Sovcombank shares soared on the first day of trading after the IPO

On Friday, Sovcombank's shares made their debut on the Moscow Exchange following the completion of its initial public offering (IPO).

In the first minute of trading, the securities saw an increase of nearly 30% from the offering price.

At the end of the trading session, the growth was not as significant as initially expected.

On the stock exchange, 11.5 billion rubles were raised by Sovcombank.

The first IPO in the Russian banking sector since 2015 has been successful, which will likely spur other private banks to enter the stock exchange.

Trading of Sovcombank's shares on the Moscow Exchange commenced on Friday, though the start of secondary trading in the company's securities was delayed until 5:00 PM, instead of the originally planned 4:00 PM.

At the start of trading, Sovcombank (SVCB) shares jumped 29.6% to RUB 14.9, compared to the initial public offering (IPO) price of 11.5 rubles. However, the securities dropped over the next two hours, and the final price was only 8.7% higher, at 12,505 rubles.

Kommersant reports that Sovcombank's IPO was successful, passing at the upper limit of the price range. Sergei Khotimsky, the chairman of the bank's board, noted that the demand for the initial public offering was more than 10 times greater than the supply.

Approximately 65% of the 11.5 billion rubles total placement volume of the bank's securities was allocated to individual investors, while 35% was allocated to institutional investors. The securities were priced at 11.5 rubles each, and the stabilization package was included in the total size of the initial public offering.

The IPO of Sovcombank was the first in the Russian banking sector since 2015, according to RBC. The offering was for additional shares (cash-in) and the current shareholders of the bank did not sell any of their shares.

Sovcombank's strengths as an issuer are evidenced by its high volume of investments in shares, resulting in a return on capital of 51%, significantly higher than Sberbank's 27.6%.

Sovcombank has higher average annual growth rates (CAGR) for loans issued (33%) and deposits attracted (32%) than Sberbank, which are 16% and 14%, respectively.

Experts predict that Sovcombank's dividends for 2023 could be as high as 1.48 rubles per share, providing a yield of approximately 12% based on current prices.

Vedomosti believes that Sovcombank's successful IPO will spur other private banks to list on the stock exchange. Analysts anticipate that the shares of Sovcombank will rise to 46% of the offering price.

Sovcombank is one of the systemically important credit institutions, ranking tenth in terms of assets among Russian banks. For the first nine months of 2023, the bank reported a net profit of 76 billion rubles under IFRS, with a return on equity of 51%.