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. Last Updated: 07/27/2016

State May Sell Stakes in Sberbank, VTB

VedomostiState control of the banks would be reduced to a controlling level, in line with practices in other strategic industries.
The state is looking to cut its stakes in Sberbank and Vneshtorgbank to 50 percent plus one share, Kremlin officials said.

The state would sell shares of Vneshtorgbank, or VTB, through an initial public offering, while the Central Bank would sell additional shares in Sberbank to raise the bank's capital, Kommersant reported, citing Kremlin aide Arkady Dvorkovich.

"It means a gradual lowering of the state's stake in VTB. The first stage would be an initial public offering," Dvorkovich said. "As for Sberbank, this will happen when the bank has to increase its capital to develop further."

VTB is 99.9 percent state-controlled, while the Central Bank has 61 percent of Sberbank's capital and 63.76 percent of its common shares, analysts said.

"Reducing the equity down to the controlling level -- that's very consistent with the strategy that we see evolving from the government toward these strategic industries," said Chris Weafer, chief strategist at Alfa Bank. "Certainly we would not expect to see the state reduce its equity below a controlling level."

Weafer said the banking industry had always been on the government's shifting list of "strategic industries," sectors over which it wants to keep control and influence.

"The government has made it clear that they see the consumer boom as one of the main drivers in the economy, and they want to sustain that," Weafer said. Retail banking has been the main driver of the healthy growth in financial services over the past year.

In March, VTB put its IPO plans on hold, and industry experts have said the bank has plenty of work to do to consolidate its recent acquisitions, including St. Petersburg-based Promstroibank. In the past, Deutsche Bank and the European Bank for Reconstruction and Development have been discussed as potential strategic partners for VTB, according to published reports.

David Nangle, an analyst with Renaissance Capital, said he doubted a Western bank would bid for a significant stake in VTB or Sberbank.

"Would a Western bank want to get in bed with the government and not have control? I'm not sure," he said.

Nangle said a VTB IPO in early 2007 could pave the way for other IPOs in the banking sector. Currently Sberbank is the only publicly traded Russian bank with significant daily trading volume. Other banks have been held back by strict regulations limiting the sale of foreign stakes in the Russian banking sector.

"If you have a big state bank doing an IPO, you'll get the authorities behind it to make it happen," Nangle said.

Moves to privatize VTB or sell some of its shares in an IPO have been repeatedly delayed. One analyst said it was unlikely the bank would succeed in listing shares abroad until Russia reached agreement on joining the World Trade Organization.