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. Last Updated: 07/27/2016

Sberbank Reiterates Price for Share Float

Sberbank should price its bumper rights issue at or above market levels, CEO Andrei Kazmin said Friday, even as sources close to the deal said the share offering should sell at a discount to succeed.

Kazmin's comments added to market confusion over how the placement of up to 3.5 million new shares would be priced. If all the shares were sold at current levels, Sberbank would raise $12 billion, a record for the Russian stock market.

Earlier, a source familiar with the matter said investors should expect the offering to price in line with a three- to six-month share price average, implying a discount after recent gains.

"This information is absolutely incorrect," Kazmin told Ekho Moskvy radio when his interviewer read him a media report suggesting a discount might be offered.

"I absolutely assure you ... that the decision will not be made based on such a historical timeframe as the last three months, let alone six," he said. "It will be the market plus a certain premium."

The report wiped 7 percent off the Sberbank share price before it recovered, continuing the volatility that has affected it since a 20-day subscription period opened last week.

The people close to the deal are concerned that aggressive pricing could herald a sell-off in the issue's aftermarket, setting a negative precedent in the first-ever major placing of stock solely on the domestic market.

"The worst thing that can happen is we price it, and the share price plunges," one source said, adding that it would be important to set a price that "the market will support."

Sberbank, which controls half of retail deposits in Russia, has launched the fundraising to bolster its balance sheet, stretched by rapid lending growth.

The bank, whose $65 billion market valuation rivals that of oil major LUKoil, also needs to invest in its network of 20,000 branches to meet the threat from competitors.

The placement rivals in size last year's listing by oil firm Rosneft, which raised $10.6 billion in London and Moscow. JPMorgan and Credit Suisse are advising Sberbank.

As such, it is a major test not only of domestic investor appetite but also of the Russian mechanism for initializing share offerings -- a process many investors find lacks transparency.

Kazmin has struggled to manage expectations, saying this week that the minimum entry ticket would be to buy one Sberbank share for no less than 68,000 rubles ($2,570) -- a 30 percent discount to January's record high.

That triggered a sell-off in Sberbank's shares which was only stopped by Kazmin's statement, repeated Friday, the shares would be priced in line or with a premium to the market. Pricing will be set only after pre-emptive subscriptions for existing shareholders end Feb. 19.