1. World from Michael_Novakhov (22 sites): Reuters: World News: Australia to consider taking in Saudi teen who fled family ‘abuse’

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Australia said on Wednesday it would consider taking in a 18-year-old Saudi woman who fled to Thailand saying she feared her family, which she accused of abuse, would kill her.

Reuters: World News

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Global Security News from Michael_Novakhov (27 sites): 1. World from Michael_Novakhov (22 sites): Reuters: World News: Brexit backstop role for Northern Ireland parliament ‘meaningless’: DUP

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A proposal to give a role to the Northern Ireland assembly on the future imposition of EU rules on the region under Britain’s Brexit deal is “meaningless”, the party that props up Prime Minister Theresa May’s government said on Wednesday.

Reuters: World News

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1. World from Michael_Novakhov (22 sites): Reuters: World News: Brexit backstop role for Northern Ireland parliament ‘meaningless’: DUP

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A proposal to give a role to the Northern Ireland assembly on the future imposition of EU rules on the region under Britain’s Brexit deal is “meaningless”, the party that props up Prime Minister Theresa May’s government said on Wednesday.

Reuters: World News

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Global Security News from Michael_Novakhov (27 sites): 1. World from Michael_Novakhov (22 sites): Top stories – Google News: Rosenstein plans to leave Justice Dept. shortly after Barr confirmed – CNN

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Rosenstein plans to leave Justice Dept. shortly after Barr confirmed  CNN

Deputy Attorney General Rod Rosenstein is planning to leave the Justice Department shortly after William Barr, the President’s nominee for attorney general, …

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1. World from Michael_Novakhov (22 sites): Top stories – Google News: Rosenstein plans to leave Justice Dept. shortly after Barr confirmed – CNN

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Rosenstein plans to leave Justice Dept. shortly after Barr confirmed  CNN

Deputy Attorney General Rod Rosenstein is planning to leave the Justice Department shortly after William Barr, the President’s nominee for attorney general, …

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1. World from Michael_Novakhov (22 sites): Reuters: World News: Getting Brexit deal through UK parliament will be challenging: business minister

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It’s going to be “clearly challenging” to pass Prime Minister Theresa May’s Brexit deal with the European Union through the British parliament, Business Minister Greg Clark said on Wednesday.

Reuters: World News

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1. World from Michael_Novakhov (22 sites): Reuters: World News: ‘Unprecedented’ U.S. sanctions are pressuring Iran: Khamenei

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U.S. sanctions are putting unprecedented pressure on Iranians while “first class idiots” are running Washington’s policy, Supreme Leader Ayatollah Ali Khamenei said on Wednesday.

Reuters: World News

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1. World from Michael_Novakhov (22 sites): Reuters: World News: Bulgaria ready to start talks with U.S. on F-16 jet deal

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The Bulgarian government has approved a plan to start talks with the United States on buying eight new F-16 fighter jets to replace its ageing Soviet-made MiG-29s and improve compliance with NATO standards, the defense minister said on Wednesday.

Reuters: World News

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1. World from Michael_Novakhov (22 sites): FOX News: Man held in grisly killings of his grandmother, 90, and their landlord, 87: reports

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A man accused of killing his 90-year-old grandmother told a judge Tuesday that he “chopped her up in the name of the Lord,” because she, “tried to touch me sexually, and I had enough.”

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6:30 AM 1/9/2019 – Did Deutsche Bank sell Trump’s debt to Sberbank? Would it mean that he is “owned” by Russia? – M.N. | “Had Deutsche sold any part of Trump’s debt to foreign entities?” – The Sydney Morning Herald-Dec 30, 2017

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Donald Trump at the Taj Mahal casino in Atlantic City in 1996, one of a string of bankruptcies in the 1990s that alienated him from major US lenders.

  • Had Deutsche sold any part of Trump’s debt to foreign entities?

  • What meetings had the bank held with the Trump administration?
  • Had Trump or his family received preferential treatment?
  • Who decided to carry on lending to Trump after he defaulted in 2008?
  • Had Russia or Russian entities underwritten any aspect of these loans?
  • Was Deutsche shielding the President because of the Justice Department’s ongoing investigation into mirror trades?
Every inquiry, question, and query came up against a wall… 
Did Trump accept Russian sources of funding during these times? Richard Dearlove, the former head of MI6, said this question hangs over the President. Dearlove told the magazine Prospect: “What lingers for Trump may be what deals – on what terms – he did after the financial crisis of 2008 to borrow Russian money when others in the West would not lend to him.”
It wasn’t just Donald Trump who maintained a warm relationship with Deutsche. The German bank looked after his entire family. Jared Kushner, Ivanka, and Kushner’s mother Seryl Stadtmauer were all Deutsche clients.”

Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from The Sydney Morning Herald

Mysterious triangle: Donald TrumpDeutsche Bank and the Kremlin …

The Sydney Morning HeraldDec 30, 2017
The fed-up reproving parent was Deutsche BankTrump’s New York creditor. …. stocks from Deutsche Bank Moscow in companies like Gazprom or Sberbank. … Had Deutsche sold any part of Trump’s debt to foreign entities?

Donald Trump, Deutsche Bank and the Kremlin ‘cookie jars’

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Donald Trump inside the under-construction Trump International Hotel in Washington in March 2016. In 2014, Deutsche Bank agreed to lend the Trump Organisation up to $US170 million to finance the gut renovation of the hotel. Credit:ZACH GIBSON
One had to be a little awed by Trump’s nose-thumbing response. Instead of paying up, he counter-sued.
He argued that Deutsche Bank had co-created the financial downturn. Or as he put it: “Deutsche Bank is one of the banks primarily responsible for the economic dysfunction we are currently facing.”
Therefore, he was not obliged to pay back any money.
Therefore, Deutsche Bank owed him money. He wanted $US3 billion in damages.
Donald Trump at the Taj Mahal casino in Atlantic City in 1996, one of a string of bankruptcies in the 1990s that alienated him from major US lenders.Credit:CHESTER HIGGINS JR
The same day he argued that the depression meant he was off the hook, Trump gave an interview to The Scotsman newspaper. After a two-year fight, he had succeeded in getting approval from the Scottish government for a new Trump golf resort near Balmedie in Aberdeenshire.
“The world has changed financially and the banks are all in such trouble, but the good news is that we are doing very well as a company and we are in a very, very strong cash position,” Trump told the newspaper.
Anshu Jain, right, and Juergen Fitschen, then co-chief executives of Deutsche Bank, during a news conference in Frankfurt in 2013.Credit:RALPH ORLOWSKI
Trump’s outrageous behaviour vis-a-vis Deutsche Bank might have been anticipated. He was, after all, someone who had been through a slew of corporate bankruptcies. His Taj Mahal casino, his other casinos in Atlantic City, his Plaza Hotel in NYC all filed for chapter 11 bankruptcy in the early 1990s.
After those failures, US banks that had previously advanced the capital to Trump for building projects, believing them to be sound investments, stopped lending. Chase Manhattan, Citibank, and other burned Wall Street houses declined further credit and refused his calls.
The Trump National Doral resort in Florida, which Deutsche Bank’s private wealth wing allowed Trump to mortgage twice.Credit:ILANA PANICH LINSMAN
The one institution willing to advance him loans in the new century was Deutsche Bank.
In 2010 Trump settled his feud with Deutsche. This was done, extraordinarily, by borrowing more money from … Deutsche Bank.
The Trump International Hotel in Washington, which Deutsche Bank’s private wealth wing helped pay for.Credit:AL DRAGO
Shut out from its real estate division, Trump turned to another part of the same institution – Deutsche’s private wealth division, which typically deals with high net worth individuals. It doesn’t normally do property. Still, the unit lent him the money. And later gave him another $US25 to $US50 million in credit.
Asked whether it was normal to give more money to a customer who was a bad credit risk and a litigant, one former senior Deutsche staff member said: “Are you f—ing kidding me?”
Robert Mueller, the Justice Department’s special counsel, in Washington in June.Credit:DOUG MILLS
Remarkably, Trump was able to borrow even bigger sums. He took out two mortgages against his Trump National Doral resort in Miami. And a $US170 million loan to finish his hotel in Washington in the old post office tower. These loans flowed from the private wealth wing.
According to an analysis by Bloomberg, by the time he became the 45th president, Trump owed Deutsche Bank around $US300 million. All four debts were due in 2023 and 2024. This was an unprecedented sum for an incoming president and one that raised awkward questions about conflict of interest. If Deutsche Bank were to get into regulatory difficulty, one of the bodies that would investigate was the Department of Justice. Which reported to Trump. It was hard to see how the department could work dispassionately. Or how Deutsche might take legal action against a sitting president if he defaulted again.
Collusion by Luke Harding.Credit:NEW YORK TIMES

