March 15, 2013 / 12:50 PM / 5 years ago

UPDATE 2-Russia's VTB Bank plans $3.3 bln Moscow share sale

* Placement could raise 100 bln roubles - 1st Deputy PM

* Move would dilute state’s stake by up to 25 pct

* Talks with strategic buyers so far inconclusive

By Katya Golubkova and Alexei Anishchuk

MOSCOW/ST.PETERSBURG, Russia, March 15 (Reuters) - VTB , Russia’s No.2 bank, set out plans for a 100 billion rouble ($3.3 billion) share sale in Moscow, that could signal a desire to secure sources of funding if talks with sovereign wealth funds come to nothing.

VTB needs to raise its capital buffer to meet tighter regulatory requirements and give it freedom to make more loans to Russian consumers and businesses.

The long-planned share sale will take place via the Moscow Exchange, VTB Chief Executive Andrei Kostin said on Friday, as the state-owned bank heeds a government call to promote the local stock market.

The sale, which is also part of a privatisation drive by Russia, could reduce the state’s 75.5 percent holding in the bank by up to 25 percent.

Yet VTB faces a formidable task in completing the issue, which would be the largest ever secondary share sale in Moscow.

The bank finds its path to international markets blocked by a wariness towards Russia among some overseas investors, while talks with sovereign wealth funds (SWFs) - such as those based in the oil-rich Middle East - on a direct stake sale have so far proved inconclusive.

Three people with direct knowledge of the matter had told Reuters in February Qatar’s sovereign wealth fund had hired UBS to advise it on a possible $3 billion investment in VTB.

Kostin declined to comment on whether any SWFs, including Qatar’s, would support the share issue as anchor investors. But he said the bank was setting an example for other Russian and ex-Soviet Union based companies to follow.

“Bank VTB ... plans a wide-scale placement worth tens of billions of roubles. I think that our example will help other companies from Russia and (the Commonwealth of Independent States) to place here (in Moscow),” he told a conference.


VTB’s Tier 1 equity ratio stood at 9.3 percent in September - regarded by some analysts as relatively low given bigger state rival Sberbank’s is over 10 pct - constraining its capacity to write new loans and prompting the need for the share sale.

Igor Shuvalov, first deputy prime minister, told reporters in St Petersburg the sale could be done by autumn once all investors are on board.

“We will do (the additional share placement) when we have a full pocket of investors ... We think it would be around 100 billion roubles ($3.3 billion),” Shuvalov said. “We don’t want do to it in parts. In principle we can do it by autumn.”

Asked whether talks with Qatar had failed, Shuvalov said: “We work with all potential investors who show interest in the bank.”

Sources close to the matter said VTB had approached investment banks to arrange the offering, but had not awarded any mandates.

VTB shares were trading at 5.5 kopecks on Friday, bringing cumulative losses to 60 percent since it first floated on the stock market in 2007 and to 40 percent since a secondary offering two years ago.

The Russian state has compensated small-time investors who lost money on the flotation, but institutions have not received such favourable treatment and VTB is rated below Sberbank on many common measures.

The bank trades at a price-to-book value of around 0.9 times versus Sberbank at 1.4 times, according to brokerage Aton.

VTB also lags its rival on metrics such as return on equity where Sberbank achieved 23.8 percent in the third quarter while VTB delivered 16.2 percent, and in terms of their cost-to-income ratio, where Sberbank’s stood at 47.3 percent against VTB’s 49.4 percent.

VTB’s mistakes such as its value-destructive acquisition of Bank of Moscow in 2011 have also damaged it in some investors’ eyes.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below