The Central Bank of Russia (CBR) on April 10 completed its deal to sell its 50% stake in retail banking giant Sberbank to the Ministry of Finance for a reported RUB2.14 trillion ($29.1bn), the regulator announced in a statement.
“In accordance with Article 1 of Federal Law No. 50-FZ, dated 18 March 2020, ‘On the Acquisition by the Government of the Russian Federation of Ordinary Shares of Public Joint-Stock Company Sberbank of Russia from the Central Bank of the Russian Federation and on Invalidating Certain Provisions of Legislative Acts of the Russian Federation’, on 8 April 2020 the parties concerned signed the agreements for sale and purchase of the 50% equity stake (11,293,474,000 ordinary shares) plus 1 ordinary share of Sberbank held by the Bank of Russia,” the CBR said in its statement.
“The price of one share was defined in the agreements as the weighted average price of Sberbank’s ordinary shares at the close of trading at the Moscow Exchange over the 30-day period from 9 March 2020 to 7 April 2020 and amounted to RUB189.44 per share,” the CBR said.
The deal had been discussed for several months but has now been rushed through as a way of pumping through more cash from the National Welfare Fund (NWF) into the budget in the midst of the economic meltdown caused by the double whammy of the collapse of oil prices and the stop-shock of the coronavirus (COVID-19) pandemic.
The money the CBR paid was drawn from the NWF which has accumulated just over RUB12 trillion ($157bn) ,or just over 11% of GDP, almost doubling in size in the last year. For context, the Ministry of Finance is expecting the surplus in this year’s budget to disappear and needs to fill a RUB3 trillion hole caused by the current crisis, which it can draw down from the NWF.
The deal will also increase the MinFin’s resources over the longer term. Sberbank pays significant dividends and this year has already announced it will increase its payout to 50% of profits. Previously this money was paid to the CBR, which transferred only part of that payment to the budget. Under the new ownership arrangements, the entirety of Sberbank’s dividend payments will now be paid directly into the budget funds.
The deal also ends an uncomfortable arrangement where the regulator of the banking sector also owns a majority share in the biggest bank in the sector: a conflict of interest.
The CBR will continue to hold one share in Sberbank that will be transferred to the government after agreements are reached, slated to happen on May 6 this year, the CBR said.
“The Bank of Russia continues to hold this one share since this is necessary to conclude a shareholder agreement between the Bank of Russia and the Government of the Russian Federation,” the CBR said.
The CBR also holds shares in several of the so-called Garden Ring banks that it took over in the autumn of 2017 after a near-miss banking crisis. The shares are held in its newly created Banking Sector Consolidation Fund (BSCF) that was set up in April that year and is a mechanism to impose a Chinese wall between the regulator and the banks it controls.
In February, CBR governor Elvira Nabiullina repeated plans that the CBR intends to start selling off the shares in Otkritie and Trust banks in 2021 to interested parties. However, due to the current crisis – the worst since 2008 – those plans are likely to be delayed now. The CBR is hoping to recoup the RUB2 trillion it injected into these banks to prevent a banking sector systemic meltdown.
The CBR has not made up its mind on how to dispose of the banks, but according to a Russian banker who spoke to Reuters, the central bank is leaning towards an initial public offering of Otkritie and does not want other state lenders to buy Otkritie.