From Russia to New York: the Deutsche connection

During the same period Deutsche was doing something abnormal – something that would provoke the interest of regulators, and in turn lead to punishment. The bank was laundering money. Russian money. Not small amounts but many billions of dollars. This dubious tide flowed from Moscow to London, and from London to New York.
In 2005 Deutsche bought UFG, a boutique investment bank already well established in Moscow. The man behind Deutsche’s aggressive expansion was Anshu Jain, its future co-chief executive. Jain came up with a controversial strategy: to tap into potentially huge Russian profits, he decided to forge relationships with state partners.
Former head of MI6 Richard Dearlove in 2008.Credit:AP
Russia’s most powerful banker was Andrey Kostin. Kostin had served in Sydney and London as a Soviet diplomat. Intelligence sources think he was a KGB spy. In the 1990s, he became head of Vnesheconombank – VEB – a state development bank described by one former CIA analyst as the “Kremlin’s cookie jar”.
Then Putin made Kostin head of Vneshtorgbank, or VTB, also state-run.
Jain and Deutsche Bank recruited Kostin’s twenty-something son, also called Andrei, with an i. In spring 2007 Kostin jnr moved from a posting in London to Deutsche Bank in Moscow. Suddenly, he got massive flows of business.
According to one estimate, Deutsche Bank’s Moscow subsidiary began notching up profits of $US500 million to $US1 billion a year, with VTB generating somewhere between 50 and 80 per cent of all revenue. In Moscow, a Russian client bought blue-chip Russian stocks from Deutsche Bank Moscow in companies like Gazprom or Sberbank. The payment was in roubles. The size of a typical order was $US2 million to $US3 million. Shortly afterwards a non-Russian “customer” sold exactly the same number of securities to Deutsche Bank in London, paying in dollars.
These “mirror trades” were fake and had no economic logic. The selling parties were based in offshore territories like Cyprus or the British Virgin Islands. Billions were moved out of one Deutsche Bank, from its modern glass office at Building 2, 82 Sadovnicheskaya Street, to another Deutsche Bank, at 60 Wall Street. There were nearly 6000 transactions. Nobody in New York or London or Frankfurt or any of the international financial centres really noticed.
The end came in August 2015, when Deutsche Bank suspended American Tim Wiswell and then fired him. After that, he disappeared. There were Facebook postings from South-east Asia and Bali, where the Wiswells went with their two small children. He appeared to be on the run from US authorities and is now allegedly back in Moscow. One friend described him to The New Yorker as “finance’s Edward Snowden“.
In a wrongful dismissal suit Wiswell said he’d been scapegoated. Around 20 colleagues, including two senior managers in London, knew all about the trades, he said.
The affair was a grievous blow to Deutsche Bank’s reputation. The New York State Department of Financial Services (DFS) – which has the power to suspend any bank with a branch in New York – fined Deutsche $US475 million. London’s Financial Conduct Authority imposed a £163 million ($282.2 million) penalty. The bank carried out an internal review, Project Square.
The review did not identify the Russians behind the scheme. We don’t know who they were or where the billions went. Or where the money came from in the first place.
A Kremlin bank, VTB, had seemingly captured Deutsche Bank’s Moscow outpost. Deutsche’s London and New York divisions were economic beneficiaries of this arrangement. While this was going on, Deutsche Bank in New York lent hundreds of millions of dollars to the future president. What Democratic senators and representatives wanted to know was this: Was there a connection? It was a good question.

