Russia successfully sells stakes worth $3.3 billion in VTB Bank

Russian Prime Minister Vladimir Putin with VTB Bank's Andrei Kostin

Russian Prime Minister Vladimir Putin with VTB Bank’s Andrei Kostin

The Russian government has successfully sold a 10% stake in the country’s second largest bank and raised 96 billion Rubles ($3.3 billion, £2.1 billion) in the transaction.

The VTB Bank stake sale marks the beginning of a huge government drive to privatise the public enterprises aimed at raising more than a trillion Rubles over three years.

Commending the successful stake sale, Prime Minister Vladimir Putin said it showed “proof of the trust in the Russian financial system”.

In a separate development, the biggest Russian bank Sberbank said that it may divest 7% of its stake by the end of this year.

Sberbank’s chief executive German Gref said: “We are discussing it actively with the central bank. We will try to place (the stake) in the second half of the year”.

The Russian government plans to fund its budget deficit and attract investors with the money raised from stake sales of public sector units.

“This is one more step forwards on the way to integration with big global business which will help the creation of a global finance centre in Moscow”, the government said in a statement.

The shares of VTB have taken a beating since the government announced its plan to sell 10% stake since the end of January.

Andrei Kostin – the head of VTB, however said that the issue was oversubscribed by two times. Talking of the investor interest in the issue, the bank said: “many major US, European, Middle Eastern and Asian companies for the first time invested significant money in the Russian economy”.

Citing unfavourable market conditions, three smaller Russian companies cancelled their Initial Public Offering (IPO) plans.

Talking about investor response in the VTB issue, Marina Shestakova of Wermuth Asset Management said “investors are interested in such names despite the fairly negative market conditions” adding “Plus the valuation was fair”.

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