OAO Sberbank, Russia’s largest lender, plans to sell as much as $1.5 billion of subordinated debt by 2015 as borrowing costs decline, Deputy Chairman Anton Karamzin said.
“We are optimistic about the debt markets and, as soon as conditions are favorable,” the bank can issue new debt, Karamzin said in an interview in New York yesterday. The lender, which holds the savings of almost half of Russia’s population, may sell bonds once or twice during the next 15 months in the international markets and doesn’t plan to borrow in rubles any time soon, he said.
Sberbank would join emerging-market issuers from Hungary to Indonesia that have tapped the bond market amid a decline in yields from a 21-month high. Borrowers from developing nations have raised at least $113 billion in dollar debt since July 10, as speculation mounted the U.S. would scale back monetary stimulus. Sberbank last sold debt on May 17, raising $1 billion in 10-year subordinated dollar notes at a yield of 5.25 percent. Yields have climbed 0.91 percentage point to 6.16 percent since the sale.
American depositary receipts of Sberbank added 2 percent to $12.96 in New York, with trading volume 88 percent above the daily average during the past three months. The Bloomberg Russia-US Equity Index of the most-traded Russian companies gained 0.6 percent to 101.04, while RTS Index futures expiring in December increased 0.5 percent to 146,550.
Sberbank is “undervalued” at the current price levels, Karamzin said, declining to comment on what would be the fair price. The lender trades at 5.9 times estimated earnings or about half the valuation of its global peers, according to data compiled by Bloomberg.
“We are monitoring the markets,” Karamzin said. “There is no urgent need to borrow as we have sufficient capitalization and balanced tempo of growth in both deposits and lending - in other words, there is no imbalance there.”
Sberbank plans to cut 30,000 jobs and close more than 3,600 branches over the next five years to boost profitability as loan growth slows. Russia’s $2 trillion economy grew less than estimated in the third quarter, extending its worst slowdown since the 2009 recession.
The Russian banking system’s 90-day non-performing loans will “gradually increase” through 2014, Karamzin said, adding that he doesn’t expect any “explosive phenomena” and that big banks, including Sberbank and Vnesheconombank, Russia’s state development bank known as VEB, won’t be affected by the trend. “The core of the banking system is strong and healthy,” Karamzin said. “Some small banks may feel consequences.”
Higher credit risks have accelerated the deterioration in Russia’s consumer-finance banks’ asset quality in 2013, leading to lower profits, Moody’s Investors Service said in September. Russia’s non-performing loans remained at 4.4 percent of total loans, according to the nation’s central bank.
Sberbank sees corporate-loan growth slowing to a range between 18 percent to 20 percent in 2014, and then to 13 percent to 15 percent by 2018, according to a Nov. 12 presentation. Retail lending growth will slow to 22 percent to 25 percent next year and to 12 percent to 15 percent by 2018, it said.
Karamzin said Russian authorities should restrict the interest rate on retail loans to as much as 25 percent a year.
The Market Vectors Russia ETF (RSX), the biggest U.S. exchange-traded fund that holds Russian shares, gained 0.7 percent to $28.85. The RTS Volatility Index, which measures expected swings in the index futures, decreased 0.3 percent to 20.8. The Russia-US gauge rose for a third day.
OAO Mechel (MTLR), Russia’s biggest producer of coal for steelmakers, rallied 3.4 percent to $2.40. The shares tumbled 24 percent last week.
United Co. Rusal, a Moscow-based aluminum producer, rose 1.4 percent to HK$2.22 in Hong Kong trading as of 10:41 a.m. local time, poised for the largest gain since Oct. 23. The MSCI Asia Pacific Index gained less than 0.1 percent.
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