Sovcombank expects to raise 10 billion rubles during the IPO

“Kommersant” became aware of the details of the placement of shares of Sovcombank, which is among the top ten in terms of assets in Russia. This is the first banking IPO in the country since 2015. It will be carried out according to the cash-in scheme and does not imply a significant dilution of shares. It is planned to attract 10 billion rubles. This is only 4% of capital, but it looks like a realistic approach given the current market conditions, experts believe.

According to several Kommersant sources in the financial market, Sovcombank expects to raise 10 billion rubles during the IPO. One of Kommersant’s interlocutors clarified that the road show will start in early December, another source noted that the placement itself will also take place in the first half of the month.

Kommersant’s interlocutors say that the conditions provide for a moratorium on the sale of securities for six months for the group’s shareholders. During the same period, it is planned to transfer the placed securities from the second quotation list to the first. The bank did not respond to Kommersant’s request.

In October, Sovcombank shareholders approved the decision to place shares and apply for listing on the Moscow Exchange. We are talking about the issue of 5 billion ordinary shares with a par value of 0.1 rubles. On November 20, the Central Bank registered an additional issue and prospectus of the bank’s ordinary shares placed by public subscription.

Sovcombank’s IPO will not only be the first public offering of a legal entity under US sanctions, but also the first banking IPO in Russia in many years. In 2020–2021, the option of an IPO of Otkritie FC was considered, but in the end the bank was sold to VTB. Also in 2021, it was reported about a possible IPO of MTS Bank, but at the beginning of 2023, the head of MTS, Vyacheslav Nikolaev, said that the market is not suitable for this now, and in October, the founder of AFK Sistema, Vladimir Yevtushenkov, doubted that it would be held in 2024. The last Russian bank to hold an IPO was Moscow Credit Bank in 2015.

“The organizers promise a good discount to fair value so that the shares become a story of growth, not decline, like some of the recent placements (see, for example, “Kommersant” dated November 3),” says a Kommersant source in the market.

According to the analyst of Ingosstrakh-Investments Management Company Artem Outlev, Sovcombank’s valuation in terms of multipliers should probably be closer to Sberbank’s indicators than, for example, to TCS Group. Senior analyst at the Sinara investment bank Olga Naydenova draws attention to the efficiency of the credit institution’s management, as evidenced by the “good profitability indicators” of Sovcombank. Sberbank’s return on capital for January-September was 26.2%, TCS Group – 34.7%, Sovcombank – 55% for the first half of the year (last disclosed IFRS statements).

However, Mr. Outlev emphasizes, Sberbank has a more attractive dividend history. Sovcombank’s dividend policy provides for payments in the amount of 25% to 50% of profits. Sberbank’s current policy stipulates the payment of dividends in the amount of at least 50% of profits under IFRS. TCS Group’s policy was to allocate at least 30% of profits to dividends, but from 2021 they are not paid either.

According to Mr. Outlev, a fair valuation of Sovcombank may be in the range of 350–400 billion rubles. (that is, with a coefficient of 1.4–1.6 to capital).

Alfa Capital investment consultant Alexander Abrahamyan also rates Sovcombank higher than capital: “Usually large banks are valued around capital, but Sovcombank may cost a little more because, although it is a systemically important bank, it occupies only 2% of the market and historically shows growth of 30%. annually”.

The premium to the valuation at which Sberbank is trading is justified in relation to Sovcombank: the latter has greater flexibility and growth opportunities, says Olga Naydenova. “We won’t see a multiple increase in the balance sheet of Sberbank, the largest on the market; it cannot significantly outpace the market in terms of growth,” explains the expert, “while Sovcombank is quite large, it has diverse business segments, and there is growth potential in existing markets.”

According to Ms. Naydenova, the established potential placement volume is “a realistic assessment of current market conditions.” The market has narrowed due to the departure of large non-resident investors, the expert notes, and it will not be possible to attract a large amount of funds from individuals.

Olga Sherunkova, Vitaly Gaidaev