The Sberbank Supervisory Board recently proposed a significant increase in dividends for the 2022 financial year, setting a new record for the bank. The recommended payout is 565 billion rubles, which equates to 25 rubles per share. This increase is noteworthy, as it is the highest dividend payout in Sberbank’s history. Shareholders should take note that the record date for the payment of Sberbank dividends is May 11, 2023, meaning that in order to receive dividends, shares must be acquired before that date. As such, investors should plan accordingly and act quickly to acquire Sberbank shares if they hope to benefit from this historic dividend payout.
Eligibility for Sberbank Dividend Payments
Sberbank dividends are available to two groups of investors regardless of the sanctions imposed on Sberbank by certain countries. The first group is composed of shareholders who hold shares through Russian brokers. The second group consists of investors who hold shares through non-Russian financial institutions and brokers, including those who bought depositary receipts through foreign brokers and later converted them to underlying shares. As a concrete example, even shareholders who hold shares through a US-based broker like Interactive Brokers, which voluntarily converted all Sberbank shares in 2022, can receive Sberbank dividends. Therefore, investors who fall under either of these two groups are eligible to receive the Sberbank dividends payout.
Guidelines for Receiving Sberbank Dividends
The process for receiving Sberbank dividends differs depending on how the shares are held. Shareholders with direct shares through a Russian broker will receive dividends automatically. However, investors who hold shares through foreign organizations must fill out a specific application with Raiffeisenbank Russia’s Moscow branch. As the custodian of all foreign brokers concerning Sberbank shares, Raiffeisenbank serves as the intermediary for these foreign investors to receive their dividends.
Currently, there is no published procedure for collecting dividends from foreign investors at Raiffeisenbank. However, the bank has reported that an official process will be developed and released soon. Based on similar cases, including Norilsk Nickel and Novatek shares, it is probable that foreign investors will need to establish a Russian bank account and submit documents that confirm the ownership of depositary receipts during the record date, purchase date, and conversion date for the shares. By following these steps, foreign investors can get the dividends they are entitled to receive from Sberbank.
Preparing to Claim Sberbank Dividends
To claim Sberbank dividends, investors who hold shares through foreign brokers will likely need to submit documents with legalization or an apostille stamp. Notarized translations of these documents into Russian may also be required. Investors can use a power of attorney to open a Russian bank account, but this document will also need legalization alongside the investor’s passport. The entire process of legalizing documents can take up to a month, so it is highly recommended that investors begin preparing these documents as soon as possible.
Past experience indicates that Raiffeisenbank will establish a short application deadline for investors to request dividends. Given that there are no specific legal consequences for failing to collect dividends, investors must be aware that not submitting an application within the established timeframe will result in the potential loss of Sberbank dividends. To avoid this risk, investors should start gathering the necessary documents for bank account opening and legalizing them, as soon as possible. Following these guidelines will help ensure that investors receive the dividends they are entitled to from Sberbank.
The Possibility of Dividend Repatriation from Sberbank
Investors from friendly countries can expect to receive Sberbank dividends directly to their regular accounts and transfer them abroad. However, for investors from “unfriendly” countries, their dividends will be placed into special “blocked” type-C accounts. These funds can only be used for reinvesting in Russian government bonds, payment of Russian taxes, bank and depositary fees, or transferred to the “blocked” type-C account of another “unfriendly” investor. The list of “unfriendly” countries approved by the Russian Government includes various countries like Albania, Andorra, Australia, Canada, Japan, Liechtenstein, the United States, all European Union countries, and more.
It is important for investors to take note of this information in relation to their specific country of origin. The possibility of dividend repatriation from Sberbank is dependent on how the Russian Government categorizes a particular country. These guidelines are subject to change, so it is highly recommended for investors to be updated and follow any developments related to this policy. By doing so, investors can make informed decisions regarding their investments in Sberbank.
Why was it necessary to convert depositary receipts?
It is worth noting that after the implementation of Federal Law No. 114-FZ on April 6, 2022, new regulations were established regarding depositary receipt issuance programs. Under these regulations, Russian issuers are required to terminate their depositary receipt issuance programs. Additionally, foreign depositary receipt issuers are obligated to write off depositary receipts and pay investors according to the terms established by the depositary agreements between them and the corresponding Russian issuers. Usually, the amount paid to investors is significantly lower than the market value of the shares.
It is essential to highlight that these regulations also apply to Sberbank’s depositary receipts. As a result, Interactive Brokers promptly converted these receipts voluntarily. By doing so, the investors were able to avoid potential losses associated with the enforcement of new Russian securities laws. These regulatory changes will have significant impacts on the depositary receipt market, especially for investors and issuers.
It is important to note that investors who successfully converted their depositary receipts in a timely manner were able to avoid the consequences of new regulations. However, foreign issuers are required to write off depositary receipts and pay their value to investors, which is a significant challenge due to sanctions and counter-sanctions restrictions. This makes the conversion of depositary receipts especially important for investors.
Depositary receipt holders are generally entitled to receive the shares for which the receipts were initially issued through conversion. However, Law 114-FZ determines that investors are only entitled to receive the underlying shares as of the effective date of the law. Thus, purchasing depositary receipts after this date will not entitle the holder to receive the underlying shares, thus rendering the conversion of such receipts impossible.
Furthermore, Law 114-FZ also stipulates that investors can demand the payment of all unpaid dividends after swapping their depositary receipts and receiving shares of Russian issuers, making them direct shareholders of these issuers. This is important for investors who hold depositary receipts of Russian issuers such as Gazprom PJSC and Lukoil PJSC, who distributed substantial dividends that could not be paid to depositary receipt holders due to sanctions and countersanctions restrictions. This is also relevant to those who have invested in Sberbank.
Conclusion
To summarize, Sberbank shareholders who have shares held through Russian brokers will automatically receive dividends. However, for those who have shares through foreign brokers, it is essential to act promptly and submit a special statement to Raiffeisenbank’s Moscow branch. Although the procedure for dividend collection by foreign investors has not been published yet, it is expected to be released soon.
