VTB has been working in China since 2008, and has increased its headcount in its fully licensed Shanghai bank by around 40% over the past two years. The bank offers corporate services including advisory, lending, conversion and derivative operations, commodities trading, and settlement accounts for Chinese residents and non-residents. It also provides trade finance support, helping Chinese exporters in discounting letters of credit with payment deferrals, and is the largest market maker in RMB/RUB.
In partnership with the China Export & Credit Insurance Corporation (Sinosure) credit agency, VTB Group also supports trade and economic relations between China and Russia, and maintains leading positions in corporate investment while supporting joint projects of the One Belt One Road initiative. VTB is also the first Russian bank to become a Shanghai Gold Exchange (SGE) member, with the right to participate in international trading via the Shanghai free trade zone.
Mr. Soloviev explains more about the banking group’s growing capabilities:
Could you tell us a bit about VTB Group's expansion plans in Asia?
We are currently in the final stages of setting up a trading desk in Shanghai, where hiring is ongoing in order to strengthen VTB's position in mainland China. The desk will be trading base metals initially, with a pipeline of deals already lined up, and subsequently it can expand its work into other commodities, most notably agriculture and energy. For our commodities business, Asia is extremely important, as Russia’s economy is heavily dependent on commodity production – and Asia, with China in particular, is becoming more and more important as an export market.
What kind of interest do you see from local investors and businesses – how are they looking to get involved?
We have some demand from Asian investors for fixed income instruments, particularly those who are Singapore and Hong Kong-based. They mostly participate in primary placements of Eurobonds for Russian borrowers. Bonds from state-owned companies are popular, including those denominated in Rubles.
Investors from China, Singapore and the Middle East are quite active in Russian ECM deals. For example, we saw investor demand from China in the recent IPO of Sovcomflot, which is a state-owned Russian company that became the first Russian IPO since 2017. We also saw interest from the Middle East in the recent share capital increase by Aeroflot, which has become one of the largest ECM deals out of Russia over the last several years.
Investors from these regions - Hong Kong, China, Singapore, and the Middle East - are mostly focused on ‘new economy’ names and attractive primary equity placements, so we don’t see that many of them investing in the shares of oil, coal or metal companies; however, they’re actively looking at retail and digital stories as well as deep value investments in the gas sector.
Could you tell us about digital mortgages the bank announced a few months ago?
In collaboration with PIK, the largest developer in Russia, VTB became the first bank in Russia to offer digital mortgages. With the help of government support measures, including subsidized interest rates, this innovative digital service has helped to save the construction industry during these challenging times. Just two months after we first introduced the digital mortgages in April, this service attracted clients from different regions, including the United States, Israel, Turkey and several European countries, buying apartments with digital mortgage credit from VTB. Starting from August the digital mortgages also became available for 20 other large Russian developers – all VTB key partners.
How has COVID-19 affected business interactions?
The digitalization, which became our key modus operandi a while ago, has been given an additional boost. We had to move most of the business interactions into online formats and reduce both client traffic and the amount of personnel working in premises where they must use necessary means of protection. It was a bit odd in the beginning but we got used to it and even benefited from reduced business trips and transportation costs. Now we’re doing one-to-one meetings fully in a digital format. I think it’s going to stay this way and have a big impact on the way banking is done as moving away from physical meetings can be a difficult transition – particularly for complex negotiations where it might be hard to align stakeholders without the implied trust of real human connection.