OAO Sberbank, Russia's biggest lender, is attracting investors to a $10 billion sale of shares that are almost 40% more expensive than the average for European banks.
Shares in the state-run bank will sell for at least $3,222 apiece, or 10% below the current price, according to analysts including Alex Kantarovich at MDM Bank in Moscow. At that price, OAO Sberbank will be valued at about 25 times 2007 estimated earnings, compared with an average price-earnings ratio of 18 for European banks, data compiled by Bloomberg show.
The 165-year-old bank's shares have more than doubled in the past 12 months in a market dominated by energy and commodity stocks and an economy that's grown for nine straight years. The central bank, which owns a majority of the equity, will also buy stock. „Demand is going to be huge from all kinds of investors,” said Matthias Siller, a portfolio manager at Baring Investors Service in London who helps oversee $3 billion in Europe, the Middle East and Africa.
President Vladimir Putin is using the sale to reduce the state's grip on the lender to about 58% from 64%. The rights offering for current shareholders closes today. Any stock that's not purchased will be sold to new investors in March. JPMorgan Chase & Co. and Credit Suisse Group are managing the offering.
„A big portion of the issue will go to existing shareholders because they don't want to be diluted,” said Alexei Rybnikov, head of Russia's Micex Stock Exchange. The central bank, Russian billionaires, and funds that already own shares will buy up most of the stock, leaving just $2 billion to $3 billion for new shareholders, Rybnikov said in an interview.
Sberbank will have a market value of about $81 billion after the sale, making it Europe's 11th largest lender, just behind No. 10 Societe Generale SA, France's biggest bank, and ahead of Deutsche Bank AG, Germany's largest lender, Bloomberg data show. The bank is among the most profitable in Europe.
Its three-year average return on equity is 19%, compared with an industry average of 13.2%, according to data compiled by Bloomberg. „The banking sector is growing enormously,” said Vadim Kleiner, head of research at Hermitage Capital Management, which has $3 billion of stock. Investors would prefer „to have more choice of liquid bets on this sector,” he said.
VTB Group, Russia's second-largest bank, plans an initial public offering this year, CEO Andrei Kostin said in an interview last month. ZAO Gazprombank, the banking arm of the world's top natural gas producer, is preparing for an IPO in the middle of 2008, Deputy CEO Alexander Sobol told reporters in Moscow today.
Sberbank has relied on its brand name and its branch network across Russia's 11 time zones to keep more than half of Russian retail deposits. Smaller banks such as Rosbank have brought in western European banks as investors to tap their expertise in information technology systems and marketing.
Loans have grown more than fivefold in the past five years, with corporate loans accounting for about two-thirds of the total, company earnings show. Net income under Russian accounting standards jumped 42% to 89.3 billion rubles ($3.4 billion) and the bank's loan book swelled to 2.7 trillion rubles last year.
„Amazingly, given where Sberbank has appreciated from, we still see fundamental upside,” said James Fenkner, managing director of Red Star Asset Management in Moscow, which has $100 million in assets. „It looks like insiders will be buying.” Some foreign investors have been put off taking part in the sale because of the paperwork.
„It was a difficult process, though I'm still hoping to get shares,” said Zina Psiola, a portfolio manager at Clariden Bank in Zurich. JPMorgan and Credit Suisse are offering special notes linked to Sberbank stock to international investors who can't place their own bids in accordance with Russian rules, Vedomosti newspaper reported today, citing an unidentified person familiar with the sale. JPMorgan spokeswoman Alexandra Buxton and Credit Suisse spokeswoman Rebecca O'Neill declined to comment.
The price of the shares may be a deterrent for individual investors in Russia. At $3,580, each Sberbank share is about seven times the average monthly salary. By comparison, individuals ordered $560 million of OAO Rosneft shares in the oil company's IPO in July. For that offering, investors needed to buy a minimum of just $558-worth of stock.
The pace of growth in the shares of Sberbank, led by CEO Andrei Kazmin for the past decade, is likely to slow, according to MDM analyst Kantarovich. „Many fund managers bought Sberbank when the price was in the hundreds, not in the thousands, so for them this may seem like the perfect moment to reduce their holdings,” Kantarovich said. (Bloomberg)