How much revenue does the ecosystem bring to Sberbank
According to the results of the three quarters of 2021 (latest available data), Sberbank’s non-financial business revenue reached RUB 121.7 billion. This is 2.8 times higher than the result of the same period in 2020. The largest share of revenue was generated by e-commerce — the GMV indicator (total turnover of goods) for this period amounted to 62.9 billion rubles. against 5.5 billion rubles. for the same period a year earlier. The pre-tax loss from ecosystem services amounted to RUB 32.2 billion.
Sberbank expects to break even for most ecosystem services only by 2023. In December 2020, the head of Sberbank German Gref said that Sberbank intends to annually increase the revenue of the main non-financial services of the ecosystem by more than 100% over the next three years. As a result, by 2023 their share in net operating income should grow to 5%, and by 2030 to 20-30%. At the end of 2021, Sber predicts an almost threefold increase in revenue from non-financial services, from RUB 71.4 billion to RUB 71.4 billion. at the end of 2020 to more than 200 billion rubles.
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The representative of Sberbank did not answer substantive questions about the reform of the ecosystem.
Why I will save a new holding
It is logical to single out the direction of e-commerce as an independent direction both from the point of view of the business itself and from the point of view of management, says Selivanova from Magnum Hunt: “This is a different product, customer interaction, storage and delivery infrastructure, marketing, and therefore it is difficult to manage it within the organizational structure of the bank.” Consolidated assets are easier and more convenient to fund, it is easier and more logical for them to establish strategic development plans, adds Yury Belikov, Managing Director of the Validation Department of the Expert RA Agency.
Gref assessed the impact of tough ecosystem regulation scenarios on Sberbank
Unified asset management will allow Sberbank to strengthen its position in the market and achieve operational payback, says Natalia, an analyst at NRA banking ratings Bogomolov. According to the goals of the Strategy-2023 of Sberbank, e-commerce services should to come in in the top 3 players in this market.
The new holding “Sberbank” creates against the backdrop of plans to bring some of its subsidiaries to IPO – for the first time about the possibility of such monetization Gref declared back in 2020. It is important for investors that the company in which they invest has an independent corporate governance system, explains the managing director of the NKR rating agency Stanislav Volkov: “It is cheaper to create it once at the holding level than to form it separately in each company.” An IPO would reduce the level of investment in non-banking assets, and would also increase the dividend flow if such a strategy is successfully implemented, adds Belikov.
Partnership with VK
The announcement of the creation of a new holding came after the change of shareholders of its main partner in the ecosystem – VK, with which Sber is developing a joint venture O2O-holding. At the end of last year, the composition of shareholders of MF Technologies, a company that owns 57.3% of the voting shares of VK, changed: Gazprombank and SOGAZ received 45% each, and Rostec received another 10%. Shortly before this, Sberbank withdrew from the shareholders of MF Technology. Vladimir Kiriyenko, a former top manager of Rostelecom and the son of the first deputy head of the presidential administration, Sergei Kiriyenko, has become the new CEO of VK.
The new management of VK has not yet presented a strategy, and it is not completely clear whether the development of O2O is included in the company’s plans, said Vladimir Bespalov, an analyst at VTB Capital. He recalled that last year an impressive amount was contributed to the joint venture, which washes away a significant part of VK’s cash flow (co-owners of O2O invested 43 billion rubles). “If the need for this funding decreases, for example as a result of a divorce [о проблемах в отношениях партнеров, в частности сообщала Financial Times], given the current situation, when money is “rising” all over the world, this will not be the worst option for VK, Bespalov argues. “In addition, if the joint venture goes to Sberbank, VK may receive some money for this.”
“VK’s stake in O2O-Holding remains with the company. The projects included in the joint venture are showing positive dynamics, we see the potential for further growth and development of joint assets,” a VK representative told RBC.
How the position of the Central Bank could influence the decision of Sberbank
The formation of the Sberbank ecosystem took place mainly on the basis of the purchase of assets, for which the bank has repeatedly criticized the Central Bank. According to the head of the Bank of Russia, Elvira Nabiullina, ecosystems should not be built “according to a closed principle, when market leaders capture more and more non-banking products in their perimeter, collect more and more data, and data become the main competitive advantage of the financial business,” as this will lead to the creation “digital financial monopolies”.
In the summer of 2021, the Central Bank presented a concept for regulating ecosystems. According to it, by 2023, the regulator can set a risk-sensitive limit for banks – the maximum share of investments in immobilized (non-banking) assets relative to its total capital. It should fit into the limit at the level of 30% of the bank’s capital (by 2025–2027). If it is exceeded, then the adjusted value of assets should be deducted from capital, which will put pressure on the bank’s core ratios. The Central Bank proposed to classify all non-core business of banks as immobilized assets.
The reorganization of assets may be prepared in order to reduce the additional burden on the capital of Sberbank after the entry into force of the new regulation, suggests Belikov. Whether the holding being created will be considered an immobilized asset depends on its ownership structure, package and the form of participation of Sberbank, the expert argues: “These parameters have not yet been determined. In addition, the regulator itself is still calibrating the risk-sensitive limit, regulatory inputs may still change.”
The head of Raiffeisenbank doubted the benefits of ecosystems for clients
According to Volkov, based on the concept of regulation of the Central Bank, Sberbank’s investments in the capital of a new holding will definitely be considered an immobilized asset, as well as shares and shares in individual companies in the ecosystem. Bogomolova agrees with him. But the creation of a holding should make it easier to assess ecosystem companies for regulatory purposes, including to reflect the pressure on capital, she adds.
Will the reform affect the assessment of Sberbank by investors
The market capitalization of Sberbank on the evening of February 15 was 6.06 trillion rubles. Even at the end of the third quarter of 2021 – before the escalation of the conflict over Ukraine – it reached 7.7 trillion rubles. The price of ordinary shares of Sberbank from the peaks of early October (387.6 rubles) due to geopolitics and the threat of sanctions by January 18 fell to 234.7 rubles. (at least last year). On February 15, the company’s papers cost 269.5 rubles.
The ecosystem can contribute approximately 10% to the value of bank shares: in August last year, analysts at Goldman Sachs predictedthat by August 2022, Sberbank papers will cost 500 rubles, of which 450 rubles. — evaluation of the banking business of the company, 50 rubles. — assessment of the ecosystem.
However, under the current conditions, the organizational reform of Sberbank and the separation of non-banking services into a separate holding will not improve the forecast for the company’s securities, analysts interviewed by RBC say.
Investors and analysts are more focused on geopolitical risks, although they continue to monitor how the Sber ecosystem is developing, Mikhail Ganelin, senior analyst at Aton, points out. “Macroeconomics, lending rates, asset quality, rates are at the forefront – this is what investors pay attention to, the ecosystem is rather a pleasant bonus,” the expert explains. Mikhail Zeltser, an expert on the BCS World of Investments stock market, also announced that there are no plans to revise Sberbank estimates due to already “clogged” stock quotes on the wave of geopolitical risks.”
The news about the reorganization will create a favorable background around the shares of Sberbank in the short term, but one should not expect any significant revaluation of the bank at this stage, Igor Dodonov, an analyst at Finam Group, believes. He notes that the reorganization of non-financial services will have to increase “the operational efficiency of these areas, lead to an increase in synergies and, ultimately, reduce the time for them to reach a profitable level.”
In the longer term, organizational reform could be the basis for moving towards a valuation that shows how much the combined divisions of companies would be worth if they were spun off or acquired by another company – this could help raise target prices, concludes a senior analyst at Sinara investment bank. Olga Naydenova.