Russia’s Sberbank seeks more partnerships with Middle Eastern sovereign investors

Sberbank, the major lender in Eastern and Central Europe, is in talks with sovereign and private investors in the centre East to explore joint investments as it looks to expand its geographical reach, its regional chief executive said.

The bank, which is in the process of establishing an office in the Abu Dhabi Global Market, plans to utilize the emirate’s financial hub as a regional base to get partnerships with “like-minded” investors, Andrei Ugarov, who heads the bank's Sberinvest Middle East arm, told The National.

The push to forge fresh ties with sovereign investors follows the Russian lender’s agreement in September with Mubadala Investment Company, Abu Dhabi’s strategic investment arm, to explore co-investments such as debt and equity financing opportunities.

This is furthermore to exploring long-term financing of Mubadala projects in Russia and other territories as well as the provision of advisory services, hedging and credit risks.

“What you want to do is to make utilization of it [the Mubadala relationship] as a platform to launch additional partnerships with other investors in your community,” Mr Ugarov said.

“It is prematurily . to say who those other parties are, but definitely we are speaking to investors - both sovereign and private.”

The lender, which had a lot more than 32 trillion roubles ($442bn) in assets as of September 30, is keen to “develop similar deals with other parties who have interest in Russia and partnering with Russian businesses”, he said.

The Sberbank-Mubadala agreement paves the way for potential cooperation and investment in areas such as for example AI, cybersecurity, life sciences, capital raising, Islamic finance, telemedicine and education, Mubadala said in a September 22 statement.

“Our relationship with Mubadala is pretty broad. There are many different directions where our partnership is expected to manifest itself,” Mr Ugarov said.

“We believe that there are various more opportunities on which Sberbank can jointly use Mubadala both in Russia and elsewhere in the world. We will see more announcements about those in the future.”

The UAE and Russia have deep economic and trade ties. There are lots of pacts in place, allowing oil and gas and other energy companies to explore cross-border ventures and investments following Russian president Vladimir Putin’s visit to the UAE in October Last year.

Mubadala, which has an asset base of $232bn, is actively buying Russia. Last year, it signed an agreement to explore a jv with the state-owned Russian Direct Investment Fund to build a new $2.8bn pulp mill plant in northwest Russia.

The Mubadala-RDIF collaboration dates back to 2013, when the two companies formed a $7bn co-investment platform. Up to now, they have made more than 45 joint investments with an aggregate value of more than $2bn.

Sberbank, the 179-year-old lender which rebranded as Sber in September, is pivoting towards investing, especially in technology firms. The lender now considers itself an "ecosystem" of tech organizations that are supporting its core banking operations. A number of the technology companies within the lender's ecosystem are already mixed up in Middle East and others are seeking an entry.

These are the firms the bank plans to support through its Abu Dhabi office by finding investors, Mr Ugarov said.

“Sberbank has a lot of companies in its ecosystem and a few of these firms, especially in the technology sector, have already been investing in the center East and will continue steadily to expand here,” he said.

“What we are looking at is developing partnerships with like-minded investors in the region who would like to tie up around in extending the reach of these ecosystem companies and bring a few of the ideas and investors from the spot into Russia.”

The lender can be seeking to help its ecosystem organizations access Saudi Arabia, the biggest Arab economy.

“Saudi Arabia is a significant player, so clearly you want to create a relationship with investors in the kingdom, as we wish to do with other countries in your community,” he added.

Sberinvest Middle East expects to start businesses at the ADGM by the finish of the year, once it receives a licence from the marketplace regulator.

The lender plans to use its Abu Dhabi office as a hub for Russia-focused Islamic finance products regarding both structuring deals and raising Sharia-compliant capital from the region.

More than 20 per cent of Russia's population is Muslim and “you will find a lot of interest" in Islamic finance, however the market there isn't “very well developed”, Mr Ugarov said.

Russia-focused Islamic finance transactions would also be of interest to regional investors.

“What we'd be bringing here will be different,” he said. "We believe this an opportunity that people are keen to build up and use as yet another bridge between Russia and the center East."