VTB requested capital – Newspaper Kommersant No. 17 (7462) of 01/31/2023

As early as this quarter, VTB may carry out a large-scale additional issue in favor of the state for several hundred billion rubles. It is comparable to the bailout the bank received in 2015 and will help support VTB’s capital position, which has been weakened by the severe crisis since the outbreak of hostilities in Ukraine.

On January 30, the VTB shareholders’ meeting approved an increase in the bank’s authorized capital through the placement of ordinary shares by private subscription for 301.96 billion rubles. Thus, the authorized capital of VTB will grow to 952.99 billion rubles. 30.196 trillion shares will be issued, they will be bought out by the Federal Property Management Agency and the Ministry of Finance for money and “other forms of property.”

The latter, in particular, include a full stake in the Crimean RNKB (an independent appraiser determined its value at 48.4 billion rubles), as well as requirements under an agreement on the placement of funds from the National Welfare Fund on a subordinated deposit in VTB (under the law on the budget for 2023 year we are talking about 100 billion rubles). According to Alfa-Bank analysts, the state’s voting share in VTB may increase as a result of the additional issue from 60.93% to 88.3%. VTB itself does not comment on the placement details.

On the same day, the meeting of shareholders approved a change in the bank’s charter, which provides for an increase in the maximum number of authorized shares from 14 trillion to 65 trillion. This means expanding the limit within which a bank can place an additional amount of shares without making changes to the charter, explains Ivan Semenkin, partner at EMPP law firm. According to him, one can often find a reserve in the amount of two or four capitals. Taking into account the planned placement of VTB, its reserve for future capitalization will amount to 20.8 trillion ordinary shares.

VTB found itself in a difficult situation after the outbreak of hostilities in Ukraine. It was among the first to fall under tough Western sanctions; the volume of the bank’s frozen assets reaches 0.6 trillion rubles.

At the end of 2022, its losses most likely exceeded 0.5 trillion rubles, Alfa-Bank analysts estimated (see. “Kommersant” dated January 10). Based on IFRS reporting for the first quarter of 2022, then the loss amounted to 408.3 billion rubles. The bank did not disclose the results for the full year, however, the head of VTB Andrey Kostin admitted that he would end the year with a loss.

Already in autumn 2022, ACRA rating analysts downgraded the risk profile of the bank from satisfactory to weak due to the deterioration in the quality of the loan portfolio “due to an increase in the volume of restructured loans on the bank’s balance sheet.” According to their calculations, the share of debt of companies in high-risk industries at that time still exceeded the value of VTB’s core capital. Analysts of ACRA and NKR also drew attention to the deterioration of VTB’s liquidity position and the decrease in capital stock.

Now the key question is at what price the shares will be placed.

There are two possible options for determining the cost, says Unicon partner Denis Taradov. In the first case, the market price of shares is taken (for example, the average monthly cost of one share over the past three months). However, due to the current situation in the financial markets, quotes may not correspond to the real value of the bank, the expert believes, therefore it is possible to attract an independent appraiser who will determine the value of shares based on future cash flows and predicted financial results with a certain discount factor.

According to Ekaterina Sinogeikina, General Director of Euroexpert, the evaluation process can take at least three weeks. According to her, such a report can be used for transactions within six months. However, Mr. Taradov emphasizes, the last word on the placement price is up to the VTB Supervisory Board. In his opinion, the additional capitalization of the bank is “a good signal that the shareholders continue to invest in the bank and are ready to maintain its financial stability.”

At the same time, among the shareholders there were those who voted against and abstained. Andrey Lavrov, a partner at GM Management, notes that they will have the right to pre-emptive acquisition of shares. It can be assumed, the expert explains, that those who voted against are those who want to keep their stake in the authorized capital of the bank.

Olga Sherunkova