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Sberbank stake sale to replenish currency reserves
CBR no longer committed to channel proceeds into the budget

The Central Bank of Russia (CBR) has decided to sell a 7.58% stake in Sberbank, thus reducing its equity position in Russias largest lender to 50% plus one share. The proceeds from the sale of this stake are expected to be channeled into CBRs currency reserves, and not the federal budget, as was initially intended under the privatization program. Sberbanks shares slumped in the run-up to the offering.

Bookbuilding for the placement of 7.58% of Sberbanks ordinary shares was launched by CBR yesterday. Some 6.5% are expected to be floated on the London Stock Exchnage, and the remaining shares will be placed on the MICEX stock exchange. The lender said it could close the order book as soon as Tuesday evening or even earlier, if the demand is strong.

A number of reports claimed that by Monday evening the order book was already oversubscribed at the price of RUB 93-94 (approx. USD 3.04-3.07) per share. The selling price was set at between RUB 91 (approx. USD 2.97) and the market price at the time the book closes. TPG and certain Asian investment funds are reportedly among those ready to buy Sberbanks shares. TPG Capital is allegedly seeking to buy USD 1bn worth of Sberbanks shares.

The sale of the stake in Sberbank is expected to fetch CBR USD 5.1bn, if the stock is sold at the minimum price of RUB 91 (approx. USD 2.97), including up to USD 770m worth of shares sold in Russia. Currency generated during the sale will be channeled into currency reserves, the lenders Deputy CEO Sergey Shvetsov said, according to a Reuters report. Consequently, the sale of the 7.58% stake in Sberbank is not expected to pressure the currency market, but will not benefit the federal budget either, even though the privatization program was initially aimed at generating budget revenue.

It is actually strange that CBR intends to channel a major portion of the proceeds from the sale of Sberbanks stake into reserves, since privatization is meant to boost budget revenue, Olga Balenkaya, an analyst with Sovlink investment company pointed out.

The current situation has little in common with 2009, when the federal budget deficit piled up and the government tapped the Reserve fund to cover budget gaps, BNP Paribas Chief Economist Yulya Tseplyaeva said. The Reserve Fund currently holds USD 60bn, and the budget deficit is low, so theres nothing to worry about, she noted, adding that by reducing its equity interest in Sberbank the government is seeking to bolster the efficiency of the national economy, and is not looking to raise major proceeds.

Natalia Lesina, an analyst with Alor Group, said that Sberbanks shares are unlikely to be floated at the starting price, since the demand during the long-awaited SPO is expected to be strong. In the meantime, speculators started to pressure Sberbanks stock, which was down 1.52% to RUB 95.7 per share, while the MICEX index gained 0.04% to 1,531.

Research Department of RIA RosBusinessConsulting

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