MOSCOW (Reuters) - Russia’s second-largest bank VTB (VTBR.MM) has won firm orders for its entire offering of new shares worth $3.3 billion, a source close to the bank said on Sunday, bolstering its capital strength as it eyes a push into retail lending.
The rights issue will bring in new sovereign wealth fund investors, including from Norway and Azerbaijan, while diluting the Russian state’s controlling stake as part of a broader drive to privatize state assets.
“We have been able to cover the entire amount of the offering with legally-binding commitments,” the source told Reuters, speaking on condition of anonymity ahead of an official announcement due on Monday morning.
The capital raising is intended to show that VTB has moved on after the hit it took from its takeover in 2011 of Bank of Moscow, which revealed a balance-sheet hole at the acquired bank and triggered Russia’s largest-ever financial bailout.
VTB last Wednesday announced steady 2012 earnings that bolstered its Tier 1 capital adequacy ratio - a measure of its ability to absorb losses - to 10.3 percent from 9 percent at the end of 2011.
“The challenges associated with Bank of Moscow are truly over,” said the source. “We have turned the page.”
The bank’s supervisory board on Friday approved the issue of 2.5 trillion new shares at 4.1 kopecks each, a discount of around 9 percent to the price at which the stock ended the week.
If fully taken up, the stock offering would raise 102.3 billion roubles ($3.3 billion).
The offer price would be a third of the level at which VTB first floated in 2007. Despite its weak past performance VTB - worth just 0.6 times book value - may offer upside to strategic long-term investors, analysts say.
In contrast to a $5 billion share sale last September by state-controlled market leader Sberbank (SBER.MM), VTB will issue only new shares, ensuring that the bank itself - and not the Russian state - receives the proceeds.
The government has waived its right to subscribe to the offering, which if fully taken up by investors would dilute its stake from 75.5 percent to 60.9 percent.
Existing shareholders will have eight days to exercise their subscription rights to the shares, being issued on the Moscow stock exchange. Even if they decline to do so, VTB has enough orders to cover the book, the source said.
VTB plans to commit the proceeds to expanding its loan book, the source said, in contrast to many Western banks that have to raise fresh capital to meet tighter capital requirements.
The bank is finalizing a three-year strategy that would seek to defend its market share in lending to corporates while outgrowing its competitors in the expanding retail market.
“We want to grow faster than the market in retail,” the source said, highlighting VTB’s promotion of a new mass-market retail banking brand called Leto.
($1 = 31.2412 Russian roubles)
Reporting by Katya Golubkova and Douglas Busvine; Editing by Alex Smith and Elaine Hardcastle