Summit News

Russia VTB wants to open privatization

MOSCOW (Reuters) - State-run VTB VTBR.MM, Russia's No.2 lender, aims to be a pioneer for the government's $50 billion privatization plan, however it has not yet picked potential buyers for the stake, VTB's CFO said on Wednesday.

Herbert Moos, CFO of VTB, speaks with journalists at the Reuters office in Moscow, September 15, 2010. REUTERS/Alexander Natruskin

Russia aims to raise $50 billion from assets sale in five years selling stakes in its crown jewels to plug budget holes in the biggest privatization since the 1990s.

“I, so far, have no particular circle of investors to recommend to the government,” Herbert Moos, who oversees the VTB stake sale, told the Reuters Russia Investment Summit.

“VTB is a mirror of Russia’s economy... A successful start of the privatization would be a landmark as it would show demand for Russian assets from Western investors and it would signal... that sophisticated investors are interested in taking part.”

The government owns an 85.5 percent stake and a Finance Ministry official has said Russia may sell 10 percent in VTB in 2010 and divest another 25 percent in 2011-2013.

Moos declined to comment on details of VTB’s privatization.

Russia may start the privatization this year with two transactions possibly happening in the infrastructure and financial sectors, Yuri Solovyov, the head of VTB Capital, VTB’s investment arm, said on Monday.

The country’s banking sector is on the recovery path as the economy improves after the first contraction in a decade, and bankers eye robust growth to continue next year. However margins are under pressure from low interest rates.

VTB, Russia’s second-biggest bank by assets, has reported better-than-expected results for the second quarter underpinning government hopes to sell a stake by the year-end.

The bank made a $2 billion loss in 2009 as provisions for bad loans jumped through the roof, but expects to earn as much as 50 billion roubles ($1.63 billion) this year, which Moos said is an “ambitious target.”

Non-performing loans (NPLs) -- which dragged down the sector during the crisis -- have been steadily improving but VTB sticks to a cautious approach, Moos said.

“We do not plan a significant release of provisions next year. It will be in low single digits,” the banker said.

VTB also targets a number of acquisitions in retail, corporate and investment banking businesses, however there are no huge transactions in its pipeline, Moos said.

“We are considering a number of potential deals. Our strategy targets a rise in efficiency rather than balance sheet growth,” the banker said.

Editing by Mike Nesbit