Family ties

My attempts to get information from Deutsche Bank over its lending to Trump were unsuccessful. House and Senate Democrats fared no better.
There were legitimate things to ask. Such as:
  • Had Deutsche sold any part of Trump’s debt to foreign entities?
  • What meetings had the bank held with the Trump administration?
  • Had Trump or his family received preferential treatment?
  • Who decided to carry on lending to Trump after he defaulted in 2008?
  • Had Russia or Russian entities underwritten any aspect of these loans?
  • Was Deutsche shielding the President because of the Justice Department’s ongoing investigation into mirror trades?
Every inquiry, question, and query came up against a wall.
Overall, Germany’s largest bank was in trouble. In 2005 the DFS reprimanded the bank for rigging the LIBOR, the main interbank lending rate. There was a further fine for sanctions busting – processing dollar transactions on behalf of entities in Iran, Libya, Syria, Myanmar and Sudan. And another $7.2 billion for selling high-risk mortgage-backed securities before the 2008 slump.
Did Trump accept Russian sources of funding during these times? Richard Dearlove, the former head of MI6, said this question hangs over the President. Dearlove told the magazine Prospect: “What lingers for Trump may be what deals – on what terms – he did after the financial crisis of 2008 to borrow Russian money when others in the West would not lend to him.”
It wasn’t just Donald Trump who maintained a warm relationship with Deutsche. The German bank looked after his entire family. Jared Kushner, Ivanka, and Kushner’s mother Seryl Stadtmauer were all Deutsche clients.
The Puck Building in New York, which securities filings show is involved in loans the Kushner Companies received from Deutsche Bank.Credit:New York Times
According to our sources inside Deutsche, Trump’s bid to become president made him a politically exposed person, or PEP. Deutsche reviewed its lending to Trump and his relatives, and the review was sensitive. Its goal was to discover if there was a Russian connection to Trump’s loans. The DFS also requested information.
The sources insist that the answer was negative. No trail to Moscow was ever discovered, they told us. Deutsche, however, refused to make public comment. Nor would it provide details of its private review to Capitol Hill. Senators wrote letters; the bank stonewalled, citing privacy rules. Congress showed interest in mirror trades. It got the same evasive nein.
In a letter to Bill Woodley, Deutsche’s US chief executive, senator Chris Van Hollen expressed concerns about the bank’s lending to Kushner. Kushner had a $US25 million line of credit with Deutsche. Additionally, in October 2016, it loaned him $US285 million. The loan was made around the time when Kremlin representatives were eagerly seeking Kushner’s ear.
Kushner first met Sergey Kislyak in April, when Trump gave his foreign policy speech at DC’s Mayflower Hotel – just a handshake and pleasantries, Kushner said. Next came the meeting with Natalia Veselnitskaya. Then, on November 16, Kislyak got in touch again. By this point it was clear that Kushner would become senior adviser to the president.
Kremlin-linked lawyer Natalia Veselnitskaya met with Donald Trump jnr and Jared Kushner.Credit:AP
The Kushner-Kislyak meeting on December 1 took place at Trump Tower. Michael Flynn was present, too. Kushner made an unusual proposal. He asked Kislyak if it would be possible to set up a secret and secure communications channel between the Trump transition team and the Kremlin. The purpose, seemingly, was to keep any conversations hidden from the outgoing Obama administration and US intelligence.
Could this be done, Kushner wondered, by using Russian diplomatic facilities in the United States?
The inquiry was staggeringly naive. If Kushner or Flynn were to drop by the Russian embassy, then US intelligence would certainly notice. The FBI didn’t bug the conversation but learned of it afterwards, when Kislyak reported to his superiors back in Moscow. According to FBI intercepts of Russian communications, Kislyak was taken aback by Kushner’s unusual request.
Russia, it seemed, didn’t need to expend much effort to get close to Trump’s aides. Kislyak came up with a suggestion of his own. Perhaps Kushner would like to meet with another person from Moscow, someone with “a direct relationship” to President Putin?
Jared Kushner: courted by Russian officials as a fixed point in the otherwise volatile Trump team.Credit:New York Times
The details were agreed during a meeting on December 12 between Kislyak and Kushner’s assistant, Avi Berkowitz. Putin’s emissary turned out to be a banker, or more accurately, a banker-spy. His name was Sergei Gorkov. He was the head of VEB, the state development bank, which Kostin had run and whose board Putin had chaired during his four years as prime minister.
Gorkov had trained in the 1990s at the academy of the FSB [the successor to the KGB in handling state security], before joining the state-run Sberbank. Like VTB, Sberbank performed certain Kremlin functions. It was the official sponsor of the 2013 Miss Universe contest in Moscow, attended by Trump and hosted by Aras Agalarov. Eight days after the contest Sberbank announced it was lending Agalarov 55 billion roubles ($1.25 billion) to finance new projects. One of those under consideration was Trump’s Moscow tower.
Russian businessman Aras Agalarov, left, with Miss Universe Gabriela Isler and Donald Trump in Moscow in November 2013.Credit:Kommersant via AP
VEB provided capital to build facilities at the Sochi Olympics and cash to secessionist rebels in eastern Ukraine. These top-down ventures lost money. VEB had large debts. The United States had included VEB, VTB and Sberbank in its 2014 sanctions package – the same package that led Putin to ban US couples from adopting Russian children. Gorkov’s job was to restore the bank’s fortunes.
Gorkov was well prepared for his meeting with Kushner. He flew in from Moscow. On his plane were gifts. These were a piece of art and some earth carefully dug up and transported from the town of Novogrudok in north-west Belarus.The town was where Kushner’s paternal grandmother, Rae Kushner, grew up.
This subtlety was wasted. In evidence, Kushner said Putin’s messenger had given him a “bag of dirt”. It came from “Nvgorod,” he wrote, spelling his grandmother’s birthplace incorrectly.
Kushner characterised the encounter as brief, meaningless. Next Gorkov flew directly from New York to Japan, where Putin was attending a summit. The banker would have certainly reported to his boss.
Aras Agalarov, right, with Russian President Vladimir Putin and Kremlin chief manager Vladimir Kozhin in Vladivostok in 2012.Credit:AP
Targeting Kushner was logical. He was soon to become a federal employee. His portfolio included tax, banking policy, the military and international affairs. In a protean White House – where anyone could be fired – Kushner’s status as the President’s son-in-law made him unsackable.
During his meetings with Russians, Kushner said nothing about Moscow’s attack on US democracy.
Read the whole story

· · · · · · · · · · ·

Did Deutsche Bank sell Trump’s debt to Sberbank? – Google Search

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Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Just Security

The Trump-Russia Timeline

Just SecurityDec 19, 2018
Russia defaults on its debt and its stock market collapses. … Efforts to sell Russians apartments in Trump World Tower, Trump’s West Side condominiums and Trump’s building on Columbus …. TrumpSues Deutsche Bank, But Bank Keeps Lending To Him Anyway …… Sberbank’s CEO does not show up for the address.
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from The Sydney Morning Herald

Mysterious triangle: Donald TrumpDeutsche Bank and the Kremlin …

The Sydney Morning HeraldDec 30, 2017
The fed-up reproving parent was Deutsche BankTrump’s New York creditor. …. stocks from Deutsche Bank Moscow in companies like Gazprom or Sberbank. … Had Deutsche sold any part of Trump’s debtto foreign entities?
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Newsweek

Is Donald Trump’s Dark Russian Secret Hiding in Deutsche Bank’s …

NewsweekDec 21, 2017
Is Donald Trump’s Dark Russian Secret Hiding in Deutsche Bank’s Vaults? … Deutsche was seeking an immediate $40 million from the client, plus interest, … to pay back his debts, he gave an interview to The Scotsman newspaper. …. from Deutsche Bank Moscow in companies like Gazprom or Sberbank.
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Financial Times

Donald Trump’s debt to Deutsche Bank

Financial TimesAug 30, 2017
When Donald Trump sued Deutsche Bank in late 2008, it was “classic Trump”, …. In addition, the bank could sell them extra services through its …. the Trump SoHo hotel, and several Russian banks, including Sberbank, …
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Reuters

Trump lawyer denies Deutsche Bank got subpoena on Trump accounts

ReutersDec 5, 2017
He later said the bank in question was Deutsche Bank. … was to find out whether Deutsche Bank may have sold some of Trump’s mortgage or other … request, had one been received,” responded a representative of Sberbank (SBER.MM). Holding Trump debt, particularly if some of it was or is coming due, …
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Bloomberg

Putin Pays Price for Sanctions as Government Bond Sales Scrapped

BloombergApr 10, 2018
It’s the first debt auction Russia abandoned since cancellations in … a London-based emerging-markets trader at Investec Bank Plc. “My … When the ruble went into freefall in December 2014, she did just that … auction, Sberbank PJSC postponed a local bond sale because of the “negative market dynamic.
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Financial Times

Sberbank: the bank trying to shape Russia’s future

Financial TimesSep 29, 2018
… that limit access to international debt markets since 2014, the bank has … The child of an ethnic German family exiled to central Asia by Stalin, Mr Gref, 54, … Having visited Sberbank branches across Russia, Mr Gref was shocked …. bank’s share price fell nearly 20 per cent in April during a mass sell-off.
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Is Mueller investigating whether Deutsche Bank may have sold Trump Organization debts to sanctioned Russian banks?

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Image result for deutsche bank, trump, oligarchs, mafia

After multiple outlets reported that Mueller had subpoenaed Deutsche Bank’s records on Trump’s accounts, Trump reportedly attempted to fire Mueller, only to pull back when Mueller’s team told him those reporters were inaccurate. A U.S. official has, however, told Reuters that Mueller is investigating whether Deutsche Bank may have sold Trump Organization debts to sanctioned Russian banks.(Neither Deutsche Bank nor the Russian banks contacted by Reuters commented on whether such a transaction was made.)

Read the whole story

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We now know a whole lot more about the identity of Robert Mueller’s mystery foreign government owned company

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The Supreme Court decided today that it has no interest in hearing the appeal from the mystery foreign government-owned company that’s been trying to dodge an evidence subpoena from Special Counsel Robert Mueller. This essentially means that Mueller has won the battle once and for all, as there is no higher court for the company to appeal to. We’ve also learned a lot more today about the company’s identity.

