* Order book covered - sources
* Sale priced at tight discount
* Deal seen removing stock overhang
* Shows Russia ready to privatise
By Katya Golubkova and Oksana Kobzeva
MOSCOW, Sept 17 (Reuters) - Russia attracted strong investor interest in the sale of a $5 billion stake in Sberbank on Monday, reducing its control in Europe's third-largest bank by equity value and reviving its stalled privatisation programme.
The sale of a 7.6 percent stake in Sberbank has been held up for more than a year by weak markets, but last week's announcement of a new round of credit easing by the U.S. Federal Reserve lifted sentiment and opened the window to a placement.
"This was the best imaginable day of the past 15 months to take the decision to go to the market," Chief Executive German Gref told Reuters in a telephone interview, after Sberbank stock hit its highest since April on Friday.
Gref said he hoped asset managers in China, Singapore and Hong Kong, among others, would be interested in the three-day offering, which may be closed early if there are enough orders.
Market sources said the order book had already been covered by Monday evening in Moscow, with bids for the 1.71 billion shares on offer coming in at 93.5 roubles or higher - above a minimum of 91 roubles - putting a value of at least 160 billion roubles ($5.25 billion) on the offering.
The sale will help clear a stock overhang that has held back the recent share performance of the former Soviet state savings bank, and capped Russian market valuations at a big discount to other emerging markets.
It will boost the liquidity of Russia's most actively traded stock, widely viewed by investors as a proxy for economic growth running at 4 percent, and by one estimate the world's best-performing large company stock over the past decade after U.S. Apple Inc, maker of the iPhone.
While delivering a welcome revenue windfall, the sale also sends a signal to markets that President Vladimir Putin, who returned to the Kremlin in May, is willing to press ahead with privatisations after a lengthy pause.
Russia has set out ambitious plans to reduce the 50 percent share of the state in the economy to boost efficiency and growth but, despite running a budget surplus thanks to high oil prices, has proved unwilling to sell state assets on the cheap.
"Russia will probably start to perform because Sberbank will perform," said Bruce Bower, a portfolio manager at Moscow-based fund manager Verno Capital, which owns Sberbank and will seek to add to its position via the secondary offering.
"Firstly, if they can find $5 billion for this they can find money for other privatisations," added Bower. "Secondly, there was a lot of worry that the government was not committed to reform. I think this forces (critics) to revise their opinions."
The Sberbank deal will also set the tone for an initial public offering planned by Russia's No.2 mobile phone company MegaFon, which could happen within weeks and which analysts estimate could raise $3 billion.
Sberbank said it would price the sale of 1.7 billion shares at between 91 roubles ($2.99) apiece and the market price at the time of closing the books on the sale.
The minimum price represents a discount of 6 percent to Friday's close of 97.05 roubles. Although the bank's stock fell 1.5 percent on Monday to 95.57 roubles, sources close to the placement said investor demand was brisk. Pricing will be set late on Tuesday and announced on Wednesday.
"The timing of the deal is perfect: first, you have strong global market dynamics," said Jason Hurwitz, a senior analyst covering the financial sector at Alfa Bank in Moscow.
"Secondly, we think it is clear that Russian banks including Sberbank will face diminishing profitability," added Hurwitz. "So why not sell the stake now?"
While the government had eyed a sale price above 100 roubles per share, holding out could have proved risky as the Russian economy is losing momentum as demand for exports of oil and gas to Europe is sapped by the euro zone debt crisis.
Nonetheless the offering, which values Sberbank at a price-to-book multiple of 1.4 times, "is extremely cheap" compared to other emerging markets banks, said Kirill Bagachenko, a senior portfolio manager at TKB BNP Paribas Investment Partners.
The stock sale marks a milestone in a restructuring drive by Gref - a former economy minister appointed CEO in late 2007 - to transform Sberbank from a bloated bureaucracy into a modern universal bank with international ambitions.
Founded 170 years ago, Sberbank became a Soviet state monopoly and, in a legacy of the command economy, still controls 46 percent of Russian household deposits.
That, plus its quasi-sovereign status, gives Sberbank a huge funding advantage over its Western rivals, helping it to post net interest margins of over 6 percent and a chunky return on equity of 26 percent. Among European banks, only HSBC and Santander have a bigger equity value than Sberbank.
Sberbank has snapped up cheap foreign banking assets - most recently buying Turkey's Denizbank for $3.6 billion. But, after criticism from analysts that it was taking its eye off the ball in Russia, management has said it is not pursuing further takeover opportunities abroad.
Of the aggregate offering, up to 10 percent will be placed via Moscow's MICEX stock exchange, Sberbank said. At the discretion of the central bank, through which the state holds its controlling stake in Sberbank, the share of the offering to be placed in Moscow may be increased to 15 percent.
Sberbank will make the bulk of the placement in London in the form of global depositary shares, with each GDS representing four ordinary shares. No new shares will be sold, meaning the proceeds of the stock offering will accrue to the state.
The central bank, which will cut its stake in Sberbank to 50 percent plus one voting share through the sale, appointed Credit Suisse, Goldman Sachs International, J.P. Morgan, Morgan Stanley and Troika Dialog as joint global coordinators of the deal.
Sberbank said that its subsidiary LLC Sberbank Investments may acquire the equivalent of up to 20 billion roubles of ordinary shares in the offering at the offer price and on the same terms as other investors.
Gref said some of the shares bought would fund an executive incentive plan, while the remainder would be held in treasury.