Bank Rossii Open to Shedding Sberbank Majority: Russia Overnight

Russia’s Central Bank First Deputy Chairman Alexei Ulyukayev
Alexei Ulyukayev, Russia’s central bank first deputy chairman. Photographer: Scott Eells/Bloomberg

Russia’s central bank is “technically ready” to sell part of its majority stake in OAO Sberbank and is open to reducing it to 25 percent over the next five to 10 years, said First Deputy Chairman Alexei Ulyukayev.

Bank Rossii will sell 7.58 percent of its 60.3 percent stake in Russia’s biggest lender by the end of 2013, Ulyukayev said yesterday in an interview. President Dmitry Medvedev ordered policy makers last month to draft proposals by Sept. 1 for cutting state holdings in banks to less than 50 percent. Sberbank stock traded in Moscow has jumped 17 percent this year, while its American depositary receipts have surged 27 percent.

“We were technically ready to do it by September last year, unfortunately markets weren’t ready for that, this year the situation is getting better,” Ulyukayev said at Bloomberg’s headquarters in New York. “It would be a good idea to come down to 25 percent in the next five to 10 years and then cut further. My feeling is that it’s quite realistic to come down to 25 percent.”

Russia -- where the government has controlling stakes in the largest bank, the biggest oil producer and the world’s top natural gas producer -- first floated plans to pare back state holdings in companies as the global credit crisis pushed the nation into its first recession since its 1998 debt default. Concern Europe’s debt crisis will derail global growth saw the Micex Index slump 17 percent last year, and just one Russian company has undertaken an initial share offering this year, compared with five in 2011, data compiled by Bloomberg show.

ADRs Decline

Futures expiring in June on Russia’s dollar-denominated RTS Index were little changed at 153,940 in U.S. trading. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. slipped 0.6 percent to 102.64 in New York yesterday, led by oil producer OAO Surgutneftegas and OAO Mechel, the nation’s biggest coal producer for steelmakers.

Sberbank ADRs dropped 1.3 percent to $12.60 in New York yesterday, cutting their premium over the bank’s shares traded on the Micex to 0.1 percent from 1.1 percent on April 17. The company traded for 6.15 times estimated earnings on April 16, the cheapest level since January, data compiled by Bloomberg show. Sberbank’s Moscow stock fell 0.3 percent yesterday to 92.93 rubles, or the equivalent of $3.15.

“The price, the current price of the stock, is very important, but it’s not the only criteria for us,” said Ulyukayev, who said in January that Bank Rossii would sell Sberbank shares once the Micex share price moved closer to 100 rubles. “We think about the price but we also think about general demand for the shares, because $5 to $6 billion for the Russian stock market is quite a big amount of money and we have to be sure there is enough demand.”

‘Pressuring the Market’

Sberbank had a market value of 2 trillion rubles as of yesterday ($68 billion).

Russia’s First Deputy Prime Minister Igor Shuvalov said on April 16 that a Sberbank share offering may be delayed until 2013 or 2014, though he backs a sale this year. Chief Executive Officer German Gref said on April 9 that a report in the Vedomosti newspaper that Sberbank planned to sell $6 billion of shares in London over the ensuring two weeks was incorrect, the RIA Novosti newswire reported.

The government needs to decide on a date for the Sberbank share sale as the expectation is “pressuring the market,” Andrei Kostin, chairman of VTB, Russia’s second-largest bank, said yesterday at a conference to mark the opening of their investment banking arm's office in New York. “It creates a problem for VTB.”

Russia ETF Slides

VTB shares traded on the Micex were little changed yesterday at 6.4 kopeks. The Micex dropped for a third day, losing 0.2 percent to 1,468.55.

The government needs to continue with its plans to privatize stakes in state-run companies and “right now is not a bad time” in terms of the market, Kostin said.

The Market Vectors Russia ETF, a U.S.-traded fund that holds Russian shares, slipped 0.9 percent to $29.62 yesterday, the lowest level since April 10. The RTS Volatility Index, which measures expected swings in the index futures, slipped 2.6 percent to 31.17 points in New York.

Russia’s economy will expand about 4 percent this year and in 2013, and inflation will be within the 5 percent to 6 percent target this year, Ulyukayev said in yesterday’s interview.

Ruble Free Float

The ruble -- which Bank Rossii manages within a so-called corridor against a basket made up of dollars and euros -- will be allowed to completely free float in two years time, Ulyukayev said. The central bank will continue with the same pace of widening the corridor this year as in 2011, when it was expanded twice, he said.

The ruble was little changed at 33.6435 versus the basket yesterday in Moscow.

The nation, which relies on oil and gas sales for about 50 percent of government revenue, has a “good chance” of having a budget surplus this year and interest rates will stay on hold for the next few months, Ulyukayev said at the VTB conference. Russia’s overnight repurchase rate was kept at 5.25 percent at an April 9 review and the refinancing rate held at 8 percent.

Crude for May delivery lost 1.5 percent to $102.67 a barrel on the New York Mercantile Exchange yesterday, while Brent oil for June settlement dropped 0.7 percent to $117.97 on the ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, dropped 0.8 percent to $113.97, the lowest level since Feb. 2.

‘We Will Sell it’

ADRs of Surgutneftegas slid 2.9 percent to $6.40 in New York, after the company’s preferred shares on the Micex slipped 1.8 percent to 19.04 rubles, or 64 U.S. cents. One ADR is equal to 10 ordinary shares.

Mechel declined 2.1 percent to $8.74 in New York. The retreat saw the ADRs trade at a discount to the company’s Moscow-listed shares for the third day, at 0.7 percent, data compiled by Bloomberg show. Mechel retreated 2.6 percent to 259.90 rubles, or $8.80, in Moscow, the lowest level since Dec. 29.

The Standard & Poor’s GSCI Index of 24 raw materials dropped 1.1 percent to 671.58 yesterday.

The sale of Sberbank shares is part of a government privatization plan intended to raise 300 billion rubles this year. Stakes in biggest oil producer OAO Rosneft, shipper OAO Sovcomflot, diamond miner OAO Alrosa and VTB will be put up for sale, Alexei Uvarov, head of the Economy Ministry’s property department, said in September.

Ulyukayev said yesterday he hopes he will “live long enough” to see Sberbank fully privatized. For that to happen, Russia will need to change the law as currently the state is legally required to own 50 percent plus one share of the lender, he said.

“We’re technically ready and can do it any time when we feel it’s comfortable,” Ulyukayev said of the 7.58 percent stake sale, while refusing to give a concrete date.“We will sell it and the market will buy it.”

United Co. Rusal, the world’s largest aluminum producer, lost 0.9 percent to HK$5.63 in Hong Kong trading as of 11:17 a.m. local time. The MSCI Asia Pacific Index fell 0.1 percent today.

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