Sberbank placement to be delayed due to volatility
Deputy Chairman of the Central Bank of Russia, Aleksey Uluykaev, speaking on Vesti 24 TV station, said that despite the privatization schedule, the current global environment was far from ideal to be taking the Sberbank stake to market.
“As for today the market is very unstable and it is not the right time to proceed with the road show of Sberbank shares. Nevertheless, the stake must be privatized until 2013”
The Central Bank has approved the sale of the 7.6% Sberbank stake as a part of the State privatization program, with a roadshow to begin this week and placement planned for September. However plunging global equities markets, in the wake of renewed concerns about the European debt markets and fears of a recession in the United States, have undermined the plans.
Sberbank’s market capitalization fell by 21.3% between June 30 and July 30, reducing the likely market price of the share placement to 129.2 billion roubles from the 150-180 billion previously anticipated by the Economic Ministry.
Renaissance Group Chairman, Stephen Jennings, however believes that the market volatility plays to the strong market position of Russia’s largest bank, against a backdrop of renewed focus on banking regulation.
“It is a transitional period which should come to a positive ending. Strong state owned banks are advantageous for the banking sector, supporting recovery from the crisis. However, it is harmful for small businesses in the mid-term, diminishing their competitiveness. In this case the privatization of state controlled companies can help to solve the issue. I think it is important that one day these assets became privately owned.”
Senior investment strategist at BCS, Maksim Shein, says the news will have a negative effect on Sberbank shares.
“The postponement of the privatization slows growth of liquidity of bank shares, and therefore does not provide opportunities to increase its index weight; this can be a negative signal for the market meaning the beginning of the shift of the whole process of planned large-scale privatization of state property for one or two years.”
Gazprombank analyst, Andrey Klapko, says there are other factors at play in mulling the placement schedule.
“On one hand, the stock market and the economic environment are quite volatile and not attractive for that type of deals, notably, for financial sector companies. Investors will be asking for a discount. On the other hand, the current oil prices provide comfortable and gradual upgrade for the budget and the Government has no rush to sell off its assets, at some point. However, the general plan with a certain privatization timeframe could be corrected as Sberbank’s share placement is not likely to happen until 2012. The final decision will depend on the market conditions in a short term perspective and the recovery of the global banking system.”