Agency WPS
The Russian Business Monitor (Russia)
June 20, 2005, Monday
VNESHTORGBANK IS READY TO PLACE UP TO 25% OF ITS SHARES AT AN
EXCHANGE
Vneshtorgbank may become a public company already in 2006, and 10-25%
of its shares will belong to portfolio investors. Management of
Vneshtorgbank is preparing an IPO of the bank’s shares having
obtained support of a majority of members of the Board of Directors.
Almost 100% of Vneshtorgbank shares belong to the government. In
2004, assets of Vneshtorgbank group reached $20 billion, capital
amounted to $3 billion, credit portfolio amounted to $11 billion and
net profit amounted to $440 million. Besides Vneshtorgbank the group
of Vneshtorgbank also includes Russian commercial banks in
Switzerland and on Cyprus, Austrian Donau-Bank, East-West United Bank
in Luxembourg, German Ost-West Handelsbank, Armsberbank in Armenia,
United Bank of Georgia, Vneshtorgbank (Ukraine) and four subsidiaries
in Russia including Guta-bank bought in 2004 (its new brand is
Vneshtorgbank-24).
For the first time President of Vneshtorgbank, Andrei Kostin,
expressed the idea to place shares at the exchange in March 2005,
opening a subsidiary of the bank in Kyiv in the presence of Vladimir
Putin. At the same time it was reported that negotiations on sale of
a stake in the bank to strategic investors (Deutsche Bank, Mediobanca
and EBRD) were suspended.
Since then the bank did not waste time and was developing an IPO
program. Kostin reported about this. He said, “I would organize an
IPO of a certain stake already in 2006, in Russia and, for instance,
at the London or at the New York stock exchange.” According to
Kostin, “It is possible to start from a block bigger than 10% but
smaller than blocking interest anyway.” Consultants from Deutsche
Bank will advise Vneshtorgbank which block it needs to place and on
which market and then management of the bank will forward its
proposal to the government.
The President of Vneshtorgbank says, “The government may reject it
but we believe that sooner or later this issue will be raised because
capital adequacy is the limit that will hinder our development.”
Arkady Dvorkovich, director of the presidential expert department,
says that although Kostin’s plan has not been discussed by the Board
of Directors of Vneshtorgbank all directors are aware of it.
Dvorkovich calls the plan to conduct the IPO by the end of 2006,
realistic and takes it positively. Another member of the Board of
Vneshtorgbank, Deputy Economic Development and Trade Minister Andrei
Sharonov, called this step “strategically correct.”
Gennady Yezhov of the Finance Ministry says that Chair of the
Supervisory Board, Finance Minister, Alexei Kudrin, “knows about the
proposals of the President of Vneshtorgbank but abstains from
comments before the discussion by the Board.” A source acquainted
with the stance of the ministry explains that because of the IPO
Vneshtorgbank will have to disclose information about the clients and
deals of the bank related to the military industrial complex. Another
source in the ministry agrees that the IPO bears big risks. In any
case, Kostin discussed the IPO with Prime Minister Mikhail Fradkov
and obtained his support, confirmed two sources in the government.
One of the sources said that they discussed a deal with a 10% stake
to be placed in Russia on account of shares of a new issue.
The polled bankers cannot say how much Vneshtorgbank will cost by the
moment of the placing because before the IPO the bank should
consolidate all its new assets. In summer 2004, Vneshtorgbank
acquired an 86% stake in Guta-bank and in spring it bought a 25%
stake in Promstroibank St. Petersburg. Until the end of 2005,
Vneshtorgbank plans to increase its interest in Promstroibank to 75%
and to receive from the Central Bank stakes in Russian banks abroad
headed by London-based Moscow Narodny Bank. Relevant amendments to
the budget are being currently prepared. They will make provisions
for increase of capital of Vneshtorgbank by 42 billion roubles.
According to Director of the Federal Service of Financial Markets
Oleg Vyugin, placing of a 10% stake of Vneshtorgbank even on a
Russian exchange will enable the bank to earn not less than $1
billion. The goal of Kostin to increase capital of the bank to $5-10
billion to have “a bank of European size.” In 2003, Vneshtorgbank
with capital of $2.4 billion took 179th place on the list of the
largest banks according to The Banker magazine. The leader of the
list was Citigroup with capital of $66.9 billion. Capital of the
largest French bank, Credit Agricole, amounted to $55.4 billion
(second place), capital of the largest British bank, HSBC, amounted
to $54.9 billion (third place) and capital of the largest bank of
Germany, Deutsche Bank, amounted to $27.3 billion (12th place). All
these banks are public companies.
Experts say that the market will buy up shares of Vneshtorgbank
because besides Sberbank there are no other public banks in Russia.
Chair of the Board of Directors of Troika Dialog, Ruben Vardanyan, is
convinced that shares would become a blue chip. Vyugin agrees that
shares of Vneshtorgbank will enjoy success and will have liquidity
not less than liquidity of Sberbank shares.
Source: Vedomosti, June 17, 2005