Various major media outlets have collectively revealed a number of details about the company today. For instance, while this comes as no surprise, it’s now confirmed that the company is a financial institution. In addition, the company has at least one branch in New York, which is where the subpoena was first delivered to. This narrows things down significantly.

We’ve already managed to rule out Donald Trump’s favorite money laundering bank, Deutsche Bank in Germany, as well as Alfa Bank in Russia, because they’re not owned by their respective governments. On the other hand, Sberbank is owned by the Russian government, and it has an office in New York City, and it tried to fund Trump Tower Moscow, so it completely fits the description. VEB Bank is also owned by the Kremlin, and it funded Trump’s failed real estate project in Toronto, but VEB doesn’t appear to have any presence in New York.

We still don’t have a definitive name, but the list of possibilities keeps getting shorter, and Sberbank fits the description the most closely. But the bigger story is that Robert Mueller has now definitively won this battle, and he’ll get his evidence against Trump unless the bank wants to get squeezed to death by massive daily financial penalties. And once Mueller finishes his report, this evidence will be in it, which should reveal the company’s identity in the process.
Bill Palmer is the publisher of the political news outlet Palmer Report

sberbank and us supreme court – Google Search

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Story image for sberbank and us supreme court from CNN International

The full ‘Putin list’ of Russian oligarchs and political figures released …

CNN InternationalJan 30, 2018
(CNN) It’s been dubbed the “Putin list” — the names of 210 prominent Russians, many with close ties to the Kremlin, released by the US …
Story image for sberbank and us supreme court from Center for Public Integrity

How a sanctioned Russian bank wooed Washington

Center for Public IntegrityMay 31, 2018
The United States put VTB and other Russian companies under sanctions … work for another sanctioned Russian bank, Sberbank, prompted the lobbying …. onto the curtain of the highest-profile theater venue in the nation’s capital. …. The financial disclosures for Trump’s possible Supreme Courtnominees.

sberbank – Google Search

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Sberbank: On The Pullback, DCF Analysis Suggests 14% Annualized …

Seeking Alpha15 hours ago
Sberbank dominates Russian banking. As shown in the chart directly below, it holds 44.6% of retail deposits and 24.1% of corporate deposits.

Sberbank introduces app-only lending

FinextraJan 1, 2019
Now, Sberbank Online users can apply for a consumer loan and receive a decision with no need to visit the bank’s office, and then funds will be …

Sberbank: Banking Behemoth In The Shadow Of Sanctions

Seeking AlphaDec 24, 2018
In this analysis I introduce the investment thesis for Russian banking behemoth Sberbank(OTCPK:SBRCY), which despite its strong economic …
Story image for sberbank from ComputerWeekly.com

Sberbank partners US accelerator for startup programme

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Sberbank: Banking Behemoth In The Shadow Of Sanctions – Sberbank of Russia ADR (OTCMKTS:SBRCY)

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Introduction

In this analysis I introduce the investment thesis for Russian banking behemoth Sberbank (OTCPK:SBRCY), which despite its strong economic fundamentals and dominant market position in Russia trades with a disproportionate discount to its intrinsic value. This discount is a result of sanctions imposed on the Russian economy and its banking sector. I believe this brings an opportunity to own a bank with moat-like characteristics, which trades with more than 70% discount to its intrinsic value and 9% gross dividend yield at its current prices.

Business overview

Sberbank is the largest bank in Russia with the international franchise in more than 22 countries. The bank’s business is built on three key pillars:
  • traditional retail banking
  • financial services (insurance, wealth management and brokerage)
  • other non-financial businesses (Yandex market and e-commerce initiatives)
What makes Sberbank so dominant is its strong position especially in traditional retail and financial services business. To give you a quick taste of Sberbank’s dominance, it has more than 30% market shares in Russian banking sector assets, it holds approximately 45% of the country’s retail deposits and it provides 41% in consumer loans and 34% of total corporate loans. Despite Sberbank’s market position, its stock lost over 50% since the geopolitical tension between USA and Russia led to introduction of sanctions on the Russian economy.
Source: seeking alpha

Competition in the Russian banking sector

Before jumping straight into the valuation of SBRCY, it is worth to look at the position of the bank within the Russian market. First and foremost, the Russian government owns 50% stake in the bank which is a blessing and a curse at the same time. On the one hand, many retail customers take SBRCY as a guarantee of stability especially during hard times, which helps to attract deposits and increase market share when tomorrow seems uncertain. On the other hand, for many western investor funds, SBRCY is too interlinked with the Russian government, which keeps them from significantly increasing their equity stakes.
The Russian banking sector is dominated by five major banks, which are directly or indirectly owned through the Russian government, however Sberbank has the strongest position among them. Sberbank’s ability to increase its market share especially in traditional retail banking is visible on both sides of its balance sheet, which make it possible to profit on deposits as well as loans provided.
Russian deposits
Russian loans
From the graphs above, it is visible that Sberbank is able to increase its market share in both deposits as well as loans provided, with limited impact of western sanctions which took place since 2015.
There are two main factors responsible for this trend. One is revoked licenses in the Russian banking sector to several smaller banks and migration of clients to safer banks. Since 2013, the number of operating banks in Russia halved from 1,092 to 517. This move helped the largest 5 institutions to cement their market position with Sberbank one of the biggest beneficiaries.
The other factor is also related to decreased competition and is described with Herfindahl-Hirschman Index (HHI), which measures the concentration of the market. Based on this index, the concentration of the Russian banking sector is in the range of moderate concentration (1000 – 1800) and in 2017 was 1200. In comparison, based on the data provided by ECB, the HHI for the Eurozone in 2017 was only 113. The difference is strikingly high and tells a lot about composition of competition in the Russian market.

Operating efficiency and strong financial performance

Favorable operating environment and cost efficiencies have positive impact on Sberbank’s profitability and its operating efficiency. To compare Sberbank with its global peers, I looked at its ability to achieve high return on equity (ROE) and cost effectiveness measured with cost to income ratio (CI ratio).
Global banks for the past 10 years struggled to significantly decrease their costs bases. There are several structural factors behind this trend such as higher regulatory costs, increased requirements for technological innovations or growing competition from fin-techs. As is visible on the graph below, average cost to income ratio for global retail banks is the range of 50% to 70%. At the same time, Sberbank can regularly achieve cost to income ratio below 50% with a projection for 2019 to achieve CIR less than 35%.
CIR global banks
CIR SberbankSource: annual reports
There are several reasons behind such a low costs base compared to its competition. The most important ones are economies of scale which grow with increased market share, initiatives to rationalize branch network and the number of full-time employees as well as strong focus on cost cutting. Additionally, Sberbank’s goal to improve back office processes through digitalization and AI slowly bear its fruit.
Similar picture is present with regards to profitability. High costs efficiency leads to high returns on equity, as the main indicator of profitability in the banking sector. Sberbank’s ability to achieve high returns on equity is even more significant when it is compared with global peers. It’s not a secret than since global financial crises many retail banks were not able to earn returns on equity above their costs of equity which is approximately 10% for global retail banks. The graph below confirms that for the period mentioned, there were only two years when banks created returns above their cost of equity.
Taking into consideration intricacies of the Russian market, I calculated that cost of equity for Sberbank is approx. 11%, which makes only one year when Sberbank did not create value for its shareholders. Positive fact is that Sberbank earned these high returns even during times of international sanctions, slump in oil prices and outflow of foreign capital from the Russian economy.
ROE SberbankSource: annual reports

