Kremlin mulls state bank share issues
The Kremlin is considering allowing state banks to raise new capital through share issues as an alternative to the proposed privatization plan, according to Russian press reports.
Local financial news publication Kommersant reports that the Kremlin is considering tweaking the original plan to simply sell some of the government stakes held in Russia banks. Instead, the banks may be allowed to issue new shares in order to raise additional capital. This would help them withstand the effects of the financial crisis, experts say.
Diluting the government’s stake in the banks may make the Russian banking sector more attractive to foreign investors. Many Russia-focused funds, such as JPMorgan Russian Securities and Prosperity Capital Management’s funds stay away from state-owned assets, considering them to be too risky and unpredictable.
Prosperity’s founding partner Mattias Westman said the MSCI Russia index has around 60% state-controlled companies, while the manager only holds around 20% in its portfolios.
Ainur Medeubayeva and Andrew Keeley, analysts at Troika Dialog, are of the opinion that “full” target dilution of the state’s stakes is unlikely in the near future. In order to achieve the privatization goals for the two main state banks – Sberbank and VTB Group – 14% and 51% of new shares, respectively, would have to be issued into the market over the next year and a half.
Analysts do not believe it will be possible to conduct this through primary issues alone, but do not exclude the possibility of a mix between primary and secondary share issues.
VTB Group and Sberbank declined to provide comments to the local press.