficient. The events in Ukraine will significantly affect the banking sector, and it will be very interesting to see how they show up in the 2022 results.
Translated from Russian. First published in the “Belarusian Issuers” Telegram channel. Charts and screenshots are in Russian. This is not investment advice.