Russia's VTB Capital eyes Asian cash

VTB Capital, re-branded and re-staffed, is on a mission to entice Asian investors into Russia's volatile capital markets. Last week, Herbert Moos, ex-CFO of Lehman Brothers' Asia-Pacific ex-Japan business and now chief executive of VTB Capital in London, was on a marketing trip in Hong Kong, attempting to leverage the bank's well-established, albeit small, Singapore office in order to attract cash to Russia's financial assets.

Moos was joined by a Deutsche Bank alumni, Alexey Yakovitsky, chief executive and managing director of CISC VTB Capital in Moscow. Their aim is to "facilitate Asian capital flows into Russia", and hope to do so by: helping Russian companies achieve dual stock exchange listings in Hong Kong and Moscow; intermediating between Asian portfolio investors and Russian companies already listed on Moscow's RTS and Micex exchanges; and in the first instance, encouraging regional conglomerates and family firms to invest as private equity partners in key Russian industrial sectors, such as infrastructure, energy and other commodities.

VTB Capital is the investment banking arm of the VTB Group, which is 77.5% owned by the Russian state and is the country's second biggest financial institution after Sberbank. The group is the legacy operation of Moscow Narodny Bank, which for decades acted as a financial bridge between the old Soviet Union and the global economy from its base in London's King William Street. VTB Capital was launched in April 2008 and promises to provide the full range of investment banking services including mergers and acquisitions, debt and equity capital markets, research and distribution, commodities, and asset management -- all with a Russian focus.

Already, it has seen action. The group's investment division arranged a $1.51 billion three-year medium-term secured finance facility for OJSC Kamskaya mining company last year, and VTB Capital acted as co-lead manager of Razgulay Group's $295.2 million equity follow-on offering, and co-arranger of Eurokommerz's $200 million refinancing securitisation deal, placing it with investors in Russia, Europe and the United States. In total, it has completed eight significant deals across a range of financing options.

"Within a short and very challenging timeframe, we have built up one of the strongest teams in the market, an achievement that is probably without precedent in the investment banking business," VTB Capital's global CEO Yuri Soloviev said last year. "With our hub in Moscow, and an active presence in both Europe and Asia, we can now provide the full spectrum of investment banking services."

But arguably, VTB Capital's major strength derives from its parent. VTB Group has the backing of Moscow, operates in 17 countries, had assets of more than $100 billion at the end of June 2008, and boasted net profits of $316 million and core income of $3.8 billion in the nine months to September 2008. It has a solid BIS capital ratio of 14%.