Russia to Sell 7.6 Percent Stake in Sberbank

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Sept. 19 – Russia unveiled a US$5.4 billion auction of a minority stake in its largest lender Sberbank on Monday.

The sale of a 7.6 percent stake in Europe’s third biggest lender was priced at 93 rubles (US$3.04) per share, the Russian central bank said late on Tuesday. That was in the middle of a range of 92-94 rubles per share investors had been guided to expect.

The long-awaited sale will reduce the central bank’s stake in Sberbank to 50 percent plus one share.

Sberbank’s stake sale drew strong demand from investors around the world, attracted by the lender’s dominant position on the growing domestic market and potential to expand across emerging European economies.

The order book was already full late Monday, a person familiar with the sale said. The order book could close at any point before Wednesday evening, the person said.

In Clothworkers’ Hall in the City of London’s financial district, Sberbank CEO German Gref, a liberal economist and former economic minister, met potential investors to explain strategy and answer questions.

Gref said the share sale would help in efforts to turn the lender into a global player.

“The offerings represent an opportunity for us to further diversify Sberbank’s investor base and secure an international stock exchange listing,” he said.

“It looks like a good deal,” said one investor leaving the presentation. The investor, who declined to be named, noted Sberbank’s focus on transparency and said he had just put in “a significant order” for the stock, Reuters reports.

The stake will be sold in dollars as global depositary shares in London and in rubles as ordinary shares on Russia’s Micex exchange. The Micex offering is expected to make up 10 percent of the total offering, but that may be increased to 15 percent, depending on demand.

Bruce Bower, a partner at Verno Capital, which manages about US$200 million in Russian equities, told the Wall Street Journal, “Sberbank is one of the most liquid stocks in emerging markets, and arguably the best bank. Investors will see it as the best opportunity to get a large chunk of the stock.”

He said Verno holds a large position in Sberbank and had placed an order in the new sale.

RIA Novosti reports that the giant Texas-based TPG Capital investment fund wanted to expand its current US$100-million holding in Sberbank 10-fold to more than US$1 billion.

“We believe the chances for the successful completion of the transaction are high,” the Swiss-based UBS financial service company said.

Some analysts predicted the gamble to pay off big as Western investors seek profit in an emerging market that has recently underperformed its rivals because of political and bureaucratic risks.

“We believe that the central bank’s offering is well timed, both because of market strength and because of expected pressure on sector and Sberbank profitability,” Moscow’s Alfa Bank said in a research note.

“We think the deal will become the hottest offering of the year and not just in the Russian space,” wrote Milena Ivanova-Venturini, analyst at Renaissance Capital, in a research note.

Russia’s economy is expanding at a rate of around 4 percent, providing a healthy backdrop for Sberbank compared with most European lenders, although growth has been slowing as the Euro Zone Debt Crisis hits strategic exports of oil and gas.

Risks remain for investors, however. Russia’s market typically trades at a discount to emerging market peers due to concerns about corruption and red tape, and as the country’s economic fortunes are closely correlated to the oil price.

This will be the first state asset sale since Russia sold a 10 percent stake in VTB Bank for US$3.3 billion more than a year ago. However, analysts said the move is unlikely to signal the start of a multibillion-dollar privatization program, which is still being debated by government officials.

“This is a one-off,” said Natalia Orlova, chief economist at Alfa Bank said to WSJ.

The modern version of the venerable tsarist-era bank was founded in 1990 and now plays a pivotal role in the Russian economy while also being one of its most heavily-traded stocks.

Sberbank provides emergency credits to other lenders and holds nearly half of the country’s savings, in particular as much as 46 percent of Russian household deposits. It also issues about a third of its loans.

The central bank appointed Credit Suisse Group, Goldman Sachs Group, J.P. Morgan Chase, Morgan Stanley and Troika Dialog as global coordinators for the offering.