VZCZCXYZ0009
PP RUEHWEB

DE RUEHMO #5043/01 2901440
ZNR UUUUU ZZH
P 171440Z OCT 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 4673
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS MOSCOW 005043 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/RUS, EEB/IFD 
TREASURY FOR TORGERSON 
NSC FOR MCKIBBEN 
 
E.O. 12958: N/A 
TAGS: EFIN ECON RS
SUBJECT: RUSSIA'S SBERBANK TAPS GERMAN GREF AS NEXT CEO 
 
 
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Summary 
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¶1.  (SBU) On October 16, the supervisory council of 
state-controlled Sberbank nominated former Economic 
Development and Trade Minister German Gref to be the bank's 
next CEO.  Shareholders will formally consider Gref's 
nomination November 28.  The nomination was not unanimous. 
Outgoing CEO Andrey Kazmin and First Deputy CEO Alla 
Aleshkina both voted against Gref and sold their shares in 
the bank.  News of Gref's nomination has, on balance, 
received negative reviews in the press.  Banking sector 
observers are more mixed.  Critics question his banking 
experience and call his time at the Ministry of Economic 
Development and Trade (MEDT) a "do-nothing" tenure.  However, 
other analysts hail his reform-minded credentials and see 
potential.  End Summary. 
 
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Kazmin Out 
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¶2.  (SBU) After 11 years as the CEO of state-controlled 
Sberbank, Andrey Kazmin will step down to become the next 
Director General of the Russian Postal System.  President 
Putin selected Kazmin with the dual goal of modernizing the 
country's postal services and expanding the reach of 
financial services into areas with no banking presence. 
 
¶3.  (SBU) Kazmin is widely credited with improving Sberbank's 
financial standing and quality of services, according to 
Trust Bank Chief Economist Sergey Nadorshin.  Renaissance 
Capital's Fixed Income Director Aleksey Moiseev notes that 
"Kazmin succeeded in building a fully functional institution 
that will continue to earn healthy profits after his 
departure."  The bank now boasts more than 33 percent of 
retail lending and 54 percent of retail deposits, according 
to Alfa Bank Chief Economist Natalya Orlova. 
 
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Gref In 
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¶4.  (SBU) Rumors that former Economic Development and Trade 
Minister German Gref would succeed Kazmin as Sberbank's CEO 
began circulating in the media on October 4.  Reports of 
Gref's possible leadership of Sberbank at that time coincided 
with a drop in the bank's share price, which some analysts, 
like Standard & Poor's Financial Institutions Deputy Director 
Elena Romanova, said may have indicated a lack of trust in 
Gref. 
 
¶5.  (SBU) The bank's supervisory council formally nominated 
Gref at a meeting on October 16.  Not all council members 
supported the decision.  Kazmin and his First Deputy CEO Alla 
Aleshkina voted against Gref, and both have subsequently sold 
their equity holdings in the bank.  Nevertheless, the measure 
passed, and shareholders are expected to endorse Gref's 
candidacy during an extraordinary general meeting on November 
¶28.  (Note: The Central Bank, which introduced the Gref 
nomination to the supervisory council, is Sberbank's largest 
shareholder.  End Note.) 
 
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Banking Sector's Views 
---------------------- 
 
¶6.  (SBU) Echoing the largely negative sentiment in business 
press reports on Gref's nomination, UralSib Bank's First 
Deputy CEO Vladimir Ryskin told us that Gref accomplished few 
concrete results at MEDT.  Ryskin dismissed the notion that 
Gref would succeed in reducing the state's share of Sberbank, 
speculating that "state-controlled banks would continue to 
dominate the sector in 10 years."  Ryskin also expressed 
doubt that Gref would be able to reverse an emerging trend in 
which state-controlled banks "crowd out" private banks from 
large-scale infrastructure, project finance, and trade 
facilitation deals.  Ryskin explained that, despite the 
banking sector's growth, "even large private banks like 
UralSib sometimes need support from institutions like OPIC or 
EBRD to compete with state-controlled banks like Sberbank and 
VTB in major projects." 
 
¶7.  (SBU) BIN Bank Senior Vice President Oleg Kharitonov 
called Gref's term as the head of MEDT "unremarkable," noting 
that the projected reforms that became known as the "Gref 
Plan" never came to fruition. 
 
¶8.  (SBU) Troika Dialog Banking Analyst Olga Viselyova, on 
the other hand, said the nomination is "positive for 
Sberbank."  Gref's reform-minded credentials and his interest 
in focusing on retail operations could yield "the ideal 
combined result of expanding households' access to retail 
credit while reducing the state's control of Sberbank."  Alfa 
Bank's Orlova suggested that Gref could "build on Kazmin's 
success by increasing lending to small businesses" and 
expressed her hope that Gref would "be the catalyst to 
increase private ownership" of the bank.  UBS Chief Economist 
Al Breach noted that Gref's "record as a competent Economic 
Development and Trade minister and good managerial skills" 
would add to Kazmin's improvements. 
 
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Comment 
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¶9.  (SBU) Gref's comments following the news of his 
nomination suggest that the initial phase of his leadership 
at Sberbank would produce few strategic changes.  He will 
probably adopt a gradual approach in the expansion of retail 
services to maintain investor confidence and, by extension, 
share prices.  End Comment. 
Burns