MOSCOW, Oct 11 (Reuters) - The investment-banking arm of VTB , Russia’s second-biggest bank, is looking to expand its business in Europe and gain market share at home as international banks retrench, says VTB Capital’s chief executive, Alexei Yakovitsky.
Western sanctions imposed against Russia over its role in the Ukraine crisis has deterred foreigners from doing business with Russian banks, including state-run VTB, which is limited in raising funds abroad and whose executives with Western passports can’t help sanctions-affected entities.
But Russia’s successful Eurobond placement this year and the launch of a privatisation drive, helped by VTB Capital, has given it cause to believe it can manage to retain its presence and even expand in certain areas, including abroad, especially where some European rivals have left.
Last year VTB Capital advised on a 335 million-euro ($375 million) acquisition by Turkey’s Yildirim Group of Portuguese ports operator Tertir and was also co-arranger of a 1 billion-euro Eurobond deal for Cyprus earlier this year.
“We now do (Russian-related and other) business that traditionally has been handled by European banks. A selective approach to Europe is absolutely right for us. This is a really important source of growth for us in the future,” Yakovitsky told Reuters in an interview.
VTB Capital, which has its European headquarters in Vienna and currently generates up to a quarter of its revenues from operations outside Russia, aims to take advantage of the reduced competition, as foreign banks struggling to make profits in the low interest rate environment look to withdraw from some markets.
Apart from deals in Europe, the bank is now also targeting cross-border transactions such as mergers and acquisitions involving Asian investors.
“VTB Capital is doing well on that front as the risk appetite among Western banks has fallen to zero and their headcount has dropped drastically.
“This process had begun during the 2007-2009 (financial) crisis and, in fact, has continued in recent years,” Yakovitsky said.
He also said that though the market for mergers and acquisitions has shrunk in the last few years, there was still some business to do in Russia, where the government has backed import substitution, driving consolidation in the manufacturing and agriculture sectors.
“This increases demand for our services,” he said.
While many foreign banks are now gone or have reduced their presence, foreign investors, primarily from China, are still interested in the Russian M&A market, he said.
He also sees opportunities for VTB Capital to get involved in Chinese-related transactions in Europe.
“We have several China-Europe cross-border deals in the pipeline”, Yakovitsky said.
VTB Capital is also counting on commodity markets as a growth driver. The investment bank is planning to provide loans to commodity market players, taking their products such as grain or crude oil as collateral.
“Geographically-speaking, we have penetrated all the regions and countries that we are interested in. Now we are reinforcing the team selectively,” Yakovitsky said of moves to recruit more staff.
“It is the right time for that on the market. Many good foreign experts are ready to go to Russia where the investment business sees activity and deals,” he said. ($1 = 0.8928 euros) (Reporting by Kira Zavyalova and Katya Golubkova; Writing by Andrey Ostroukh; Editing by Alexander Winning, Greg Mahlich)
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