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September 17, 2012 4:07 pm
Europe’s third-biggest bank by market capitalisation is Russian. Does anyone have a problem with that? As Russia’s central bank began selling down a 7.5 per cent stake in Sberbank on Monday, investors could contemplate the prospect of owning a slice of a $70bn institution. That is not far behind Banco Santander ($80bn); only HSBC ($170bn) is further ahead. Size is nice, of course. The question is whether Sberbank has other attractions.
One is that with nearly half the retail deposit market, it is the local favourite (founded in 1841: not many Russian institutions can say that). Another is that size is relative. It has assets of $400bn, or 30 per cent of all Russian banking assets, but hardly grandiose by international standards (Citigroup has $2tn). It is also one of those branch-in-every-town types – 19,000 across a large country. (Imagine the cleaning bills.)
Sberbank’s dominance has left it relatively well-insulated from some current banking industry woes. It does not have funding problems, is not much exposed to the eurozone crisis, and has modest positions in investment banking (it owns Troika Dialog) and internationally (mainly in Turkey, where it is buying DenizBank for about $4bn). Its tier one capital ratio of more than 11 per cent looks robust. Its return on average equity, which Citi estimates will be 21 per cent between 2012 and 2014, is also superior to other European emerging market banks.
The problem is that Sberbank’s appeal has already been recognised: its shares trade on a multiple of 1.5 times book value, three times that of European peers such as Deutsche Bank. The $5bn of stock on offer will be priced roughly at the market level (95 roubles a share on Monday), not far from its 2012 high. The attraction is exposure to the rise of the Russian consumer. Sberbank offers a more stable ride on Russian growth than anything the energy sector can offer.
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