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. Last Updated: 07/27/2016

Sberbank Share Sale May Hit VTB's IPO

Sberbank is considering selling up to $10 billion in new shares to investors in the next year, but analysts said Tuesday that the move could hurt the IPO plans of the other big state-controlled bank -- VTB.

To increase its capital, Sberbank, the biggest Russian bank and the only one with highly liquid shares in public hands, is already authorized to sell up to 4.75 million shares to investors, worth $10 billion at current market prices.

"When such huge issues come to the market, they implicitly compete for funds and for investors' attention," said Alex Kantarovich, a banking analyst at MDM Bank. "There is a big demand for Russian banking shares to be sure, but when we're talking about billions and billons of dollars, then of course the conditions should be right."

The Sberbank placement could come as early as the first quarter of 2007, ahead of an IPO from Vneshtorgbank, or VTB, that could happen in the second quarter. A hedge fund that bought into one of the big banks' placements could very well skip the next, Kantarovich said.

Investors have put a premium on shares in Russian banks, partly because of the banks' rapid growth and partly because of the limited number of shares in the sector, which is seen as a proxy for the growth in consumer spending.

News of the Sberbank share sale emerged as the bank announced net income for the first nine months of the year of $2.4 billion, up 41 percent over the previous year under Russian accounting standards. Total assets increased by 44 percent.

Currently, the Central Bank has 64 percent of Sberbank shares, and issuing 4.75 million new shares would reduce its stake to 51 percent, according to MDM Bank. VTB -- the Soviet Union's bank of foreign trade -- is almost entirely in the government's hands.

The level of investor interest in VTB's IPO and Sberbank's share placement will be determined by the issue price and the timing of the sales, as well as the supply of new shares, said Ivan Mazalov, a director at Prosperity Capital Management. "It sounds like a lot of new supply, but at the same time you have to say that there aren't a whole lot of liquid banking shares on the market right now, so it's do-able," Mazalov said. "It doesn't necessarily hurt the Vneshtorgbank IPO, but on the margin, it doesn't make it easier."

Since the top two state-controlled banks are looking to sell big stakes to investors, the government will likely hasten its efforts to modify rules about foreign participation in the banking sector.

Currently, foreigners who want to invest in the financial services sector have to buy shares that are "blessed," or approved, by the Central Bank.

Sberbank did not reply to telephone or e-mail questions about its share placement. On the MICEX, Sberbank shares dropped 3.46 percent to close at 60,002 rubles ($2,228).

In another development, Vneshtorgbank, having realized its name would be difficult for potential foreign IPO investors to pronounce, will change its name to VTB, Kommersant reported. The bank paid Swiss Interbrand $2 million for the rebranding idea, even though the bank is already known as VTB in the industry, it said.