Qatar turns to Orcel’s UBS for VTB bank deal

David Hellier
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RUSSIA’S second largest bank VTB yesterday announced that a group of sovereign wealth funds has backed a $3.3bn (£2.13bn) fundraising that will take the government’s stake in the lender down from 75 per cent to 60 per cent or less.

In a surprise to investment bankers, VTB used Citi and its own investment banking department to advise on the deal rather than UBS, which had been expected to win the mandate. Andrea Orcel, head of the UBS investment bank, has previously enjoyed a close relationship with VTB and most bankers expected him to get a role.

City A.M. has learned that UBS was involved in the deal though, acting on behalf of Qatar’s sovereign wealth fund, which has taken a stake in VTB.

The fund-raising had been billed as a rights issue, where the company goes to the market offering existing shareholders new shares, usually at a discount.

But bankers said the deal that was arrived at is structured more like a private placement, in which a group of sovereign wealth funds and oligarchs agreed to take shares not being taken up by the government.

VTB offered stock at a third of the price at which it floated six years ago, reflecting the impact of the global crash, a troubled acquisition and a costly push into investment banking.

The deal was covered before subscriptions were due to open, VTB said yesterday, with backing from state funds from the energy-rich states of Norway, Qatar and Azerbaijan, described by chief executive Andrei Kostin as “committed, long-term investors”.

VTB is one of three Russian banks, along with Sberbank and Rennaissance Capital, that is aiming to expand outside its home base.

The share issue will bolster VTB’s Tier 1 capital adequacy ratio – a key measure of a bank’s ability to absorb losses – to 11.9 per cent from 10.3 per cent as of 31 December, higher than market leader Sberbank .