Russia's VTB to hold first London investor forum in three years

 Russia's VTB to hold first London investor forum in three years
VTB Capital will stage first London investor's forum since 2013.
By Jason Corcoran in Moscow March 29, 2016

VTB Capital, the Russian state-controlled investment bank, is hosting its first London investor forum in three years as relations with the West show signs of improving and as the country's capital markets rebound.

The bank cancelled investor conferences in London and New York since its parent lender was sanctioned in mid-2014 by the European Union over Russia's interference in the Ukraine conflict.

"We are back on and the timing is right," a VTB London source told bne IntelliNews: "I don't think there is as much as stigma surrounding Russian banks as before and clients are keen to get back to making money with us."

VTB Capital didn't immediately reply to e-mails seeking comment. A spokesperson for parent VTB declined to say whether chief executive Andrei Kostin or other leading executives would attend the forum, which bne IntelliNews sources say will likely happen in May like previous editions.

A link on VTB Capital's website indicated only that an investor conference will be taking place in London. Its last event in the city in 2013 attracted hundreds of investors and featured Alexei Ulyukayev, then deputy governor of the Central Bank of Russia (CBR) and now economy minister, former finance minister Alexei Kudrin, and London Stock Exchange CEO Xavier Rolet.

Shifting landscape

The timing could indeed be favourable, even though Russia is still sanctioned by the EU and US. Russian securities have come back in favour as Brent crude, used to price the country's main export blend, rose above $40 a barrel to a three-month high. The ruble, which is closely correlated to the price of oil, is the second-best performer in 2016 among the key 24 emerging-market currencies. And ruble-denominated bonds are becoming attractive for former diehard Russia detractors like US investor Jim Rogers, who is now a member of VTB Capital's advisory board.

Diplomatically too, a visit by US Secretary of State John Kerry to meet President Vladimir Putin on March 24 indicated that differences with Russia over Ukraine and Syria are narrowing. 

VTB's shares tumbled 18% on March 3, 2014 after Putin's troop invasion in Crimea led to the biggest sell-off in Russian stocks for more than five years.

The bank, along with Sberbank and a host of other state lenders and officials, was sanctioned months later. EU and US prohibitions have restricted Russian banks in ways that go beyond the initial design, which was to restrict their ability to borrow on international markets. Leading Western investors reined in all trading activities with VTB Capital and other Russian brokerages for fear of drawing regulatory scrutiny and fines.

VTB Capital, which has the biggest presence of any lender in the UK, slashed its personnel in London by more than 50% in the wake of the sanctions and collapse in commodity prices.

The bank is now sub-leasing two floors of its main office on Cornhill near the Bank of England, according a filing last year with UK Companies House.

In expanding overseas, VTB has tried to become a bigger player in emerging markets using London as a hub for investing into Africa and Asia. Since sanctions were imposed, the bank has transferred some personnel to its Hong Kong and Singapore offices as part of Putin's pivot towards Asia.

Kostin, who mulled removing the bank's listing from the London Stock Exchange in favour of China, previously warned that he doesn't expect US sanctions to be lifted until 2018. The EU prolonged its measures against Russia in January by six months but Greece has broken ranks with its Russian ambassador saying on March 27 it won't allow the sanctions to be automatically renewed.

Investment banks in Russia collected $208mn advising on mergers and securities sales last year, a 41% drop from the same period last year, according to Freeman & Co., a New York consulting firm. VTB Capital bucked the trend, posting a 11% increase in fees to $49mn.

Western banks operating in Russia have also been badly by the country's political isolation and the drop in oil prices. Royal Bank of Scotland, Barclays and US bank Jefferies have all shut up shop in Moscow over the past six months.

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