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

The bank is already speaking to both sovereign and private sector investors to forge new alliances, Sberinvest Middle East CEO says

FH1NBM Evening view of new financial and business district called Abu Dhabi Global Market square (ABGM) on Al Maryah Island Abu Dhabi. Alamy
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Sberbank, the largest lender in Eastern and Central Europe, is in talks with sovereign and private investors in the Middle 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 setting up an office in the Abu Dhabi Global Market, plans to use the emirate's financial hub as a regional base to seek 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 in addition 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 we want to do is to use it [the Mubadala relationship] as a platform to launch additional partnerships with other investors in the region,” Mr Ugarov said.

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

The lender, which had 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 AI, cybersecurity, life sciences, venture capital, Islamic finance, telemedicine and education, Mubadala said in a September 22 statement.

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

“We believe that there are many more opportunities on which Sberbank can jointly work with 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 several pacts in place, allowing oil and gas and other energy firms 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 investing in Russia. Last year, it signed an agreement to explore a joint venture with the state-owned Russian Direct Investment Fund to build a new $2.8bn pulp mill plant in northwest Russia.

The Mubadala-RDIF collaboration goes back to 2013, when the two companies formed a $7bn co-investment platform. So far, 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 bank now considers itself an "ecosystem" of tech firms that are supporting its core banking operations. Some of the technology companies within the lender's ecosystem are already active in the Middle East and others are seeking an entry.

These are the businesses 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 some of these firms, especially in the technology sector, have been investing in the Middle East and will continue to expand here,” he said.

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

The lender is also looking to help its ecosystem firms gain access to Saudi Arabia, the biggest Arab economy.

“Saudi Arabia is a major player, so clearly we want to develop a relationship with investors in the kingdom, as we would like to do with other countries in the region,” he added.

Sberinvest Middle East expects to start operations at the ADGM by the end of this year, once it receives a licence from the market regulator.

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

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

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

“What we would be bringing here would be different,” he said. "We believe that this an opportunity that we are keen to develop and use as an additional bridge between Russia and the Middle East."