Sberbank and Mail.ru on brink of divorce in $1.6bn tech joint venture
Sberbank’s ambition to turn itself into a tech company has suffered another blow, as Russia’s largest bank and the owner of the country’s largest social media network plan to break up a $1.6bn joint venture, according to three people familiar with the situation.
Sberbank and Mail.ru recently sought permission from the Kremlin to split the assets of their joint venture, including Delivery Club, a food delivery app, and Citymobil, a taxi app, two of the people said.
The two sides have clashed over strategy as their lossmaking tie-up has struggled against a profitable competitor from their main rival, Yandex.
The falling out will hit Sberbank’s plan to build a tech “ecosystem”, a platform for its 65m banking customers to find everything from online shopping, food delivery and music and film streaming to information on their mortgages and doctors’ appointments.
Sberbank and Mail.ru declined to comment on the split. The Kremlin did not respond to a request for comment.
Herman Gref, Sberbank’s chief executive, has said the bank’s foray into new ventures is vital as Russia’s tech companies begin to expand on to its financial turf.
Wildberries, Russia’s biggest ecommerce company, recently bought a bank while Yandex, Russia’s top search engine, is exploring starting its own. In addition to its joint venture with Sberbank, Mail.ru is launching ecommerce and payment platforms with China’s Alibaba.
The warring ecosystems are fighting for a share of the rapidly growing online consumer market in Russia, which has 96m active internet users, the most in Europe.
On paper, Sberbank is well-positioned. The bank enjoys a huge funding base that it inherited from its role as the Soviet deposit monopoly, is highly profitable, with Rbs760bn ($10bn) in net income last year, and has 67m monthly users of its mobile banking app.
That has allowed it to spend heavily on upgrading its IT platforms and raised hopes it can convert its users to spending on other services.
But the cost of executing its plan has put Gref under pressure from Russia’s government, which took over the Kremlin’s controlling stake in Sberbank from the central bank last year.
Putin told Gref in December that his plans were “really impressive”, then advised him not to forget that “Sber may be an ecosystem, but it’s a bank first and foremost”.
Gref told investors last year that 60 per cent of Sberbank’s profits would come from outside the core finance business by 2030, by which time revenue from its non-finance units is projected to grow eightfold to Rbs570bn.
Behind the scenes, however, Sberbank has struggled to make returns on the more than $2bn it has spent on a portfolio of start-ups. Gref has warned the government that the ecosystem may not make significant returns until the end of the decade, according to four people familiar with the discussions.
The joint venture with Mail.ru lost Rbs37.6bn last year, making it a leading driver of Sberbank’s Rbs11.9bn negative ebitda on the ecosystem, according to financial results published this month.
Sberbank insisted that “practically all” its tech businesses would “pay off” even without further investment, and that it expected “all our non-financial businesses to break even by 2023.” But it added that “while they are still growing, almost all of them require investment”.
Though Citymobil increased its number of rides more than 10 times to 190m in 2020, it has yet to make a serious dent in Yandex’s taxi business, which is profitable and controlled 63 per cent of the Moscow ride-hailing market as of this time last year.
Sberbank also plans more spending on Goods.ru, a recently acquired ecommerce minnow that it wants to grow into a major player with Rbs500bn of turnover in 2023.
Sberbank and Mail.ru have been at loggerheads over how to take their joint venture forward, according to several people familiar with the matter.
The companies appeared to be “basically not talking any more,” said a senior state banker but had not yet decided on how to split their lossmaking assets or the timing of the likely split.
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The agreed “divorce” with Mail.ru will mark the fourth collapse of a partnership intended for Sberbank’s ecosystem. Previous attempts at joint ventures in ecommerce with Alibaba, Yandex, and Ozon collapsed amid similar struggles over control.
The ecosystem’s poor performance relative to its peers may force Gref to rethink the strategy and possibly shake up its management, the people said. Its long path to profitability has thrown into focus the role of Gref’s top deputy, former supermarket executive Lev Khasis, in building it.
“The ecosystem looks more like a constantly expanding group of assets without any visible system to put them all together,” said a person who regularly speaks to Gref.
Sberbank said: “We would like to emphasise that Lev Khasis always strives to find a balance between the interests of Sber and its partners during the negotiation process. Furthermore, when advocating a position, his actions are always guided by value for the Group, keeping the interests of its shareholders and clients in mind.”
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