Sberbank is close to surpassing VTB Capital as Russias biggest-earning investment bank, just six months into a merger with Troika Dialog, figures from Dealogic show.
Fellow state-owned lender VTB has seen market share decline this year in equity and debt issuance, as well as in M&A.
Sberbank has risen to second place in Russian investment banking revenues for the six months after January 23, the day it announced the completion of its acquisition of privately owned local investment bank Troika Dialog.
By contrast, according to Dealogic, if Sberbank and Troika Dialogs revenues were combined in the same period last year, the duo would only have come seventh.
Dealogic statistics for debt, equity and M&A show Sberbank already achieving the post-merger target, outlined to Euromoney last year by Ruben Vardanian, previously chairman of Troika Dialog and now co-head of corporate and investment banking at Sberbank. That target was to achieve top-three positions across the main investment banking categories by 2013.
Overall investment banking revenue in Russia has fallen by almost two-thirds this year. "Weve gained market share this year, even though markets have been slow, but weve also turned down deals too," says Todd Berman, head of investment banking at Troika Dialog.
Sberbank continues to attract attention, with several new hires since the acquisition of Troika Dialog was announced in March 2011. Most recently, Sberbank hired Sergei Khaliullin, formerly head of corporate finance at Alfa Bank, Russias biggest privately owned bank. Dimitri Casvigny also joined Sberbank in June from Credit Suisse, where he was head of M&A for Russia.
"Weve hired more than 20 senior bankers this year and we still have a pipeline of senior hires, including building sector capacity in areas such as telecoms and technology, oil and gas, metals and mining," says Berman, who joined Troika Dialog from Bank of America Merrill Lynch in September.
Sberbank has pushed VTB Capital off the top spot in Russian equity and M&A this year. Sberbank has advised on more than twice the number and almost three times the volume of M&A deals than VTB Capital this year. To put it into perspective, VTB Capital came top in M&A in the same period for 2010, with roughly 50% more market share than its nearest rival and neither Sberbank nor Troika Dialog were in the top 10 advisers.
Russian equity issuance has been meagre this year, with just five deals, according to Dealogic. However, Sberbank is winning more mandates here too. It managed a $500 million secondary offering in London for privately owned Russian freight rail operator Globaltrans, for example. Deutsche Bank, JPMorgan and Morgan Stanley were the other bookrunners.
Sberbank enjoys low funding costs and, by extension, high profitability and capital levels, thanks to its large retail network a legacy of its status as the Soviet Unions savings bank. However, its new push in investment banking comes as VTB and other Russian banks face greater constraints after rapid rises in lending in Russia and a tight capital-raising environment.
In debt capital markets, the top bank this year remains VTB Capital. In 2008, much as Sberbank is doing now, VTB hired investment bankers, particularly from Deutsche Bank, to help sell investment banking products to corporate clients as the global crisis hit.
However, this year Sberbank is closing in on VTBs market share in terms of volumes and number of deals. In 2012, Sberbanks market share of 13.4% in debt markets is only slightly behind VTBs 18.5%. Tellingly, VTBs market share was around twice as much as Troika Dialog and Sberbank combined in the same period in 2010 and 2011.
"Sberbank has political muscle and a strong balance sheet," says Andrey Solovyev, head of DCM at VTB Capital. "[Sberbank] has been making good hires. It has also paid attention to execution, and thats particularly important as its always more difficult to get repeat mandates."