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. Last Updated: 07/27/2016

Vneshtorgbank Sale Appears Promising




Russia's Vneshtorgbank, to be sold off soon, could become Russia's most attractive bank stock, but dealers and analysts said Tuesday that many details remain to be clarified.


The Central Bank, which holds a 96.8 percent stake in the bank, will place between 1 percent to 2 percent of the stake on the market in the next few weeks.


This will enable a realistic market value to be put on the shares as the Central Bank intends in the long term to reduce its stake, either by selling more shares or through a new issue by Vneshtorgbank.


With little information available about the method of sale or the bank itself, banks and brokerages are waiting to find out more details about the placement.


"The main question is whether Vneshtorgbank shares will be available for nonresidents," a dealer with a Western bank said. "If there are no restrictions, it will be the best bank stock on the market."


He said foreign investors are generally interested in Russian bank shares, as they see them as undervalued compared with the banks' assets.


Potential investors are also waiting to find out exactly how many shares will come to market, whether the sale will be a private or a public placement and what the initial price will be.


Andrei Yashchenko, head of research at asset management company Montes Auri, was cautious about the potential of Vneshtorgbank shares. He said the recent crisis on world markets was likely to depress interest in Vneshtorgbank.


"Given the current situation, the interest in the banking sector is not very strong," he said. "The banking sector was the first to be hit by the crisis."


Vneshtorgbank is Russia's second biggest bank with 24.22 billion rubles ($4.03 billion) in assets. It grants loans to companies involved in foreign trade -- one of the country's most lucrative businesses. It is also an active player on the interbank market.


Yashchenko said it was still too early to say if Vneshtorgbank shares would trade as strongly on the secondary market as Sberbank's had done.


Sberbank's initial shares were handed out to thousands of staff and many other investors. As a result, many Sberbank shares appeared on the secondary market after employees sold them to regional buyers at very law prices, Yashchenko said. The liquidity and low price of the stocks gave them a huge potential for price increases.


The potential of Vneshtorgbank shares would only be realized if the stake was sold to several investors rather than just one strategic investor, Yashchenko said.