Identifier
Created
Classification
Origin
07MOSCOW5615
2007-11-30 14:58:00
CONFIDENTIAL
Embassy Moscow
Cable title:  

GREF CONFIRMED AS SBERBANK PRESIDENT: EXODUS OF

Tags:  EFIN ECON RS 
pdf how-to read a cable
VZCZCXYZ0018
PP RUEHWEB

DE RUEHMO #5615/01 3341458
ZNY CCCCC ZZH
P 301458Z NOV 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 5600
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
C O N F I D E N T I A L MOSCOW 005615 

SIPDIS

SIPDIS

STATE FOR EUR/RUS, EEB/IFD
TREASURY FOR TORGERSON
NSC FOR WARLICK

E.O. 12958: DECL: 11/30/2017
TAGS: EFIN ECON RS
SUBJECT: GREF CONFIRMED AS SBERBANK PRESIDENT: EXODUS OF
MANAGERS RUMORED

REF: MOSCOW 5043

Classified By: Ambassador William J. Burns, Reasons 1.4 (b/d).

-------
Summary
-------

C O N F I D E N T I A L MOSCOW 005615

SIPDIS

SIPDIS

STATE FOR EUR/RUS, EEB/IFD
TREASURY FOR TORGERSON
NSC FOR WARLICK

E.O. 12958: DECL: 11/30/2017
TAGS: EFIN ECON RS
SUBJECT: GREF CONFIRMED AS SBERBANK PRESIDENT: EXODUS OF
MANAGERS RUMORED

REF: MOSCOW 5043

Classified By: Ambassador William J. Burns, Reasons 1.4 (b/d).

--------------
Summary
--------------


1. (U) On November 28, Sberbank's shareholders confirmed
former Economic Development and Trade Minister German Gref as
the bank's new President and Chairman. Gref said publicly he
would work to retain key managers and provided a general
overview of his plans for the bank. Outgoing chairman Andrey
Kazmin and First Deputy Chairman Alla Aleshkina tendered
their resignations the same day. Media reports are
speculating that many key decision makers in Sberbank are
planning to follow Kazmin and Aleshkina. Russian Union of
Industrialists and Entrepreneurs President Aleksandr Shokhin
was quoted as saying that as many as 200 of Sberbank's
directors would resign during the next two months and "follow
Kazmin." Although Gref's confirmation came as no surprise,
the scope of the apparent dissatisfaction within the bank
about his nomination was unexpected. End Summary.

--------------
Gref In, Kazmin Out...
--------------


2. (U) An extraordinary Sberbank shareholders' meeting on
November 28 confirmed the nomination of former Economic
Development and Trade Minister German Gref as the bank's new
President and Chairman of the Board. The approval had been
expected. The Central Bank of Russia (CBR),Sberbank's
majority shareholder, put forward the nomination at a
Sberbank supervisory council meeting October 16 (reftel).
During the two-hour, November 28 meeting, Gref said he would
work to retain the bank's key decision makers to help ease
the transition. He also outlined his early priorities for
building on Kazmin's success in transforming the bank.
Referring to the view of Sberbank as a large, conservative
bank, Gref stated that his interest was in "showing that
elephants can dance." He explained that his short- to
medium-term goals were to increase Sberbank's portfolio to
include investment banking, expand the bank's international
business, and enhance overall competitiveness.


3. (U) In October, the choice of Gref had prompted mixed

reactions, with some observers lamenting Gref's lack of
banking experience and others lauding his reform-mindedness.
As soon as the nomination was approved, outgoing President
and Chairman Andrey Kazmin and his First Deputy Chairman Alla
Aleshkina announced their resignations. Kazmin said he
formally put forth his name for consideration as the new
Russian Postal System's Director General, a competitive
position to be decided by late December. (Note: Putin had
already supported Prime Minister Viktor Zubkov's nomination
of Kazmin as Director General two months ago. End Note.)
Aleshkina did not state her post-Sberbank plans publicly, but
the press speculated she would follow Kazmin to the Russian
Postal System.

--------------
So, Who Else Is Leaving?
--------------


4. (U) Media accounts speculated that in addition to Kazmin
and Alekshina, a mass resignation was expected during the
next two months, which reflected a broad-based disagreement
with Gref as the new Sberbank president. Many senior members
of the board and mid-level operations directors reportedly
timed the submission of their resignation letters to coincide
with the November 28 shareholders' meeting so they would
close out their final year with the bank on a "high note,"
according to business dailies Kommersant and Vedomosti.
President of Russia's Union of Industrialists and
Entrepreneurs Aleksandr Shokhin noted that "150-200 Sberbank
staff--managers and directors--will leave and follow Kazmin,
probably to the bank that will be established within the
Russian Postal System."

--------------
Banking Sector Reaction
--------------


5. (C) Reports on the potential "exodus" of mid-level
managers have surprised some observers. Managing Partner of
the Institute for Social-Economic and Investment Projects

Leonid Baron said "although Gref enjoyed only a lukewarm
reception following the Central Bank's nomination, I don't
think many expected the ranks of Sberbank's directorial staff
would be vacated." ING Bank Economist Tatyana Orlova
commented that she understood "there was a loyalty to Kazmin,
but Gref would probably rely heavily on these managers to
sustain Kazmin's legacy, particularly early on." In Orlova's
view, the mass resignations signaled "a mass missed
opportunity."


6. (C) International Industrial Bank Deputy Chairman Aleksey
Zlobin said that Gref's stated intentions for the bank, which
Duma Property Committee Chairman Viktor Pleskachevsky echoed
in comments to the press, "proved that the state plans to,
and will, take a larger share of the banking sector in the
intermediate term." Sberbank's size and access to resources
could squeeze the private sector out of some investment
banking areas, the leasing market, and possibly insurance,
according to Zlobin. UralSib Bank Deputy Chairman Vladimir
Ryskin said he doubted Sberbank would be as flexible as
companies interested in conducting IPOs might prefer, "but
that will probably change once Gref has a better
understanding of the bank's capabilities."


7. (C) UralSib Bank First Deputy Chairman Vladimir Ryskin
said the reported senior- and mid-level attrition the bank
might experience by early next year raised questions about
Gref's ability to assemble a management team and continue
Kazmin's success. This issue, however, was beside the point:
"The CBR does what it is told to do, and a couple of months
ago, they were told to nominate Gref, probably by Putin.
Putin's concern was not so much management of Sberbank, whose
improved status he genuinely credits to Kazmin. His concern
was taking care of his friend German Gref."

--------------
Comment
--------------


8. (C) Gref will have a short honeymoon period, given the
increased global concerns and lingering aftereffects in
Russia of the U.S. subprime crisis. Sberbank's ability to
weather this period will test Gref's abilities and that of
his management team. If the rumored exodus of managers
proves true, Gref's challenges will be even greater.
BURNS