Sberbank looking at Eurobond issue

Sberbank deputy CEO, Anton Karamzin, says the bank has enough liquidity, but is considering a eurobond issue of one billion dollars.

Speaking with Business RT Karamzin said that size was what investors thought would be suitable.

“We hear from the investors that the optimal size is around $1 billion and that would hopefully be on the right balance of the scarcity value of the instrument and the necessary minimal liquidity of the instrument. It wouldn’t be anything sophisticated, probably senior unsecured 5 year US dollar transaction.”

When asked about the situation with non performing loans Karamzin said that they were stabilizing but that he expected them to continue growing for the rest of the year.

“The situation is stabilizing, we can clearly see that the growth of NPL’s is slowing down and that has been statistically sustainable trend for the last 5-6 months. However, we see that this will continue to grow throughout the rest of the year, because the borrowers are getting themselves out of problems quite slowly.”

Karamzin added that Sberbank would consider attracting funds from abroad largely to keep a presence in the market.

“Our wholesale funding from international markets has never been more than 4% of our liabilities and in the recent times it has been somewhere between 2 and 3%. We don’t need liquidity per se at the moment. But at the same time, we don’t rule out that if the pricing on the market is going to be right, we may come out with a simple deal to the market in the next few months just to make sure our instruments are there and our investors remember who we are.”

He added that Sberbank, having been the first Russian bank to repay part of its subordinated loan to the government, was watching the outcome of parliamentary debate about the appropriate rate of interest, saying that it would look to repay it if the rate remains unchanged but could keep it if the rate comes down.

“There is a process now that has been initiated within the parliament to hopefully review the pricing on the subordinated loans. We hope the result of it will be to change the rate for all the similar loans including ours, which will be reflecting the market rates better than the original price of 8%. If the rate is right, we might as well keep the loan, otherwise we will look into repaying this because 8% per annum is a little bit too expensive."

Rusrating senior analyst, Viktoria Belozerova believes this potential bond issue is likely to attract support, with the potential for Sberbank to leverage its already strong market position in a rebounding consumer credit environment.

“Sberbank’s intention to attract $1 billion in foreign markets is timely and understandable, as there is clearly an interest from foreign players to a comparatively low risk and profitable state bank, which has a strong outlook and state support in a manageable Russian economic environment.

The announcement is timely for Sberbank, with the renewed growth of households credit programmes, meaning the first bank to offer such services on a mass scale has the opportunity to choose the best quality borrowers, which will increase its client base and provide stronger margins.

On the other hand, investors understand that the state fully supports the bank, while the supply of fixed – income instruments from other banks is limited if we compare with pre crisis times. This makes it highly likely that Sberbank will attract the whole sum it plans for at a comparatively attractive price.”