Agency WPS
The Russian Business Monitor (Russia)
March 23, 2005, Wednesday
VNESHTORGBANK WILL NOT BE SOLD
It looks that President of Vneshtorgbank Andrei Kostin has persuaded
the Kremlin to give up sale of the bank’s shares to foreign
investors. Kostin announced that this issue was not considered in
presence of President Vladimir Putin. According to Kostin, IPO is the
best way to privatize the bank.
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. Almost 100% of Vneshtorgbank
shares belong to the government. The group of Vneshtorgbank includes
Russian Commercial Bank in Switzerland and bank with the same name in
Cyprus, Austrian Donaubank, East-West United Bank in Luxembourg,
Armsberbank in Armenia, United Bank of Georgia and four subsidiary
banks in Russia including Guta-bank acquired in 2004.
It was Mikhail Kasyanov who proposed privatization of Vneshtorgbank
after he achieved reassignment of almost 100% of Vneshtorgbank shares
from the Central Bank to the government in summer 2002. At first, it
was planned to sell 10% blocks of Vneshtorgbank shares to IFC and
EBRD. In summer 2003, IFC approved issue of a $200-million credit to
Vneshtorgbank that could be converted into shares of the bank. In
December 2003, consultants hired by Vneshtorgbank (J. P. Morgan and
Ernst & Young) estimated the bank’s business at $3 billion. However,
the EBRD was ready to buy 10% of Vneshtorgbank shares for $150
million or 50% less than expected by the government.
After Kasyanov’s dismissal in February 2004, negotiations were
stalled. Vneshtorgbank did not take the money offered by IFC. Kostin
mentioned new candidates for Vneshtorgbank shares, Italian Mediobanca
and German Deutsche Bank. In any case, not a single party ever
reported about details of negotiations. Recently President of the
Moscow-based subsidiary of Deutsche Bank Alexis Rodzyanko announced
that negotiations on sale of Vneshtorgbank shares to the German bank
were not conducted.
Opening a subsidiary bank in Ukraine on March 19, Kostin announced in
presence of Russian President Vladimir Putin and Ukrainian President
Victor Yushchenko that neither a large nor a small block of the
bank’s shares would be sold to foreign investors. The President of
Vneshtorgbank explained, “Such mechanisms for creation of public
companies like IPO are more efficient.”
Just a few days earlier, presidential aide Igor Shuvalov said that
Vneshtorgbank should be privatized slowly and large international
financial institutions should become buyers of its shares. Now
Shuvalov calls negotiations with the EBRD on sale of a stake in
Vneshtorgbank a mistake. A representative of the EBRD only said that
the fate of the deal was up to the government of Russia.
The Supervisory Board of Vneshtorgbank is headed by Finance Minister
Alexei Kudrin. It was impossible to obtain his comments. Arkady
Dvorkovich, member of the Supervisory Board of Vneshtorgbank and
director of the presidential expert department, believes that
Kostin’s proposal regarding IPO is worth discussion. A source close
to the Kremlin presumes that IPO will make Vneshtorgbank more
transparent and will lead to appearance of independent directors on
the Supervisory Board and shares of the bank may become a blue chip.
Alexei Akinshin, Deputy CEO of Vneshtorgbank, reports that the bank
is going to hold consultations with the Finance Ministry first and to
propose IPO to the Supervisory Board after publication of its annual
report. Akinshin adds, “We have big plans for 2005, connected with
development of investment banking. We are going to organize IPOs for
the clients and can organize our own IPO.” According to Akinshin,
preparation of the deal after its approval by the Supervisory Board
will take approximately six months.
Akinshin also says, “Theoretically the IPO may take place already by
the end of 2005.” However, he points at the circumstance that may
hinder the deal. This is a proposal of the National Banking Council
to reassign shares of Russian banks abroad (Moscow Narodny Bank and
Eurobank) to Vneshtorgbank. Akinshin explains, “It would be logical
for potential shareholders to submit their bids after the final
formation of the structure of Vneshtorgbank.”
Over the last few years, business of Vneshtorgbank has been growing
rapidly. The bank actively borrows money in the West and has issued
Eurobonds worth $3 billion. On the basis of Guta-bank acquired in
summer 2004, Vneshtorgbank is going to develop retail business. The
bank is also actively developing markets of CIS countries. Analyst of
Standard & Poor’s Ekaterina Trofimova comments, “Vneshtorgbank is
growing at a very serious pace and prospects for growth of its market
share are very high.”
General Director of RusRating Richard Heinsworth says that bringing
shares of Vneshtorgbank to the exchange the state will improve
investment climate in the Russian banking sector. In any case, adds
Trofimova, in the near future the government will retain control over
Vneshtorgbank anyway, which foreign investors will hardly like.
Source: Vedomosti, March 21, 2005; Gazeta, March 21, 2005