- Russia’s No. 2 bank to expand in Zug, Singapore and Hong Kong
- Lender plans to increase commodities staff and revenue by 50%
The investment-banking unit of Russia’s second-biggest lender is kicking off a commodities hiring spree led by a former Goldman Sachs Group Inc. executive to boost staff and revenue in the operations about 50 percent.
VTB Capital is hiring traders for Europe and Asia. The bank, now with 35 people in raw materials, plans the expansion for next year to bolster physical trading of metals and energy, with potential for future growth, according to Atanas Djumaliev, head of global commodities, who joined last year from Goldman.
"We have big ambitions," Moscow-based Djumaliev said in an interview last week. "We are entering the market at the bottom of the cycle with a clean balance sheet at a time when established players are scaling back, good talent is available and it’s possible to build the team from scratch."
VTB Capital is among the few lenders expanding in commodities as others from Morgan Stanley to Deutsche Bank AG exit or scale back. The top 12 banks’ commodity revenues during the first half sank to the lowest since at least 2005, according to analytics firm Coalition Development Ltd.
The Russian bank is expanding in the Swiss town of Zug, head office for the operations and location for a third of its staff, Singapore and Hong Kong. It’s focusing on China, India and the Middle East for precious metals. While the bank currently sees itself entering the agriculture market mainly as a financier, trading is on the cards in the long run.
The 50 percent goal "is actually a conservative target and we can overachieve it," Djumaliev said. He didn’t give the firm’s current revenues from natural resources.
The expansion comes just two years after sanctions imposed against Russia over the conflict in Ukraine forced VTB Group to cut back some units. It reduced staff by more than half outside former Soviet states between the end of 2013 and the second quarter of last year, a company report shows.
In November 2013, Atanas Bostandjiev, then head of VTB Capital’s overseas operations, proposed shutting the bank’s commodities, equity derivatives and structured credit divisions. He left the company the following year.
VTB Capital began trading physical commodities last year with Djumaliev arriving from Goldman, where he headed fixed income, currency and commodities for Russia and the former Soviet states known as CIS. VTB now handles oil, precious and base metals, and coal.
"It’s very hard to have a strong derivatives business without actually being willing to extend credit or handle the physical flows," Djumaliev said.
VTB Capital has raised commodity revenue -- made up of commodity financing, physical trading and derivatives -- by about 150 percent this year, he said. The trading balance sheet exceeds $1 billion, according to the company.
"Our strategic focus as a Russian institution, while looking to have international presence, would be to stay close to the Russian flow of commodities, and work on transactions that would ideally have a Russian angle," Djumaliev said. "This also explains our focus on Asia because it’s the main growth area for Russian exports, especially from the commodities perspective."