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Cablegate: Russia's Sberbank Taps German Gref As Next Ceo

VZCZCXYZ0009
PP RUEHWEB

DE RUEHMO #5043/01 2901440
ZNR UUUUU ZZH
P 171440Z OCT 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 4673
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS MOSCOW 005043

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EUR/RUS, EEB/IFD
TREASURY FOR TORGERSON
NSC FOR MCKIBBEN

E.O. 12958: N/A
TAGS: EFIN ECON RS
SUBJECT: RUSSIA'S SBERBANK TAPS GERMAN GREF AS NEXT CEO


-------
Summary
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1. (SBU) On October 16, the supervisory council of
state-controlled Sberbank nominated former Economic
Development and Trade Minister German Gref to be the bank's
next CEO. Shareholders will formally consider Gref's
nomination November 28. The nomination was not unanimous.
Outgoing CEO Andrey Kazmin and First Deputy CEO Alla
Aleshkina both voted against Gref and sold their shares in
the bank. News of Gref's nomination has, on balance,
received negative reviews in the press. Banking sector
observers are more mixed. Critics question his banking
experience and call his time at the Ministry of Economic
Development and Trade (MEDT) a "do-nothing" tenure. However,
other analysts hail his reform-minded credentials and see
potential. End Summary.

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Kazmin Out
----------

2. (SBU) After 11 years as the CEO of state-controlled
Sberbank, Andrey Kazmin will step down to become the next
Director General of the Russian Postal System. President
Putin selected Kazmin with the dual goal of modernizing the
country's postal services and expanding the reach of
financial services into areas with no banking presence.

3. (SBU) Kazmin is widely credited with improving Sberbank's
financial standing and quality of services, according to
Trust Bank Chief Economist Sergey Nadorshin. Renaissance
Capital's Fixed Income Director Aleksey Moiseev notes that
"Kazmin succeeded in building a fully functional institution
that will continue to earn healthy profits after his
departure." The bank now boasts more than 33 percent of
retail lending and 54 percent of retail deposits, according
to Alfa Bank Chief Economist Natalya Orlova.

-------
Gref In
-------

4. (SBU) Rumors that former Economic Development and Trade
Minister German Gref would succeed Kazmin as Sberbank's CEO
began circulating in the media on October 4. Reports of
Gref's possible leadership of Sberbank at that time coincided
with a drop in the bank's share price, which some analysts,
like Standard & Poor's Financial Institutions Deputy Director
Elena Romanova, said may have indicated a lack of trust in
Gref.

5. (SBU) The bank's supervisory council formally nominated
Gref at a meeting on October 16. Not all council members
supported the decision. Kazmin and his First Deputy CEO Alla
Aleshkina voted against Gref, and both have subsequently sold
their equity holdings in the bank. Nevertheless, the measure
passed, and shareholders are expected to endorse Gref's
candidacy during an extraordinary general meeting on November
28. (Note: The Central Bank, which introduced the Gref
nomination to the supervisory council, is Sberbank's largest
shareholder. End Note.)

----------------------
Banking Sector's Views
----------------------

6. (SBU) Echoing the largely negative sentiment in business
press reports on Gref's nomination, UralSib Bank's First
Deputy CEO Vladimir Ryskin told us that Gref accomplished few
concrete results at MEDT. Ryskin dismissed the notion that
Gref would succeed in reducing the state's share of Sberbank,
speculating that "state-controlled banks would continue to
dominate the sector in 10 years." Ryskin also expressed
doubt that Gref would be able to reverse an emerging trend in
which state-controlled banks "crowd out" private banks from
large-scale infrastructure, project finance, and trade
facilitation deals. Ryskin explained that, despite the
banking sector's growth, "even large private banks like
UralSib sometimes need support from institutions like OPIC or
EBRD to compete with state-controlled banks like Sberbank and
VTB in major projects."

7. (SBU) BIN Bank Senior Vice President Oleg Kharitonov
called Gref's term as the head of MEDT "unremarkable," noting
that the projected reforms that became known as the "Gref
Plan" never came to fruition.

8. (SBU) Troika Dialog Banking Analyst Olga Viselyova, on
the other hand, said the nomination is "positive for
Sberbank." Gref's reform-minded credentials and his interest
in focusing on retail operations could yield "the ideal
combined result of expanding households' access to retail
credit while reducing the state's control of Sberbank." Alfa
Bank's Orlova suggested that Gref could "build on Kazmin's
success by increasing lending to small businesses" and
expressed her hope that Gref would "be the catalyst to
increase private ownership" of the bank. UBS Chief Economist
Al Breach noted that Gref's "record as a competent Economic
Development and Trade minister and good managerial skills"
would add to Kazmin's improvements.

-------
Comment
-------

9. (SBU) Gref's comments following the news of his
nomination suggest that the initial phase of his leadership
at Sberbank would produce few strategic changes. He will
probably adopt a gradual approach in the expansion of retail
services to maintain investor confidence and, by extension,
share prices. End Comment.
Burns

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