MOSCOW - Russia launched the long-awaited sale of a $5 billion stake in Sberbank on Monday, reducing its controlling interest in Europe's third-largest bank by equity value and reviving its stalled privatisation programme.
The sale of a 7.6 percent stake in Sberbank has been held up
for more than a year by weak markets, but last week’s
announcement of a new round of credit easing by the U.S. Federal
Reserve lifted sentiment and opened the window to a placement.
“This was the best imaginable day of the past 15 months to
take the decision to go to the market,” Chief Executive German
Gref told Reuters in a telephone interview, after Sberbank stock
hit its highest since April on Friday.
Gref said he hoped asset managers in China, Singapore and
Hong Kong, among others, would be interested in the three-day
offering, which may be closed early if there are enough orders.
Market sources said orders for the 1.71 billion shares on
offer were coming in at 93.5 roubles or higher – above a minimum
of 91 roubles – valuing the placement at 160 billion roubles
($5.25 billion) or more.
The sale will help clear a stock overhang that has held back
the recent share performance of the former Soviet state savings
bank, and capped Russian market valuations at a big discount to
other emerging markets.
It will boost the liquidity of Russia’s most actively traded
stock, widely viewed by investors as a proxy for economic growth
running at 4 percent, and by one estimate the world’s
best-performing large company stock over the past decade after
U.S. Apple Inc, maker of the iPhone.
While delivering a welcome revenue windfall, the sale also
sends a signal to markets that President Vladimir Putin, who
returned to the Kremlin in May, is willing to press ahead with
privatisations after a lengthy pause.
Russia has set out ambitious plans to reduce the 50 percent
share of the state in the economy to boost efficiency and growth
but, despite running a budget surplus thanks to high oil prices,
has proved unwilling to sell state assets on the cheap.
“Russia will probably start to perform because Sberbank will
perform,” said Bruce Bower, a portfolio manager at Moscow-based
fund manager Verno Capital, which owns Sberbank and will seek to
add to its position via the secondary offering.
“Firstly, if they can find $5 billion for this they can find
money for other privatisations,” added Bower. “Secondly, there
was a lot of worry that the government was not committed to
reform. I think this forces (critics) to revise their opinions.”
The Sberbank deal will also set the tone for an initial
public offering planned by Russia’s No.2 mobile phone company
MegaFon, which could happen within weeks and which
analysts estimate could raise $3 billion.
Sberbank said it would price the sale of 1.7 billion shares
at between 91 roubles ($2.99) apiece and the market price at the
time of closing the books on the sale.
The minimum price represents a discount of 6 percent to
Friday’s close of 97.05 roubles. Although the bank’s stock fell
1.6 percent on Monday to 95.50 roubles, so urces close to the
placement said the order book had been covered by one-third to
one-half by late in the day in Moscow.
“The timing of the deal is perfect: first, you have strong
global market dynamics,” said Jason Hurwitz, a senior analyst
covering the financial sector at Alfa Bank in Moscow.
“Secondly, we think it is clear that Russian banks including
Sberbank will face diminishing profitability,” added Hurwitz.
“So why not sell the stake now?”
While the government had eyed a sale price above 100 roubles
per share, holding out could have proved risky as the Russian
economy is losing momentum as demand for exports of oil and gas
to Europe is sapped by the euro zone debt crisis.
Nonetheless the offering, which values Sberbank at a
price-to-book multiple of 1.4 times, “is extremely cheap”
compared to other emerging markets banks, said Kirill
Bagachenko, a senior portfolio manager at TKB BNP Paribas
The stock sale marks a milestone in a restructuring drive by
Gref – a former economy minister appointed CEO in late 2007 – to
transform Sberbank from a bloated bureaucracy into a modern
universal bank with international ambitions.
Founded 170 years ago, Sberbank became a Soviet state
monopoly and, in a legacy of the command economy, still controls
46 percent of Russian household deposits.
That, plus its quasi-sovereign status, gives Sberbank a huge
funding advantage over its Western rivals, helping it to post
net interest margins of over 6 percent and a chunky return on
equity of 26 percent. Among European banks, only HSBC
and Santander have a bigger equity value than Sberbank.
Sberbank has snapped up cheap foreign banking assets – most
recently buying Turkey’s Denizbank for $3.6 billion. But, after
criticism from analysts that it was taking its eye off the ball
in Russia, management has said it is not pursuing further
takeover opportunities abroad.
Of the aggregate offering, up to 10 percent will be placed
via Moscow’s MICEX stock exchange, Sberbank said. At the
discretion of the central bank, through which the state holds
its controlling stake in Sberbank, the share of the offering to
be placed in Moscow may be increased to 15 percent.
Sberbank will make the bulk of the placement in London in
the form of global depositary shares, with each GDS representing
four ordinary shares. No new shares will be sold, meaning the
proceeds of the stock offering will accrue to the state.
The central bank, which will cut its stake in Sberbank to 50
percent plus one voting share through the sale, appointed Credit
Suisse, Goldman Sachs International, J.P. Morgan, Morgan Stanley
and Troika Dialog as joint global coordinators of the deal.
Sberbank said that its subsidiary LLC Sberbank Investments
may acquire the equivalent of up to 20 billion roubles of
ordinary shares in the offering at the offer price and on the
same terms as other investors.
Gref said some of the shares bought would fund an executive
incentive plan, while the remainder would be held in treasury.