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Banking

Russian banks struggle for capital

With lending booming again, Russia’s banks need recapitalizing. Ironically, partial privatization of state-owned financial institutions may be crowding out much-needed stock offerings by private-sector lenders and smaller banks.

Investment bankers covering financial institutions in Moscow are hoping for bountiful months to come in equity issuance. Daniel Jacobowitz, co-head of Russia investment banking at Deutsche Bank, thinks public equity offerings by Russian financial institutions could total as much as $10 billion in the next year.

By contrast, there was not a single such deal in the entire year from the end of April 2011, according to Dealogic.

But privatization, before anything else, is most likely to account for any increase in equity issuance by Russian banks after the first part of this year: above all, perhaps, the postponed sale of 7.6% of the central bank’s 60% stake in Russia’s biggest lender, Sberbank.

The central bank said earlier this year it might look to sell the stake once Sberbank’s share price rose above R100, valuing the sale at about $6 billion. The share price was at R93 in late April, but pronouncements suggest the government is still keen to sell the stake in 2012, preferably in the summer, or at least the autumn.

Ironically, Sberbank is perhaps the Russian bank with the least need to tap the equity market. Overall, capital ratios in Russia are still healthy, at least officially – especially compared with western Europe.

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