VTB Capital’s foreign expansion is paying off as Western sanctions over Russia’s incursion in Ukraine cause a slump in bond sales from domestic issuers.
While the number of foreign-currency deals VTB says it helped organize so far this year fell to 14 from 19 in the first half of 2013, that’s a smaller drop than for Sberbank CIB, which saw the amount slide to five from more than 20, according to data compiled by Bloomberg.
Borrowers from Asia, Africa and Latin America are selling record amounts of bonds abroad even as Russia has been largely frozen out of international debt capital markets since its March incursion in Ukraine. The investment-banking unit of Moscow-based VTB Group was among lenders that organized sales for Logan Property Holdings Co. and Beijing Capital (Hong Kong) Ltd. in China in the past month. It also co-managed Cyprus’s largest sale of sovereign bonds since 2010 this week.
“We are happy that it all came at once, and the time is right as Russia is not selling,” Andrey Solovyev, the global head of debt capital markets at VTB Capital, said by phone from Moscow June 17. “It is also important to show that even with the current negative news flow, a Russian bank can manage to do something outside its home market. We are trying to avoid putting all our eggs in one basket.”
Russian issuers -- among the biggest borrowers in emerging markets last year -- have cut offerings in dollars and European currencies by 74 percent to $7 billion so far this year compared with the same period in 2013. Sberbank is meeting investors today to offer a euro-denominated bond and Gazprombank plans meetings next week, according people familiar with the plans, who asked not be identified because information is private.
Borrowers elsewhere took advantage of falling borrowing costs after the average yield on the Bloomberg Dollar Emerging Market Corporate Bond Index dropped more than 100 basis points in the past nine months to 4.7 percent.
VTB Capital, the investment arm of Russia’s second-largest lender, was also mandated by Mediobanca SpA, Italy’s biggest publicly traded investment bank, and SPP Distribucia, a Slovak natural gas distribution company. Sberbank CIB also helped manage the seven-year bond deal for SPP on June 13. A spokeswoman for Sberbank CIB in Moscow declined to comment.
Sberbank, Russia’s largest lender, bought Denizbank AS in Turkey and Oesterreichische Volksbanken AG’s eastern European business in 2012.
“VTB and Sberbank are becoming more globally active,” Sergey Dergachev, a senior portfolio manager who helps oversee about $10 billion in emerging-market debt at Union Investment Privatfonds GmbH in Frankfurt, said by e-mail yesterday. “However, Sberbank due to its acquisition of Volksbanken will become more of a key player in central and eastern Europe whereas VTB has a more global footprint, and I would expect also more activity in China.”
Solovyev said he expects more China deals this year after hiring bankers locally in 2013, including Xin Lin, the former head of global finance for Nomura International. The company is also seeking expansion in eastern Europe and Africa following sales in Serbia, Angola and Mozambique over the past two years.
VTB Group, Russia’s state-controlled lender, began building its investment bank in 2008 with Chief Executive Officer Andrey Kostin, a former diplomat, pledging to spend $500 million on the division. It has offices in London, Hong Kong and Dubai.
“We are trying to do more in China,” said Solovyev. “This is the right market as it’s not susceptible to the news environment around Russia, and as Russia and China are getting closer.”