Sovcombank approved the placement price of shares within the IPO and completed the collection of applications

Thanks to an unprecedented advertising campaign, Sovcombank received multiple oversubscription of the application book as part of the IPO. The placement will take place at the upper limit of the price range, and there is no information yet about an increase in volume. The bank’s IPO could be the largest in recent times in terms of the number of retail investors. Experts consider this risky for both the bank and citizens. For the money of the latter, any securities compete sharply with deposits, the rates on which are rising. To preserve citizens’ funds, it is necessary to ensure a return above the key rate, which may increase again as early as December 15. The expectations of retail investors, based on the rapid growth of profits of Russian banks in 2023, may not be justified in 2024, when their financial results begin to deteriorate.

On December 14, Sovcombank completed collecting applications for the IPO and set the placement price at the upper limit of the range – 11.5 rubles. per share. This IPO was accompanied by unprecedented media support. Investors’ interest was fueled not only by widespread advertising, but also by numerous interviews with top managers (almost a dozen broadcasts from brokers and bloggers). Just three days after the collection began, the book was oversubscribed three times over. The total oversubscription could be more than 11 times, a source close to the IPO organizers told Kommersant.

The volume of placement, according to repeated statements by the bank’s top managers, is unlikely to increase above the established 10 billion rubles.

The volume of oversubscription does not serve as a guide to the future dynamics of shares on the market, emphasizes Alexander Losev, CEO of Sputnik Capital Management. At the same time, for example, the subscription for Astra Group shares exceeded the supply volume by 20 times, the book was closed at the upper limit of the range (RUB 333), in secondary trading in two days the shares soared 1.7 times, and now are trading 40% above the offering price. Investment strategist at Arikapital Management Company Sergei Suverov believes that due to high oversubscription and the stabilization mechanism (by 1.5 billion rubles), which assumes that sagging shares will be bought back from the market, Sovcombank’s quotes should increase on the first day of trading. But on December 15, a meeting of the board of directors of the Central Bank will be held on the key rate, and “its increase could lead to a general drop in stock market quotes.”

Much will depend on the final IPO structure the bank chooses. Co-owner and first deputy chairman of the board of Sovcombank Sergei Khotimsky said that institutional investors could account for 30–50% of the placement, the rest will be given to retailers. The top manager emphasized that “the smallest applications will have priority.” According to one of Kommersant’s interlocutors on the stock market, as part of the subscription, about 70% of the volume of applications came from individuals, the rest from institutions.

In terms of the number of retail investors, this may be the largest IPO in recent times, Sergei Suverov believes.

According to Kommersant’s estimates, more than 100 thousand retail investors were present in only three placements in the history of the Russian stock market: in 2006 with Rosneft (115 thousand), in 2007 with VTB (124 thousand) and in November 2023 year at the Astra Group (118 thousand). Among the institutional investors who have shown interest in Sovcombank’s IPO, there are “dozens of names,” Sergei Khotimsky said in a recent interview. These are direct investment funds, funds combining family capital, mutual funds managed by the largest management companies, insurance companies and banks.

However, investors’ expectations may not be met. As Alexander Losev notes, “in 2024, bank profits will be less than the current ones.” This is due to the tightening of monetary policy, the risks of non-payments and defaults, which will require additional reserves from banks, the expectation of the population’s transition to a savings model and the stabilization of the ruble exchange rate.

In addition, the main participants in the stock market – individuals – compare the dividend yield of issuers with deposit rates. “And so far deposits are winning (according to the Central Bank, the average maximum rate for the largest banks in the first ten days of December has already exceeded 14% per annum.— “Kommersant”), we see an outflow of funds from the stock market from the most active participants into deposits,” notes Mr. Losev. According to him, this is reflected in the quotes of the “industry champion” – Sberbank, whose shares have been declining in price for two weeks in a row: “In order to be interesting to investors, issuers must show a dividend yield above the key rate, and there are only a few of them.”

Olga Sherunkova, Vitaly Gaidaev