Valuation

In my valuation of Sberbank I used free cash flow to equity model for the forecasted period of next five years and subsequently Gordon growth model for the terminal year. I build my assumptions based on the 2019-2020 guidance, provided at Sberbank analyst day this December. Other inputs where obtained from Bloomberg terminal. Inputs after 2020 are my own. In the table below, I summarize assumptions used in the valuation.
Valuation IValuation II
Given the above-mentioned assumptions, the intrinsic value of company should be approximately $19 per share, which means that at current prices over 70% undervalued. Using the interval of 15%, which is the range in which intrinsic value can oscillate based on the market noise, the intrinsic value should trade somewhere in the range of $16.5 to $22.
I also attached sensitivity analysis, which summarizes different values based on various growth assumptions in terminal value and Beta.
Valuation III Source: own calculations

Conclusion

Based on the assumptions used in my valuation, it seems that at current prices, Sberbank is at least 70% undervalued. Additionally, with the expected dividend for FY18 ($0.968), gross dividend yield is approx. 9%. Even though, Sberbank might seems to be a bet on the Russian economy, Sberbank’s ability to earn high returns on equity along with its cost discipline makes it an attractive long-term investment, regardless of current adversary macro environment.

Disclosure: I am/we are long SBRCY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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House Democrats demand Treasury explain rollback of sanctions on Russia oligarch

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Trump-Russia investigation | The Guardian: Supreme court rejects firm’s request in mystery case with possible Mueller links

US justices turn down bid from foreign-government-owned company to avoid fines for refusing to comply with a subpoena
The US supreme court has turned down a request from a foreign-government-owned company in a case that may be linked to Robert Mueller’s investigation into Russian intervention in the 2016 presidential election.
In a brief order on Monday, the court turned down the company’s bid to avoid paying a daily fine of $50,000 imposed by a federal judge in Washington for refusing to comply with a subpoena. The name of the country and company and details of the investigation were not publicly disclosed.
 Trump-Russia investigation | The Guardian

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Trump Investigations: 6:30 AM 1/9/2019 – Did Deutsche Bank sell Trump’s debt to Sberbank? Would it mean that he is “owned” by Russia? – M.N. | “Had Deutsche sold any part of Trump’s debt to foreign entities?” – The Sydney Morning Herald-Dec 30, 2017

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Donald Trump at the Taj Mahal casino in Atlantic City in 1996, one of a string of bankruptcies in the 1990s that alienated him from major US lenders.

  • Had Deutsche sold any part of Trump’s debt to foreign entities?

  • What meetings had the bank held with the Trump administration?
  • Had Trump or his family received preferential treatment?
  • Who decided to carry on lending to Trump after he defaulted in 2008?
  • Had Russia or Russian entities underwritten any aspect of these loans?
  • Was Deutsche shielding the President because of the Justice Department’s ongoing investigation into mirror trades?
Every inquiry, question, and query came up against a wall… 
Did Trump accept Russian sources of funding during these times? Richard Dearlove, the former head of MI6, said this question hangs over the President. Dearlove told the magazine Prospect: “What lingers for Trump may be what deals – on what terms – he did after the financial crisis of 2008 to borrow Russian money when others in the West would not lend to him.”
It wasn’t just Donald Trump who maintained a warm relationship with Deutsche. The German bank looked after his entire family. Jared Kushner, Ivanka, and Kushner’s mother Seryl Stadtmauer were all Deutsche clients.”

Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from The Sydney Morning Herald

Mysterious triangle: Donald TrumpDeutsche Bank and the Kremlin …

The Sydney Morning HeraldDec 30, 2017
The fed-up reproving parent was Deutsche BankTrump’s New York creditor. …. stocks from Deutsche Bank Moscow in companies like Gazprom or Sberbank. … Had Deutsche sold any part of Trump’s debt to foreign entities?

Donald Trump, Deutsche Bank and the Kremlin ‘cookie jars’

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Donald Trump inside the under-construction Trump International Hotel in Washington in March 2016. In 2014, Deutsche Bank agreed to lend the Trump Organisation up to $US170 million to finance the gut renovation of the hotel. Credit:ZACH GIBSON
One had to be a little awed by Trump’s nose-thumbing response. Instead of paying up, he counter-sued.
He argued that Deutsche Bank had co-created the financial downturn. Or as he put it: “Deutsche Bank is one of the banks primarily responsible for the economic dysfunction we are currently facing.”
Therefore, he was not obliged to pay back any money.
Therefore, Deutsche Bank owed him money. He wanted $US3 billion in damages.
Donald Trump at the Taj Mahal casino in Atlantic City in 1996, one of a string of bankruptcies in the 1990s that alienated him from major US lenders.Credit:CHESTER HIGGINS JR
The same day he argued that the depression meant he was off the hook, Trump gave an interview to The Scotsman newspaper. After a two-year fight, he had succeeded in getting approval from the Scottish government for a new Trump golf resort near Balmedie in Aberdeenshire.
“The world has changed financially and the banks are all in such trouble, but the good news is that we are doing very well as a company and we are in a very, very strong cash position,” Trump told the newspaper.
Anshu Jain, right, and Juergen Fitschen, then co-chief executives of Deutsche Bank, during a news conference in Frankfurt in 2013.Credit:RALPH ORLOWSKI
Trump’s outrageous behaviour vis-a-vis Deutsche Bank might have been anticipated. He was, after all, someone who had been through a slew of corporate bankruptcies. His Taj Mahal casino, his other casinos in Atlantic City, his Plaza Hotel in NYC all filed for chapter 11 bankruptcy in the early 1990s.
After those failures, US banks that had previously advanced the capital to Trump for building projects, believing them to be sound investments, stopped lending. Chase Manhattan, Citibank, and other burned Wall Street houses declined further credit and refused his calls.
The Trump National Doral resort in Florida, which Deutsche Bank’s private wealth wing allowed Trump to mortgage twice.Credit:ILANA PANICH LINSMAN
The one institution willing to advance him loans in the new century was Deutsche Bank.
In 2010 Trump settled his feud with Deutsche. This was done, extraordinarily, by borrowing more money from … Deutsche Bank.
The Trump International Hotel in Washington, which Deutsche Bank’s private wealth wing helped pay for.Credit:AL DRAGO
Shut out from its real estate division, Trump turned to another part of the same institution – Deutsche’s private wealth division, which typically deals with high net worth individuals. It doesn’t normally do property. Still, the unit lent him the money. And later gave him another $US25 to $US50 million in credit.
Asked whether it was normal to give more money to a customer who was a bad credit risk and a litigant, one former senior Deutsche staff member said: “Are you f—ing kidding me?”
Robert Mueller, the Justice Department’s special counsel, in Washington in June.Credit:DOUG MILLS
Remarkably, Trump was able to borrow even bigger sums. He took out two mortgages against his Trump National Doral resort in Miami. And a $US170 million loan to finish his hotel in Washington in the old post office tower. These loans flowed from the private wealth wing.
According to an analysis by Bloomberg, by the time he became the 45th president, Trump owed Deutsche Bank around $US300 million. All four debts were due in 2023 and 2024. This was an unprecedented sum for an incoming president and one that raised awkward questions about conflict of interest. If Deutsche Bank were to get into regulatory difficulty, one of the bodies that would investigate was the Department of Justice. Which reported to Trump. It was hard to see how the department could work dispassionately. Or how Deutsche might take legal action against a sitting president if he defaulted again.
Collusion by Luke Harding.Credit:NEW YORK TIMES

