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VTB Group Drops the Most This Year on Minority Buyback Plan

VTB Group, Russia’s second-largest bank, declined the most in five weeks after analysts at Alfa Bank and Troika Dialog were critical of a plan to buy back shares from minority investors.

VTB’s shares sank 2 percent to 7.1 kopeks by the 6:45 p.m. close in Moscow, the biggest fall since Dec. 29.

The stock surged as much as 4.3 percent on Feb. 2 after Prime Minister Vladimir Putin told the state-controlled lender to consider buying back shares from investors who participated in the bank’s 2007 initial public offering. Putin yesterday said the lender is prepared to finance the buyback from its profit rather than tap state funds.

“The VTB buyback discussion is bad for sentiment,” Jason Hurwitz, senior analyst at Alfa Bank in Moscow, said by phone today. “Since the bank would presumably have to try to limit the offering to small investors, institutional investors would be treated unfairly, and could consider it as poor governance, particularly with VTB already facing a need for a capital injection.”

Analysts do not have “a single parameter” about how the buyback will be arranged, according to Herbert Moos, chief financial officer of VTB. “I would expect that all corporate governance procedures and laws to be followed,” Moos wrote in e-mailed answers to questions.

VTB Share Price

Russians, who lost billions of dollars in multiple bank collapses and stock market schemes in the 1990s, rushed to buy stock in what then-President Putin dubbed a “people’s IPO,” which raised $8 billion. VTB hasn’t traded above the offering price of 13.6 kopeks since August 2007 and tumbled as much as 86 percent to 1.9 kopeks in March 2009, according to data compiled by Bloomberg.

“We see this all as negative for VTB,” Andrew Keeley, banking analyst at Troika Dialog, wrote in an e-mailed report today. “Not only is it a palpable waste of shareholders’ money, it will also likely trim the bank’s already fragile Tier 1 ratio by something like 30 basis points.”

-- Editors: Ash Kumar, Alex Nicholson

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