UPDATE 2-Russia's Promsvyazbank IPO seen as test for local banks
* To float existing shares, issue new ones via closed subscription
* Bank valued at 0.7-0.9 estimated price-to-book-value -analyst
* May raise $345 mln-$414 mln via GDRs sale only
(Adds details, analysts, background)
By Olga Popova
MOSCOW, Oct 3 (Reuters) - Promsvyazbank (PSB), one of Russia's largest privately owned lenders, revealed the details of its initial public offering (IPO) both in Moscow and London in a deal seen as a test for equity raising by other domestic banks.
In a two-step process, PSB will sell up to 30 million GDRs, including existing shares owned by main owner Promsvyaz Capital, and could raise between $345 million and $414 million from this action alone.
The lender will be also offering ordinary shares along with GDRs. After the offering is complete, PSB will issue new ordinary shares through a closed subscription. It did not say how many shares it planned to offer or how much it would raise in total. Each GDR represents 7,500 ordinary shares.
PSB's long-awaited initial public offering, which follows the sale of a $5 billion government stake in Sberbank , will be the first by a domestic lender, not controlled by the state, since Nomos raised more than $700 million in April last year.
PSB plans to use the proceeds from the two-stage deal to support its capital base and expand lending by the bank, ranked No.11 by assets among the country's 1,000 lenders. Over 50 percent of total Russian banking assets are state-controlled.
Earlier on Wednesday, PSB set an indicative price range between $10 and $12 per global depositary receipt (GDR) and at $13.33-$16 per 10,000 ordinary shares.
Local banks have been forced to consider capital-boosting measures to keep pace with a recent lending boom. Along with profits, banks are using equity issues or raising debt to support their core capital.
Promsvyaz Capital, an investment vehicle through which brothers Dmitry and Alexey Ananyev own an 88.3 percent stake in PSB, will take part in the closed subscription.
The European Bank of Reconstruction and Development is also considering subscribing with a view to maintaining its 11.75 percent stake, by converting part or all of a 3.5 billion roubles ($113 million) subordinated loan to PSB into stock.
Based on Uralsib estimates, PSB plans to float 20 percent of existing shares in the form of GDRs, or 23 percent with an over-allotment option.
Trading in the GDRs will commence in London in the week of Oct. 15, the same for its ordinary shares in Moscow, PSB said.
Artem Konstandian, PSB chief executive, told the Reuters Russia Investment Summit last week that the aim of the IPO is to strengthen the lender's capital but not for key shareholders to cash out.
Based on PSB's initial price range, the bank is valued at 0.7-0.9 times its estimated 2012 book value, with the top end of the range in line with current sector valuations, said Natalia Berezina, an analyst with Uralsib.
Russia's top lender Sberbank trades at 1.3 times book and VTB at 0.8, while non-state Nomos and Vozrozhdenie
are valued at multiples of 0.9 and 0.7, respectively.
"They (PSB) made an absolutely right decision to price in line with market. Plus, we see an upside potential for other domestic banking sector's stocks," Berezina said.
PSB appointed HSBC, J.P. Morgan and Renaissance Capital to arrange the IPO. Sources told Reuters earlier that RenCap valued PSB at 0.86-1.18 estimated price-to-book-value.
"We welcome the potential addition of a reasonably liquid and LSE-traded stock to the Russian banks universe, and this is all the more timely given Nomos Bank's likely impending exit from public listing," Troika Dialog analysts said in a recent note.
Otkritie Financial Corporation plans to take over Nomos in a deal that would create the country's second-largest private lender, listing the new entity in the next two to three years.
($1=31.0962 Russian roubles)
(Writing by Maria Kiselyova, Lidia Kelly and Katya Golubkova; Editing by Douglas Busvine and Mike Nesbit)
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Keywords: PROMSVYAZBANK IPO/RANGE