From Russia to New York: the Deutsche connection

During the same period Deutsche was doing something abnormal – something that would provoke the interest of regulators, and in turn lead to punishment. The bank was laundering money. Russian money. Not small amounts but many billions of dollars. This dubious tide flowed from Moscow to London, and from London to New York.
In 2005 Deutsche bought UFG, a boutique investment bank already well established in Moscow. The man behind Deutsche’s aggressive expansion was Anshu Jain, its future co-chief executive. Jain came up with a controversial strategy: to tap into potentially huge Russian profits, he decided to forge relationships with state partners.
Former head of MI6 Richard Dearlove in 2008.Credit:AP
Russia’s most powerful banker was Andrey Kostin. Kostin had served in Sydney and London as a Soviet diplomat. Intelligence sources think he was a KGB spy. In the 1990s, he became head of Vnesheconombank – VEB – a state development bank described by one former CIA analyst as the “Kremlin’s cookie jar”.
Then Putin made Kostin head of Vneshtorgbank, or VTB, also state-run.
Jain and Deutsche Bank recruited Kostin’s twenty-something son, also called Andrei, with an i. In spring 2007 Kostin jnr moved from a posting in London to Deutsche Bank in Moscow. Suddenly, he got massive flows of business.
According to one estimate, Deutsche Bank’s Moscow subsidiary began notching up profits of $US500 million to $US1 billion a year, with VTB generating somewhere between 50 and 80 per cent of all revenue. In Moscow, a Russian client bought blue-chip Russian stocks from Deutsche Bank Moscow in companies like Gazprom or Sberbank. The payment was in roubles. The size of a typical order was $US2 million to $US3 million. Shortly afterwards a non-Russian “customer” sold exactly the same number of securities to Deutsche Bank in London, paying in dollars.
These “mirror trades” were fake and had no economic logic. The selling parties were based in offshore territories like Cyprus or the British Virgin Islands. Billions were moved out of one Deutsche Bank, from its modern glass office at Building 2, 82 Sadovnicheskaya Street, to another Deutsche Bank, at 60 Wall Street. There were nearly 6000 transactions. Nobody in New York or London or Frankfurt or any of the international financial centres really noticed.
The end came in August 2015, when Deutsche Bank suspended American Tim Wiswell and then fired him. After that, he disappeared. There were Facebook postings from South-east Asia and Bali, where the Wiswells went with their two small children. He appeared to be on the run from US authorities and is now allegedly back in Moscow. One friend described him to The New Yorker as “finance’s Edward Snowden“.
In a wrongful dismissal suit Wiswell said he’d been scapegoated. Around 20 colleagues, including two senior managers in London, knew all about the trades, he said.
The affair was a grievous blow to Deutsche Bank’s reputation. The New York State Department of Financial Services (DFS) – which has the power to suspend any bank with a branch in New York – fined Deutsche $US475 million. London’s Financial Conduct Authority imposed a £163 million ($282.2 million) penalty. The bank carried out an internal review, Project Square.
The review did not identify the Russians behind the scheme. We don’t know who they were or where the billions went. Or where the money came from in the first place.
A Kremlin bank, VTB, had seemingly captured Deutsche Bank’s Moscow outpost. Deutsche’s London and New York divisions were economic beneficiaries of this arrangement. While this was going on, Deutsche Bank in New York lent hundreds of millions of dollars to the future president. What Democratic senators and representatives wanted to know was this: Was there a connection? It was a good question.

Family ties

My attempts to get information from Deutsche Bank over its lending to Trump were unsuccessful. House and Senate Democrats fared no better.
There were legitimate things to ask. Such as:
  • Had Deutsche sold any part of Trump’s debt to foreign entities?
  • What meetings had the bank held with the Trump administration?
  • Had Trump or his family received preferential treatment?
  • Who decided to carry on lending to Trump after he defaulted in 2008?
  • Had Russia or Russian entities underwritten any aspect of these loans?
  • Was Deutsche shielding the President because of the Justice Department’s ongoing investigation into mirror trades?
Every inquiry, question, and query came up against a wall.
Overall, Germany’s largest bank was in trouble. In 2005 the DFS reprimanded the bank for rigging the LIBOR, the main interbank lending rate. There was a further fine for sanctions busting – processing dollar transactions on behalf of entities in Iran, Libya, Syria, Myanmar and Sudan. And another $7.2 billion for selling high-risk mortgage-backed securities before the 2008 slump.
Did Trump accept Russian sources of funding during these times? Richard Dearlove, the former head of MI6, said this question hangs over the President. Dearlove told the magazine Prospect: “What lingers for Trump may be what deals – on what terms – he did after the financial crisis of 2008 to borrow Russian money when others in the West would not lend to him.”
It wasn’t just Donald Trump who maintained a warm relationship with Deutsche. The German bank looked after his entire family. Jared Kushner, Ivanka, and Kushner’s mother Seryl Stadtmauer were all Deutsche clients.
The Puck Building in New York, which securities filings show is involved in loans the Kushner Companies received from Deutsche Bank.Credit:New York Times
According to our sources inside Deutsche, Trump’s bid to become president made him a politically exposed person, or PEP. Deutsche reviewed its lending to Trump and his relatives, and the review was sensitive. Its goal was to discover if there was a Russian connection to Trump’s loans. The DFS also requested information.
The sources insist that the answer was negative. No trail to Moscow was ever discovered, they told us. Deutsche, however, refused to make public comment. Nor would it provide details of its private review to Capitol Hill. Senators wrote letters; the bank stonewalled, citing privacy rules. Congress showed interest in mirror trades. It got the same evasive nein.
In a letter to Bill Woodley, Deutsche’s US chief executive, senator Chris Van Hollen expressed concerns about the bank’s lending to Kushner. Kushner had a $US25 million line of credit with Deutsche. Additionally, in October 2016, it loaned him $US285 million. The loan was made around the time when Kremlin representatives were eagerly seeking Kushner’s ear.
Kushner first met Sergey Kislyak in April, when Trump gave his foreign policy speech at DC’s Mayflower Hotel – just a handshake and pleasantries, Kushner said. Next came the meeting with Natalia Veselnitskaya. Then, on November 16, Kislyak got in touch again. By this point it was clear that Kushner would become senior adviser to the president.
Kremlin-linked lawyer Natalia Veselnitskaya met with Donald Trump jnr and Jared Kushner.Credit:AP
The Kushner-Kislyak meeting on December 1 took place at Trump Tower. Michael Flynn was present, too. Kushner made an unusual proposal. He asked Kislyak if it would be possible to set up a secret and secure communications channel between the Trump transition team and the Kremlin. The purpose, seemingly, was to keep any conversations hidden from the outgoing Obama administration and US intelligence.
Could this be done, Kushner wondered, by using Russian diplomatic facilities in the United States?
The inquiry was staggeringly naive. If Kushner or Flynn were to drop by the Russian embassy, then US intelligence would certainly notice. The FBI didn’t bug the conversation but learned of it afterwards, when Kislyak reported to his superiors back in Moscow. According to FBI intercepts of Russian communications, Kislyak was taken aback by Kushner’s unusual request.
Russia, it seemed, didn’t need to expend much effort to get close to Trump’s aides. Kislyak came up with a suggestion of his own. Perhaps Kushner would like to meet with another person from Moscow, someone with “a direct relationship” to President Putin?
Jared Kushner: courted by Russian officials as a fixed point in the otherwise volatile Trump team.Credit:New York Times
The details were agreed during a meeting on December 12 between Kislyak and Kushner’s assistant, Avi Berkowitz. Putin’s emissary turned out to be a banker, or more accurately, a banker-spy. His name was Sergei Gorkov. He was the head of VEB, the state development bank, which Kostin had run and whose board Putin had chaired during his four years as prime minister.
Gorkov had trained in the 1990s at the academy of the FSB [the successor to the KGB in handling state security], before joining the state-run Sberbank. Like VTB, Sberbank performed certain Kremlin functions. It was the official sponsor of the 2013 Miss Universe contest in Moscow, attended by Trump and hosted by Aras Agalarov. Eight days after the contest Sberbank announced it was lending Agalarov 55 billion roubles ($1.25 billion) to finance new projects. One of those under consideration was Trump’s Moscow tower.
Russian businessman Aras Agalarov, left, with Miss Universe Gabriela Isler and Donald Trump in Moscow in November 2013.Credit:Kommersant via AP
VEB provided capital to build facilities at the Sochi Olympics and cash to secessionist rebels in eastern Ukraine. These top-down ventures lost money. VEB had large debts. The United States had included VEB, VTB and Sberbank in its 2014 sanctions package – the same package that led Putin to ban US couples from adopting Russian children. Gorkov’s job was to restore the bank’s fortunes.
Gorkov was well prepared for his meeting with Kushner. He flew in from Moscow. On his plane were gifts. These were a piece of art and some earth carefully dug up and transported from the town of Novogrudok in north-west Belarus.The town was where Kushner’s paternal grandmother, Rae Kushner, grew up.
This subtlety was wasted. In evidence, Kushner said Putin’s messenger had given him a “bag of dirt”. It came from “Nvgorod,” he wrote, spelling his grandmother’s birthplace incorrectly.
Kushner characterised the encounter as brief, meaningless. Next Gorkov flew directly from New York to Japan, where Putin was attending a summit. The banker would have certainly reported to his boss.
Aras Agalarov, right, with Russian President Vladimir Putin and Kremlin chief manager Vladimir Kozhin in Vladivostok in 2012.Credit:AP
Targeting Kushner was logical. He was soon to become a federal employee. His portfolio included tax, banking policy, the military and international affairs. In a protean White House – where anyone could be fired – Kushner’s status as the President’s son-in-law made him unsackable.
During his meetings with Russians, Kushner said nothing about Moscow’s attack on US democracy.
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Did Deutsche Bank sell Trump’s debt to Sberbank? – Google Search

