Russian MTS Bank raises $125mn in IPO on Moscow Exchange

By bne IntelliNews April 29, 2024

Russian MTS Bank completed an initial public offering (IPO) at the upper end of the price range of RUB2,500 per share, floating 13.3% of the shares on Moscow Exchange, raising RUB11.5bn ($125mn) at a total capitalisation of RUB86.6bn ($938mn).

MTS Bank’s IPO book was reportedly oversubscribed 15 times. As covered by bne IntelliNews, the bank expectedly offered a significant discount to the listing price. Out of RUB11.5bn placement, about RUB5bn was from retail and RUB6.5bn from institutional investors, according to Vedomosti daily. 

TS Bank ranked 24th in terms of assets in the Interfax-100 bank ranking at the end of 2023. The bank is owned by the telecom company MTS, 42.085% of which is owned by AFK Sistema multi-industry investment conglomerate. 

The bank's IFRS net profit in 2023 increased 3.8-fold to RUB12.5bn. The retail loan portfolio grew by a third to RUB339bn. Revenue grew by 36% to RUB91bn. The bank's customer base at the end of 2023 stood at 3.8mn people.

Previously Sistema planned an IPO of MTS mobile operator in 2022 of up to $1bn, but the plans were botched by the fallout from the full-scale military invasion of Ukraine.

The analysts believe that the key advantage of MTS Bank is its strong position in high-margin unsecured lending (the leader in POS lending by portfolio volume with a 17% market share, among the top 10 in unsecured lending, with a 2.2% share in the credit card market and a 1.8% share in the cash loan market).

In 2023 33% of the bank's operating income came from net fee and commission income, mostly composed out of commissions on customers' settlement transactions, agency fees for the sale of insurance products and other income. 

At the same time, some warned that MTS Bank operates in a highly competitive segment of retail banking services, and the number of clients it has is many times smaller than that of the leaders. In addition, the bank currently has no long history of generating ROE above 20% – the average over the last five years is estimated at 9.7%, and the maximum was reached in 2023.

The strategic development plan of MTS Bank until 2028 guides for ROE (return on equity) growth of up to 30%. However, in 2023, the bank's ROE was only 19%, while Sberbank's ROE reached 25.3%, VTB's ROE was 22.3%, and Sovcombank's ROE was 45%. 

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