Interview: VTB's Riccardo Orcel

Interview: VTB's Riccardo Orcel

Published: May 23, 2013

Russian lender completes capitalisation despite banks telling the team their deal was “impossible”.

Russia’s VTB Bank has completed its RUB102.5bn (US$3.2bn) capital increase, attracting new shareholders including sovereign funds from Azerbaijan, Norway and Qatar.

The bank issued 2.5trn new shares, of which Norges Bank Investment Management, Qatar Holding, the State Oil Fund of Azerbaijan and China Construction Bank took about 55%.

The deal is a significant boost for the bank’s balance sheet – the capital raised will increase its Tier 1 capital ratio and total capital ratio to about 11.9% and 16.3%, respectively.

It’s also a notable accomplishment for the management team. Russian authorities are eager to promote Moscow as a global financial hub, and the fact that this deal was conducted on its domestic market in the local currency is arguably a big step.

Indeed, speaking with EMEA Finance in London as news broke of the deal, VTB Group deputy CEO Riccardo Orcel said some market players had doubted the deal’s viability.

“A year ago, when we started to meet banks, all the banks told us ‘this deal, and the way you want to do it, is impossible’,” he said. “The reason is that a year ago we said we have an indication of preference from the very top that they would like to promote Russian markets and we want to do a deal that is entirely domestic, offering only stock in roubles – domestic shares, no [global depositary receipts]. We did it.”

That’s a vote of confidence not only in VTB, Orcel hopes, but in Russia’s story as an investment destination.

“It was part of our pitch that we represented the door to Russia,” he said. “We have a history with existing shareholders of deals that we did with them, co-investing or arranging deals that have been extremely successful and made a lot of money, to prove that we take seriously the fact that we have a shareholder and that they will become our first call for future business.”

The government took no new shares in the latest deal, meaning its own stake in VTB falls to 60.93% from 75.5%. Orcel expects a further share sale by the government “eventually”, but adds that the state has plenty of other privatisation proposals to work through first.

“They have other assets to sell before they come back to us,” he said. “If they want to sell something we’ll be ready. I doubt very much that anything will happen [for] two or three years.”