VTB offering of $3.3 bn new shares fully taken up

29 Apr 2013

Russia's second-largest bank VTB had secured firm commitments for its entire offering of new shares worth $3.3 billion, Reuters reported quoting a source close to the bank yesterday. The development would  bolster its capital strength as it looked to push into retail lending.

The rights issue would bring in new sovereign wealth fund investors, including from Norway and Azerbaijan, as it diluted the Russian state's controlling stake as part of a broader drive for privatising state assets.

The source, speaking on condition of anonymity, told Reuters that the bank had been able to cover the entire amount of the offering with  legally-binding commitments.

The capital raising was intended to show that VTB had moved on after the hit it took from the takeover of Bank of Moscow  in 2011, which led to the discovery of a balance-sheet hole at the acquired bank that resulted in Russia's largest-ever financial bailout.

The bank last Wednesday posted steady 2012 earnings that bolstered its Tier 1 capital adequacy ratio, which according to experts revealed its capacity for absorbing losses, up 10.3 per cent from 9 per cent at the end of 2011.

The source said the challenges associated with Bank of Moscow were truly over, and the bank had turned the page.

We are delighted to announce the capital increase and are pleased with the transaction structure,'' Andrey Kostin, VTB chairman, said in a statement. ''Binding commitments to subscribe from major global investors have allowed us to secure our capital-raising targets.''

The state-run bank would sell 2.5 trillion new shares at 4.1 kopeks apiece, the bank said on 26 April.

VTB today said the government stake of 75.5-per cent in VTB would fall to 60.93 per cent following the placement. Buyers of the new shares would not be eligible for receiving 2012 dividends, the statement added.

VTB's shares erased an earlier loss of around 4 per cent, as they gained 2.7 per cent to 4.66 kopeks by 12:30 a.m. in Moscow. The bank's market value fell around 70 per cent since it raised $8 billion selling stock in an initial public offering in 2007.

According to some analysts, VTB was trading at the price level of a distressed asset, which was really cheap and it might be a good time to buy.

According to the statement, VTB Capital and Citigroup Inc had been named as joint global coordinators and joint bookrunners, while Bank of America Corp and JPMorgan Chase & Co were joint lead managers.