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Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Just Security

The Trump-Russia Timeline

Just SecurityDec 19, 2018
Russia defaults on its debt and its stock market collapses. … Efforts to sell Russians apartments in Trump World Tower, Trump’s West Side condominiums and Trump’s building on Columbus …. TrumpSues Deutsche Bank, But Bank Keeps Lending To Him Anyway …… Sberbank’s CEO does not show up for the address.
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from The Sydney Morning Herald

Mysterious triangle: Donald TrumpDeutsche Bank and the Kremlin …

The Sydney Morning HeraldDec 30, 2017
The fed-up reproving parent was Deutsche BankTrump’s New York creditor. …. stocks from Deutsche Bank Moscow in companies like Gazprom or Sberbank. … Had Deutsche sold any part of Trump’s debtto foreign entities?
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Newsweek

Is Donald Trump’s Dark Russian Secret Hiding in Deutsche Bank’s …

NewsweekDec 21, 2017
Is Donald Trump’s Dark Russian Secret Hiding in Deutsche Bank’s Vaults? … Deutsche was seeking an immediate $40 million from the client, plus interest, … to pay back his debts, he gave an interview to The Scotsman newspaper. …. from Deutsche Bank Moscow in companies like Gazprom or Sberbank.
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Financial Times

Donald Trump’s debt to Deutsche Bank

Financial TimesAug 30, 2017
When Donald Trump sued Deutsche Bank in late 2008, it was “classic Trump”, …. In addition, the bank could sell them extra services through its …. the Trump SoHo hotel, and several Russian banks, including Sberbank, …
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Reuters

Trump lawyer denies Deutsche Bank got subpoena on Trump accounts

ReutersDec 5, 2017
He later said the bank in question was Deutsche Bank. … was to find out whether Deutsche Bank may have sold some of Trump’s mortgage or other … request, had one been received,” responded a representative of Sberbank (SBER.MM). Holding Trump debt, particularly if some of it was or is coming due, …
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Bloomberg

Putin Pays Price for Sanctions as Government Bond Sales Scrapped

BloombergApr 10, 2018
It’s the first debt auction Russia abandoned since cancellations in … a London-based emerging-markets trader at Investec Bank Plc. “My … When the ruble went into freefall in December 2014, she did just that … auction, Sberbank PJSC postponed a local bond sale because of the “negative market dynamic.
Story image for Did Deutsche Bank sell Trump's debt to Sberbank? from Financial Times

Sberbank: the bank trying to shape Russia’s future

Financial TimesSep 29, 2018
… that limit access to international debt markets since 2014, the bank has … The child of an ethnic German family exiled to central Asia by Stalin, Mr Gref, 54, … Having visited Sberbank branches across Russia, Mr Gref was shocked …. bank’s share price fell nearly 20 per cent in April during a mass sell-off.
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Is Mueller investigating whether Deutsche Bank may have sold Trump Organization debts to sanctioned Russian banks?

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After multiple outlets reported that Mueller had subpoenaed Deutsche Bank’s records on Trump’s accounts, Trump reportedly attempted to fire Mueller, only to pull back when Mueller’s team told him those reporters were inaccurate. A U.S. official has, however, told Reuters that Mueller is investigating whether Deutsche Bank may have sold Trump Organization debts to sanctioned Russian banks.(Neither Deutsche Bank nor the Russian banks contacted by Reuters commented on whether such a transaction was made.)

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We now know a whole lot more about the identity of Robert Mueller’s mystery foreign government owned company

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The Supreme Court decided today that it has no interest in hearing the appeal from the mystery foreign government-owned company that’s been trying to dodge an evidence subpoena from Special Counsel Robert Mueller. This essentially means that Mueller has won the battle once and for all, as there is no higher court for the company to appeal to. We’ve also learned a lot more today about the company’s identity.

Various major media outlets have collectively revealed a number of details about the company today. For instance, while this comes as no surprise, it’s now confirmed that the company is a financial institution. In addition, the company has at least one branch in New York, which is where the subpoena was first delivered to. This narrows things down significantly.

We’ve already managed to rule out Donald Trump’s favorite money laundering bank, Deutsche Bank in Germany, as well as Alfa Bank in Russia, because they’re not owned by their respective governments. On the other hand, Sberbank is owned by the Russian government, and it has an office in New York City, and it tried to fund Trump Tower Moscow, so it completely fits the description. VEB Bank is also owned by the Kremlin, and it funded Trump’s failed real estate project in Toronto, but VEB doesn’t appear to have any presence in New York.

