MOSCOW (Reuters) - Russia's second-largest bank VTB (VTBR.MM) was set to push ahead with a 100 billion rouble $3.2 billion (2 billion pounds) share sale in the coming weeks to bolster its capital, even as its shares languish after a series of strategic missteps.
VTB's supervisory board was expected on Friday to approve terms for the long-planned issue, said one source close to the board. A second source close to the issue said the timing of the sale was yet to be confirmed but it could happen in mid-May.
The sale could be a major test for Chief Executive Andrei Kostin, one of Russia's most senior bankers and who has close ties to President Vladimir Putin, after investors who signed up for past share offerings by the state-controlled bank have suffered heavy losses.
Shares in VTB have shed more than half their value since the bank floated on the stock market in 2007 and a share issue in 2011 was promptly followed by the takeover of Bank of Moscow, which triggered Russia's largest-ever bank bailout.
The issue of new shares would seek to bolster VTB's capital strength and enable it to expand its lending to Russian business, but to succeed Kostin may need to bag large "anchor" investors or win backing from government-related entities.
"There's a good chance the government buys shares ... because selling 100 billion roubles of VTB is not going to be easy," said Jason Hurwitz, analyst at Alfa Bank. VTB declined to comment. Yet buying shares would be a surprise move by the government, which has no plans to participate in the offer, a senior VTB executive said last year.
It would also run counter to government aims to reduce its stake in VTB, as part of a drive to reduce state holdings in businesses ranging from diamond miner Altos to oil major Rosneft (ROSN.MM).
A source close to the Russian Direct Investment Fund, a $10 billion state fund created to team up with foreign investors on major private equity-style deals, said it was highly unlikely to back a VTB offering.
The decision to go ahead with the capital increase comes despite a recent improvement in VTB's Tier 1 capital adequacy ratio, now at 10.3 percent and close to its top peer Sberbank (SBER.MM).
"This speaks volumes about VTB's need for capital," said Ivan Kachkovski, a banking analyst at Moscow brokerage Aton.
Some analysts have said VTB, the Russian bank with the greatest exposure to Cyprus, may be downplaying the impact of a recent European Union bailout that imposed losses on depositors at the Mediterranean island's two biggest banks.
ANCHORS SOUGHT
Kachkovski said he had little doubt that the VTB deal would get done with anchor investors accounting for most, if not all, of the uptake and Russian state entities likely to be significant investors.
However, one source said that while VTB was still in talks with large foreign sovereign wealth funds, he was not aware of any positive outcome.
The bank has been talking to these funds about the sale since early in the year, sources with knowledge of the discussions said at the time.
Qatar's sovereign wealth fund had hired financial advisers to investigate buying the entire VTB stake, but nothing has been announced. Earlier in April, Kostin said the Qataris were "tough negotiators" but declined to elaborate.
CFO Herbert Moos this week declined to say whether VTB was still talking to Qatar. U.S. private equity firm TPG, which bought $100 million of VTB shares in 2011 alongside China's investment fund CIC, is not looking to increase its stake in VTB, a source recently said.
One analyst calculated that in order for the government to not dilute its stake below 60 percent an offer would need to be at least $2.39 per global depositary receipt, although it could be higher. VTB's GDRs (VTBRq.L) trade at around $2.80.
A sale at that level would values VTB stock at an estimated price-to-book ratio of 0.6 times, according to Alfa Bank, a steep discount to the multiple of 1.1 times enjoyed by its larger and more profitable state rival Sberbank (SBER.MM).
The share issue will be the latest hurdle for Kostin, but observers say the well-connected banker, who has run VTB for more than a decade, has enough friends in high places to ensure his job is secure, citing previous difficulties he had survived.
"After Bank of Moscow, people said Kostin's head would roll," said one analyst who declined to be named.
"He won't last forever, but whoever is pulling the strings may not be Kostin, and whoever it is, trusts him and is likely to continue trusting him. He'll probably keep his job because changing horses is risky for everyone."
yahoo.com
VTB's supervisory board was expected on Friday to approve terms for the long-planned issue, said one source close to the board. A second source close to the issue said the timing of the sale was yet to be confirmed but it could happen in mid-May.
The sale could be a major test for Chief Executive Andrei Kostin, one of Russia's most senior bankers and who has close ties to President Vladimir Putin, after investors who signed up for past share offerings by the state-controlled bank have suffered heavy losses.
Shares in VTB have shed more than half their value since the bank floated on the stock market in 2007 and a share issue in 2011 was promptly followed by the takeover of Bank of Moscow, which triggered Russia's largest-ever bank bailout.
The issue of new shares would seek to bolster VTB's capital strength and enable it to expand its lending to Russian business, but to succeed Kostin may need to bag large "anchor" investors or win backing from government-related entities.
"There's a good chance the government buys shares ... because selling 100 billion roubles of VTB is not going to be easy," said Jason Hurwitz, analyst at Alfa Bank. VTB declined to comment. Yet buying shares would be a surprise move by the government, which has no plans to participate in the offer, a senior VTB executive said last year.
It would also run counter to government aims to reduce its stake in VTB, as part of a drive to reduce state holdings in businesses ranging from diamond miner Altos to oil major Rosneft (ROSN.MM).
A source close to the Russian Direct Investment Fund, a $10 billion state fund created to team up with foreign investors on major private equity-style deals, said it was highly unlikely to back a VTB offering.
The decision to go ahead with the capital increase comes despite a recent improvement in VTB's Tier 1 capital adequacy ratio, now at 10.3 percent and close to its top peer Sberbank (SBER.MM).
"This speaks volumes about VTB's need for capital," said Ivan Kachkovski, a banking analyst at Moscow brokerage Aton.
Some analysts have said VTB, the Russian bank with the greatest exposure to Cyprus, may be downplaying the impact of a recent European Union bailout that imposed losses on depositors at the Mediterranean island's two biggest banks.
ANCHORS SOUGHT
Kachkovski said he had little doubt that the VTB deal would get done with anchor investors accounting for most, if not all, of the uptake and Russian state entities likely to be significant investors.
However, one source said that while VTB was still in talks with large foreign sovereign wealth funds, he was not aware of any positive outcome.
The bank has been talking to these funds about the sale since early in the year, sources with knowledge of the discussions said at the time.
Qatar's sovereign wealth fund had hired financial advisers to investigate buying the entire VTB stake, but nothing has been announced. Earlier in April, Kostin said the Qataris were "tough negotiators" but declined to elaborate.
CFO Herbert Moos this week declined to say whether VTB was still talking to Qatar. U.S. private equity firm TPG, which bought $100 million of VTB shares in 2011 alongside China's investment fund CIC, is not looking to increase its stake in VTB, a source recently said.
One analyst calculated that in order for the government to not dilute its stake below 60 percent an offer would need to be at least $2.39 per global depositary receipt, although it could be higher. VTB's GDRs (VTBRq.L) trade at around $2.80.
A sale at that level would values VTB stock at an estimated price-to-book ratio of 0.6 times, according to Alfa Bank, a steep discount to the multiple of 1.1 times enjoyed by its larger and more profitable state rival Sberbank (SBER.MM).
The share issue will be the latest hurdle for Kostin, but observers say the well-connected banker, who has run VTB for more than a decade, has enough friends in high places to ensure his job is secure, citing previous difficulties he had survived.
"After Bank of Moscow, people said Kostin's head would roll," said one analyst who declined to be named.
"He won't last forever, but whoever is pulling the strings may not be Kostin, and whoever it is, trusts him and is likely to continue trusting him. He'll probably keep his job because changing horses is risky for everyone."
yahoo.com
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