Promsvyazbank (PSB), one of Russia's largest privately owned lenders, said it will proceed with its long-awaited initial public offering (IPO), aiming to strengthen its capital and better position itself to compete with state-owned banks.
PSB is seeking to capitalise on positive investor sentiment towards Russian banks, powered by market leader Sberbank's partial privatisation last week, which raised just over $5 billion.
With the Sberbank deal now out of the way, PSB is joining companies like Russia's No 2 mobile phone company MegaFon - which is eyeing a $3 billion float in London - in seeking an international listing.
Promsvyaz Capital, through which brothers Dmitry and Alexey Ananyev own an 88.3 percent stake in PSB, will sell existing ordinary shares in Moscow and global depository receipts (GDRs) in London.
After the offering, the lender plans to issue new ordinary shares via a closed subscription, in which Promsvyaz Capital has agreed to participate.
The European Bank for Reconstruction and Development (EBRD), which owns the rest of PSB, is considering participating in the closed subscription, PSB said.
The EBRD may convert a 3.5 billion rouble ($113 million) subordinated loan provided to PSB in 2011, with a view to maintaining its ownership level at 11.75 percent.
Artem Konstandian, chief executive with PSB, told Reuters on Monday that offering existing shares first and issuing new ones subsequently is "a just a matter of technique, more comfortable" in the current market environment.
He said the purpose of the IPO is to raise new capital for the bank, not for existing shareholders to make money selling their stakes.
"Given current market conditions, our shareholders are not very interested in cashing out. The market mood should turn more positive, (for that to happen)," he told the Reuters Russia Investment Summit in an interview.
In September, PSB asked Russia's regulator to approve the listing of no more than 25 percent of its shares in London in the form of GDRs.
It had planned to raise around $1 billion in the form of new and existing shares but sources told Reuters last week that PSB now aims to raise up to $500 million.
Konstandian declined to comment on details of the deal but said that the previous estimate "was likely to include cashing out by shareholders but now we are talking about new capital (only)."
PSB, ranked No 11 among Russian banks by assets according to Interfax data, said it plans to use the proceeds to strengthen its capital to support ongoing development.
The lender did not disclose when it is expected to list or how much it is going to raise. Sources told Reuters earlier that road show is planned to start October 2 with pricing on October 11.
Sberbank's 7.6 percent stake sale was priced at a minimum discount to its market price, valuing the bank at 1.3 price-to-book value, compared with an average of 0.9 for Russia's banking sector as a whole, according to Uralsib estimates.
"Markets are very volatile, changing every day. No-one can be sure of successful pricing but Sberbank's example and investors' overall mood gives grounds for optimism," Konstandian said. PSB had considered an initial public share offering before the global banking crisis of 2008-09 but postponed the move.