Sberbank Drops After MSCI Considers Removing Stock

OAO Sberbank (SBER) fell to the lowest since 2011 on concern Russia’s biggest lender may be excluded from a benchmark stock index tracked by international investors amid sanctions against the nation’s companies.

The stock slid 3.6 percent to 69 rubles in Moscow, the lowest close since Oct. 7, 2011. The shares have dropped 32 percent this year.

MSCI Inc. (MSCI) is discussing whether to continue to include Sberbank shares in its MSCI Russia Index as it also reviews whether to continue including shares of VTB Group, MSCI said in an e-mailed statement. The European Union blocked local investors from buying new stock and bonds issued by Sberbank and VTB along with other companies it’s sanctioned amid allegations Russia is fomenting the crisis in Ukraine.

“Their removal could have a catastrophic impact on the index as the exclusion of Sberbank, for example, could trigger $600 million in outflows from passive funds and over $5 billion from active funds,” Sberbank CIB analyst Iskander Abdullaev wrote in an e-mailed report. Sberbank CIB is a unit of Sberbank.

The banks are unlikely to be dropped from the index, as was the case with OAO Rosneft (ROSN) and OAO Novatek (NVTK), Abdullaev wrote. Both energy companies were sanctioned and have remained in the index.

The U.S. imposed sanctions on state banks, including VTB, its Bank of Moscow unit and Russian Agricultural Bank (RSHB) on July 29, while the EU added Russia’s three largest lenders, Sberbank, VTB and OAO Gazprombank, on July 31 to a list of companies penalized over President Vladimir Putin’s support for the insurgency in Ukraine.

MSCI Feedback

MSCI is also considering keeping the stocks in the index until the companies sell shares. MSCI is seeking feedback from investment community until Aug. 7 and will announce its decision on Aug. 8. MSCI gauges are tracked by investors managing about $9 trillion.

“The secondary and tertiary effects of these sanctions to the Russian banks can be disastrous for investors stuck in this tug of war,” Luis Saenz, head of equity sales and trading at BCS Financial Group in London, wrote in e-mailed comments. “Chances are very low they will be excluded but the reputational damage is done.”

To contact the reporter on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net

To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net

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