We still don’t have a definitive name, but the list of possibilities keeps getting shorter, and Sberbank fits the description the most closely. But the bigger story is that Robert Mueller has now definitively won this battle, and he’ll get his evidence against Trump unless the bank wants to get squeezed to death by massive daily financial penalties. And once Mueller finishes his report, this evidence will be in it, which should reveal the company’s identity in the process.
Bill Palmer is the publisher of the political news outlet Palmer Report

sberbank and us supreme court – Google Search

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Story image for sberbank and us supreme court from CNN International

The full ‘Putin list’ of Russian oligarchs and political figures released …

CNN InternationalJan 30, 2018
(CNN) It’s been dubbed the “Putin list” — the names of 210 prominent Russians, many with close ties to the Kremlin, released by the US …
Story image for sberbank and us supreme court from Center for Public Integrity

How a sanctioned Russian bank wooed Washington

Center for Public IntegrityMay 31, 2018
The United States put VTB and other Russian companies under sanctions … work for another sanctioned Russian bank, Sberbank, prompted the lobbying …. onto the curtain of the highest-profile theater venue in the nation’s capital. …. The financial disclosures for Trump’s possible Supreme Courtnominees.

sberbank – Google Search

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Sberbank: On The Pullback, DCF Analysis Suggests 14% Annualized …

Seeking Alpha15 hours ago
Sberbank dominates Russian banking. As shown in the chart directly below, it holds 44.6% of retail deposits and 24.1% of corporate deposits.

Sberbank introduces app-only lending

FinextraJan 1, 2019
Now, Sberbank Online users can apply for a consumer loan and receive a decision with no need to visit the bank’s office, and then funds will be …

Sberbank: Banking Behemoth In The Shadow Of Sanctions

Seeking AlphaDec 24, 2018
In this analysis I introduce the investment thesis for Russian banking behemoth Sberbank(OTCPK:SBRCY), which despite its strong economic …
Story image for sberbank from ComputerWeekly.com

Sberbank partners US accelerator for startup programme

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Sberbank: Banking Behemoth In The Shadow Of Sanctions – Sberbank of Russia ADR (OTCMKTS:SBRCY)

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Introduction

In this analysis I introduce the investment thesis for Russian banking behemoth Sberbank (OTCPK:SBRCY), which despite its strong economic fundamentals and dominant market position in Russia trades with a disproportionate discount to its intrinsic value. This discount is a result of sanctions imposed on the Russian economy and its banking sector. I believe this brings an opportunity to own a bank with moat-like characteristics, which trades with more than 70% discount to its intrinsic value and 9% gross dividend yield at its current prices.

Business overview

Sberbank is the largest bank in Russia with the international franchise in more than 22 countries. The bank’s business is built on three key pillars:
  • traditional retail banking
  • financial services (insurance, wealth management and brokerage)
  • other non-financial businesses (Yandex market and e-commerce initiatives)
What makes Sberbank so dominant is its strong position especially in traditional retail and financial services business. To give you a quick taste of Sberbank’s dominance, it has more than 30% market shares in Russian banking sector assets, it holds approximately 45% of the country’s retail deposits and it provides 41% in consumer loans and 34% of total corporate loans. Despite Sberbank’s market position, its stock lost over 50% since the geopolitical tension between USA and Russia led to introduction of sanctions on the Russian economy.
Source: seeking alpha

Competition in the Russian banking sector

Before jumping straight into the valuation of SBRCY, it is worth to look at the position of the bank within the Russian market. First and foremost, the Russian government owns 50% stake in the bank which is a blessing and a curse at the same time. On the one hand, many retail customers take SBRCY as a guarantee of stability especially during hard times, which helps to attract deposits and increase market share when tomorrow seems uncertain. On the other hand, for many western investor funds, SBRCY is too interlinked with the Russian government, which keeps them from significantly increasing their equity stakes.
The Russian banking sector is dominated by five major banks, which are directly or indirectly owned through the Russian government, however Sberbank has the strongest position among them. Sberbank’s ability to increase its market share especially in traditional retail banking is visible on both sides of its balance sheet, which make it possible to profit on deposits as well as loans provided.
Russian deposits
Russian loans
From the graphs above, it is visible that Sberbank is able to increase its market share in both deposits as well as loans provided, with limited impact of western sanctions which took place since 2015.
There are two main factors responsible for this trend. One is revoked licenses in the Russian banking sector to several smaller banks and migration of clients to safer banks. Since 2013, the number of operating banks in Russia halved from 1,092 to 517. This move helped the largest 5 institutions to cement their market position with Sberbank one of the biggest beneficiaries.
The other factor is also related to decreased competition and is described with Herfindahl-Hirschman Index (HHI), which measures the concentration of the market. Based on this index, the concentration of the Russian banking sector is in the range of moderate concentration (1000 – 1800) and in 2017 was 1200. In comparison, based on the data provided by ECB, the HHI for the Eurozone in 2017 was only 113. The difference is strikingly high and tells a lot about composition of competition in the Russian market.

Operating efficiency and strong financial performance

Favorable operating environment and cost efficiencies have positive impact on Sberbank’s profitability and its operating efficiency. To compare Sberbank with its global peers, I looked at its ability to achieve high return on equity (ROE) and cost effectiveness measured with cost to income ratio (CI ratio).
Global banks for the past 10 years struggled to significantly decrease their costs bases. There are several structural factors behind this trend such as higher regulatory costs, increased requirements for technological innovations or growing competition from fin-techs. As is visible on the graph below, average cost to income ratio for global retail banks is the range of 50% to 70%. At the same time, Sberbank can regularly achieve cost to income ratio below 50% with a projection for 2019 to achieve CIR less than 35%.
CIR global banks
CIR SberbankSource: annual reports
There are several reasons behind such a low costs base compared to its competition. The most important ones are economies of scale which grow with increased market share, initiatives to rationalize branch network and the number of full-time employees as well as strong focus on cost cutting. Additionally, Sberbank’s goal to improve back office processes through digitalization and AI slowly bear its fruit.
Similar picture is present with regards to profitability. High costs efficiency leads to high returns on equity, as the main indicator of profitability in the banking sector. Sberbank’s ability to achieve high returns on equity is even more significant when it is compared with global peers. It’s not a secret than since global financial crises many retail banks were not able to earn returns on equity above their costs of equity which is approximately 10% for global retail banks. The graph below confirms that for the period mentioned, there were only two years when banks created returns above their cost of equity.
Taking into consideration intricacies of the Russian market, I calculated that cost of equity for Sberbank is approx. 11%, which makes only one year when Sberbank did not create value for its shareholders. Positive fact is that Sberbank earned these high returns even during times of international sanctions, slump in oil prices and outflow of foreign capital from the Russian economy.
ROE SberbankSource: annual reports

Valuation

In my valuation of Sberbank I used free cash flow to equity model for the forecasted period of next five years and subsequently Gordon growth model for the terminal year. I build my assumptions based on the 2019-2020 guidance, provided at Sberbank analyst day this December. Other inputs where obtained from Bloomberg terminal. Inputs after 2020 are my own. In the table below, I summarize assumptions used in the valuation.
Valuation IValuation II
Given the above-mentioned assumptions, the intrinsic value of company should be approximately $19 per share, which means that at current prices over 70% undervalued. Using the interval of 15%, which is the range in which intrinsic value can oscillate based on the market noise, the intrinsic value should trade somewhere in the range of $16.5 to $22.
I also attached sensitivity analysis, which summarizes different values based on various growth assumptions in terminal value and Beta.
Valuation III Source: own calculations

Conclusion

Based on the assumptions used in my valuation, it seems that at current prices, Sberbank is at least 70% undervalued. Additionally, with the expected dividend for FY18 ($0.968), gross dividend yield is approx. 9%. Even though, Sberbank might seems to be a bet on the Russian economy, Sberbank’s ability to earn high returns on equity along with its cost discipline makes it an attractive long-term investment, regardless of current adversary macro environment.

Disclosure: I am/we are long SBRCY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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