VTB to list on Moscow Exchange

By bne IntelliNews March 18, 2013

bne -

Obeying a recent call by Russian President Vladimir Putin to carry out the country's privatization drive via the domestic bourse, banking giant VTB announced on March 15 plans to sell a large stake in Moscow.

The announcement - made by CEO Andrei Kostin at a banking forum - comes as the government almost quadruples the value of stakes in Russian state-owned companies that are to be sold to private investors this year. The official said that the float will happen this year, but refused more details.

"Bank VTB ... plans a wide-scale placement worth tens of billions of rubles on the Moscow Exchange," Kostin said, according to Bloomberg. "I think that our example will help other companies from Russia and CIS [Commonwealth of Independent States] place here [in Moscow].

Although Kostin offered few details, VTB has said previously that it intends to sell off a 10% stake in 2013, following similar placements in the recent years. The new money will be used to bolster the bank's capital as it struggles to fulfill reserve requirements.

Those previous sales have taken place overseas, but in late January Putin instructed Russia's financial market and state company chiefs to make sure such deals take place at home to help with the ongoing effort to develop the domestic market into a global centre.

"These privatisation deals must take place on our trading floors," the president insisted. "Carrying out privatisations here at home is a sign that we are serious about our plans to build a competitive financial market and that Russia has a market infrastructure it can trust and rely on. If we do not begin this now we will never do it but will simply keep talking endlessly about the need to do it."

At the same time however, the switch in strategy is also driven by the lack of investor appetite for Russian stocks in the current chilly global climate.

As has been the case, the banks - and VTB in particular - have been first out of the gate in the much mooted privatisation drive. Despite an ambitious plan announced by then-president Dmitry Medvedev at the 2011 St Petersburg Economic Forum, the actual volume of stocks making it to market - home or abroad - has been limited, due to both poor market conditions and the opposition to the plan from many state company chiefs and others.

However, Putin's push appears to have convinced several companies to start preparing to list domestically, while last week the Kremlin added another RUB800bn ($26.6bn) worth of names to privatization list, which stood at around RUB300bn at the time. Oil giant Rosneft, national land line operator Rostelecom and Sheremetyevo Airport are the most prominent additions planned for this year, the Ministry for Economic Development announced.

Minister of Finance Anton Siluanov announced that the sales will probably start in the second half of the year, when market conditions are expected to be faring better. The addition of Rosneft and Rostelecom in particular suggests the government is regaining its appetite for privatisation, according to Alexey Zabotkin at VTB Capital.

"In Rostelecom's case, the government has indicated it is ready for full-scale divestment of the asset (that remains subject to further approvals)," he writes. "The fact that the pipeline has almost quadrupled in value, coupled with the increased number of lots for sale, implies a certain challenge as far as execution is concerned, especially if the lion's share of assets is scheduled for [the second half of the year]."

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