Russians flock to invest in $8bn VTB flotation

Karen Attwood
Saturday 12 May 2007 00:24 BST

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The Russian bank VTB raised $8bn yesterday in the world's largest global public offering this year as local and international investors scrambled to benefit from the country's booming banking sector.

The state-owned bank, which is a successor of the Soviet Union's foreign trade bank, set a price at the top of its indicated range of 0.136 roubles a share or $10.56 for its global depositary receipts (GDRs), valuing VTB at more than $35bn.

The GDRs closed up 7.5 per cent at $11.35 on the London Stock Exchange, where up to 70 per cent of the stock will trade.

More than 131,000 retail investors were allocated shares worth up to $1.6bn after many queued at branches across Russia for application forms in what has become the most popular privatisation yet in the country. A media campaign with the message "Become a shareholder of the bank" prompted many ordinary Russians to invest.

The offer of up to 22.5 per cent of the capital of VTB, Russia's second biggest IPO after last year's $10.6bn sale by the state oil company Rosneft, was seven times oversubscribed.

Andrei Kostin, the president and chairman of the management board of VTB, said the strength of demand reflects "investor appetite for the high-quality exposure to the fast-growing Russian banking market that VTB offers".

Just two years ago, the former central banker Viktor Gerashchenko described VTB, which owns about 10 per cent of Russia's banking assets, as a "sinking titanic", and it has received billions of dollars in state support. Via the IPO, VTB is now seeking to establish its position as an international bank.

The Russian banking sector has been flourishing on the back of strong consumer spending as the economy grows 6 per cent a year. According to Deutsche Bank, which helped to manage the VTB sale, Russian companies and consumers borrowed 47 per cent more money from banks in 2006 than the year before, and growth of at least 30 per cent is expected through to 2010.

The former Soviet leader Mikhail Gorbachev created Vneshtorgbank, now VTB, from Gosbank in 1990 as part of a revamp of the Communist financial system. Russia's central bank was also created out of Gosbank.

Unconditional trading in London is set to start on Thursday.

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