A $1.6bn tech joint venture between Russia’s giant state-owned bank Sberbank and Mail.ru, the owner of the country’s largest social network, has been plagued by management and cultural clashes that may lead to a “divorce”, according to several people familiar with the situation.

Sberbank and Mail.ru announced the JV last July, pledging to combine their ride-hailing, food apps and delivery services to create Russia’s “leading platform in mobility and food tech”.

The two partners recently invested a further Rbs12bn ($160m) into the JV, while Mail.ru also raised a further $600m it planned to spend on further acquisitions.

The JV, which includes the taxi app Citymobil and the restaurant ordering app Delivery Club, is a rival to Yandex’s platform in the race to capture Russia’s 95m active internet users.

Column chart of Sales share (%) showing Russia's food delivery market

The move came after a similar partnership between Sberbank and Yandex, Russia’s largest search engine, to create a “Russian Amazon” soured and saw Yandex buy out Sberbank’s stake.

But the problems between Sberbank and Yandex, which included arguments over who would be in charge when both sides had equal stakes, appear to be repeating themselves between Sberbank and Mail.ru, the people close to the situation said.

The companies have even discussed splitting up the JV, but talks on a possible “divorce” remain inconclusive as the sides have yet to decide how they would divide up the assets, the people said.

Sberbank played down any problems, saying the companies in the joint venture “are growing successfully and we are convinced they will become leaders via the equal participation of Sberbank and Mail.ru Group.”

Sergei Luchin, a spokesman for Mail.ru, said that Mail.ru and Sberbank were building “two independent ecosystems”, and “may compete in some areas” but that this would not stop them “from working together to grow our food-tech and transport assets on an equal basis.”

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Sberbank is determined to transform itself into a big participant in Russia’s tech sector, with Herman Gref, its chief executive, saying it wanted to have an “ecosystem” offering consumers everything from streamed entertainment to online mortgages and video appointments with their doctors.

Yandex, Mail.ru, state bank VTB and the Sistema conglomerate, which co-owns mobile phone company MTS and the online retailer Ozon, all have similar ambitions.

The rush to capture Russia’s 95m active internet users has even caught the attention of President Vladimir Putin, who said last month that the country’s nascent tech platforms were “extremely important” because they would “give our economy a noticeable impulse, including by letting many small and medium enterprises expand channels for marketing their goods.”

Mr Gref, inspired by the success of China’s “superapps” such as WeChat and Alipay, plans to spend a further Rbs2.5bn ($33m) on a multiyear rebranding that dropped “bank” from most of its products and replaced its logo with a generic tick in a circle.

In September, he took part in an hour-long video presentation in which he rode in a taxi with a cartoon cat, executives awkwardly showed off the ecosystem’s functions to ageing Russian celebrities, and chief technology officer David Rafalovsky used Sber’s technology to stream a TikTok-style dance with dancer Keyko Lee.

The rebranding was widely mocked on social media, where users complained the new logo made Sberbank’s app indistinguishable from dozens of others.

Sberbank announced a week later that Viktor Shkipin, the fourth executive to lead the rebranding in three years, had “made the decision at this stage of his life journey to leave us for personal reasons”, only six months into his job.

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Herman Gref took part in a video presentation, widely mocked on social media, in which he rode in a taxi with a cartoon cat

But Mr Gref’s ambitions have been limited by the central bank’s worries that ecosystems could create “digital financial monopolies” which use the user data from their tech acquisitions to boost their banking businesses.

At the joint venture with Mail.ru, meanwhile, there have been disagreements over whether Sberbank’s financial network or Mail.ru’s social network VK should form the basis of their platform, the people said.

Sberbank has chafed at demands from Mail.ru to make VK the backbone of their shared ecosystem, while Mail.ru is reluctant to use Sberbank’s payments platforms exclusively, preferring to keep its existing relationships.

The bank has also been dismayed at its lack of influence over Mail.ru after buying a 36 per cent stake in the company’s complex governance structure.

Mr Gref told reporters on Tuesday that Sberbank was “planning to expand [the ecosystem] into ecommerce,” which he said was “the main part of an issue we have yet to resolve.”

The joint venture does not include Mail.ru’s partnership with China’s AliExpress. Talks about buying a stake in Ozon, Russia’s second-largest ecommerce company, fell apart this year when its owners decided on an initial public offering in the US instead.

Mr Gref is now under pressure to justify his tech strategy after the Kremlin transferred its stake in Sberbank from the central bank to the finance ministry in February. Officials there have fought Mr Gref to raise the dividend to 50 per cent of profits, a requirement for all state companies that it only met in full this year.

Column chart of market share (%) showing Yandex dominates ride sharing in Moscow

Sberbank enjoys an enormous funding base thanks to the near-monopoly on retail deposits it inherited from the Soviet era. The bank holds almost half of all total deposits and is more than twice the size of VTB by assets.

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Mr Gref, a former economy minister in Mr Putin’s cabinet, has won plaudits worldwide for boosting Sberbank’s profitability by transforming it from a corrupt Soviet-style dinosaur into a high-tech innovator.

Its profits grew 75 per cent year on year to Rbs271bn in the third quarter of 2020 — a 20 per cent increase on analysts’ consensus expectations.

But Sberbank’s spending on its tech ecosystem has yet to produce tangible returns. None of the companies owned by the JV with Mail.ru made a profit last year: Delivery Club lost Rbs6.5bn pre-tax, while Citymobil’s losses were Rbs7.4bn.

Both remain lossmaking despite doubling and tripling their revenues year on year respectively in the third quarter, Sberbank said. Sberbank also recently bought full control of digital media company Rambler, which lost nearly Rbs1.5bn last year.

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The bank says it has spent less than $2bn on creating the ecosystem including $1bn on the JV with Mail.ru and the acquisitions of Rambler and mapping app 2GIS, but the Ministry of Finance intends to take a tougher approach to Mr Gref’s spending on tech, according to two people familiar with their plans.

However, the ministry said it did “not plan to limit spending on investments in the technology sector”.

Finance minister Anton Siluanov, who became chairman of Sberbank’s board this year, said on Tuesday that “uniting banking and non-banking services will create a synergetic effect, and non-banking markets will become a new source of income”.

Via Financial Times