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. Last Updated: 07/27/2016

Sberbank Declares Results of Offering

The last phase of Sberbank's tumultuous share sale ended Tuesday with the bank saying that it raised $8.8 billion, which was in line with recent expectations but in the lower range of its goals.

Out of the 3.5 million shares slated for emission on Dec. 27, the bank managed to place 2.6 million shares, filling 74 percent of the book. Portfolio investors had until March 21 to pay for their bids, but the bank only made its final tally of their purchases Tuesday. Almost 99 percent of them bought out their bids.

"The market will be happy that it has passed, that we have a conclusion to all this, because there was a lot of tension in the market as investors were really kept in the dark," said David Nangle, banking analyst at Renaissance Capital.

Sberbank's existing shareholders, who had pre-emptive rights to buy more shares, took up 47 percent of the total emission three weeks ago. The Central Bank bought 25.5 percent of the offered shares, although it had rights to around 60 percent. Its stake of common shares in the country's biggest lender will now be diluted from 64 percent to 60 percent.

Sberbank board members bought shares worth $3.9 million, Interfax reported.

After all the bids were in on Feb. 19, Sberbank's supervisory board set the price at 89,000 rubles ($3,400). This price was at a 4 percent discount on the market price, even though CEO Andrei Kazmin had said several times that the shares would sell at a premium rate.

The bank decided to emit the shares in order to replenish its capital, much of which had been loaned out to clients, whose demand has soared.

The Central Bank sets a lower limit of 10 percent on how much of a bank's capital must be kept on hand in case of defaults or a run on deposits. Sberbank needed to raise at least 200 billion rubles ($7.6 billion) from the flotation in order stay within a safe range of this limit.

Nangle said Sberbank's available capital would now stand between 17 percent and 20 percent, so the bank has succeeded in acquitting this basic goal. But it was a hard-fought success, sullied by accusations of mismanagement, a Federal Securities Commission investigation and reports that the bank had muscled its employees into bidding for the shares.

Alexander Kantarovich, head of research at MDM Bank, said there had been at least two occasions during the offering when he was convinced that the bank was buying up its own shares to prop up their market value.

Had the value fallen below the price of the emitted shares, investors who had bid on the shares would most likely have pulled out of the deal, cutting into the size of the book and into Sberbank's earnings.

It would have cost about $45 million to boost the market value of the stock each time, Kantarovich said.

Sberbank declined to comment on the results of the share sale.