Yesterday”s quarterly reporting Marshall Isley (MI) was worse than expected in terms of profit, but revenues significantly exceeded the bank”s expectations of analysts surveyed by Bloomberg. It is also worth noting that the final result of the positive impact provided one-time transactions from the sale of securities and the expiration “of the debt. Nevertheless, we consider the MI reporting as a positive due to the relatively high income of the bank (managed to surprise and interest and noninterest income), as well as substantial improvement in the quality of loan portfolio. Also, one can not but note the increase in profits before the creation of reserves and payment of taxes, reflecting the continued growth of the bank”s ability to generate income.

The quality of bank loans continues to show signs of improvement: the proportion of MI non-performing loans in the loan portfolio decreased the secondconsecutive quarter. And the pace of a decline in the past quarter, accelerated, albeit not yet very significant: in the IV quarter decline NPL ratio was 26 basis points, in the III quarter - 13 b. n. This is due to active management actions on the problem of debt write-off non-performing loans and sales, as well as improve the overall economic situation, resulting in the reduction of leading indicators of quality of loan portfolio. The share of loans overdue for 30-89 days, reduced the fourth consecutive quarter. In the past quarter, this figure decreased to 23 b. subsection and was 1.83. Over the last four overall decline in the proportion of such loans amounted to 184 b. ae in absolute terms. In general, the loan portfolio of the bank there is a noticeable reduction in the proportion of all “early” delay. The reason for this state of affairs - a substantial reduction in the portfolio of construction loans: up to 2, the bank reduced the share of this segment in the loan portfolio of almost 2 times.

In general, in our view, this is a trend across the industry: Issues and debt write-off of construction segment will gradually decline, which will overlap with the deteriorating quality of credit portfolio segment CRE, which until recently because some investors had feared. If we talk about the most “dangerous” lending segment, such as once a construction and development. In the past recession, this segment also, until recently, was the main cause of significant write-offs. In particular, MI cancellation of this segment in early 2008 exceeded 75% of the total write-downs the bank. At present the share of write-offs in this segment in the overall write-offs fell below 50% and will probably continue to decline in the future.

In general, the quarterly write-off of the bank are still at a very high level. In the past quarter, NCO ratio was approximately 5%, but significant decrease in this indicator from our point of view - it coming quarters.

Net interest margin bank continues its growth for the second consecutive quarter, with the last quarter of its growth in absolute terms amounted to 13 b. n. As a result, this figure had reached 2.95%. The main reasons for the growth of NIM has been to improve the quality of the loan portfolio, as well as the redemption of own debt by $ 400 million, which reduced the cost of funding. We expect that the growth of this indicator in 2010 will continue to the end of the year will reach the level of 3.1-3.15%. The main triggers be made by improving the quality of loan portfolio and interest-rate increases by the Fed. However, the latter factor would have a positive impact only in the case of resumption of bank credit to the economy. In fairness, we note that the last five quarters of its loan portfolio, only compressed, and the cumulative decline over this period amounted to more than 12%.

Thanks capital raising last quarter significantly increased rate of TCE ratio, which rose by 120 bps and made up to IV quarter of 8.2%. Other indicators of capital adequacy ratio - Tier 1 ratio and Tier 1 common ratio - also are at a relatively high level - at the level of medians on major competitors. Nevertheless, if we compare the figures cover the problem of debt capital and reserves, the MI has one of the lowest values among the competitors. Given the still high level of problem debts on the balance of the bank, despite the significant improvement of quality of loan portfolio in recent years, the risk of attracting new capital for the issuer still remains.
We raise our target price for MI to $ 9 per share on the horizon of 12 months, but reduce the recommendation to “buy” to “hold”.

Forex - in the European session
Until the end of the trading volatility in the domestic market may remain at a high level
Today”s correction has affected stocks of oil and gas sector, better market traded securities of banks
Good results of Goldman Sachs and Xerox Corp should lead to the end correction in Russia market
In 2010, the NWT will invest 400 million rubles in the development of telecommunication networks in the Murmansk region
Tomorrow, BP may decide to hold early elections in Kiev, 30 May 2010
Tymoshenko demands from the leadership of Arcelor Mittal Krivoy Rog “increacfese by 25% the salary of its employees in January
Until the end of this week the pair dollar /euro will trade within 1,4025-1,4175
Russia has been buying during the day trying to adjust, but as long as the external backd03ground prevents the strong decrease