MOSCOW: Russia launched the long-awaited sale of a $5 billion stake in Sberbank Monday, reducing its controlling interest in Europe’s third-largest bank by equity value and reviving its stalled privatization program.
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.
Russian stocks rallied by 8 percent Friday, propelling Sberbank shares to their highest since April and putting the state in a position to sell into strength.
“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.
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.
The lender will hold investor presentations Tuesday in London and New York. 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.
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 privatizations 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 privatizations,” 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 that 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 1.5 percent Monday, the relatively tight pricing buoyed market confidence that the deal would meet strong interest.
“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.
“Second, we think it is clear that Russian banks including Sberbank will face diminishing profitability,” he added. “So why not sell the stake now?”
While the government had eyed a sale price north of 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 eurozone 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 Investment Partners.
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.