VTB Bank takes over Moscow

The state extended its control over the banking sector with the addition of former bank Yury Luzhkov. VTB Bank takes over Moscow Photo: Fotoimedia And the second largest Russian bank, state-owned VTB Bank further improved its position in April to take over the Bank of Moscow, the country's fifth-largest commercial bank. Some analysts fear that the agreement increases the State's share of Russia's banking sector, but others say it will reduce corruption. The Bank of Moscow was established in mid 1990 as the Bank of pocket for the Moscow city government. However, after the expulsion of Moscow Mayor Yuri Luzhkov, last September, the bank's future was uncertain. In November, the Kremlin made a movement. Deputy Prime Minister and Finance Minister Alexei Kudrin announced that VTB was interested in buying the bank. VTB-24 retail operations and VTB Bank is a leading provider of consumer credit and mortgages, and the addition of branches of Bank of Moscow over 500 would VTB in its own league, just behind her sister Sberbank, which has most of Russia's retail banking business. But the agreement was not passed without problems. At first, the Bank of Moscow Management, said they were willing to sell their 20.3 percent of VTB, but then in March filed a lawsuit to block the purchase of VTB a small share of U.S. Goldman Sachs and announced a rival offer from the Moscow game. Bank of Moscow, President Andrew Borodin was also implicated in a corruption investigation of 440 million U.S. dollars in loans made to sketch a property company controlled by Luzhkov's wife, Yelena Baturina. When summoned for questioning in April, Borodin fled to London and checked into a hospital for treatment. A week later, agreed to sell its stake in what analysts report was below market rates. "It's clear what really happened," said a banking source. "The old management were not happy with being expelled from the bank and were extended for a high price for their participation at a price of VTB was not prepared to pay. So the management tried to play hard, but more than what could chew. " The VTB takeover significantly increases the state share of the banking sector and closely follows the inauguration Sberbank of Russia's leading investment bank Troika Dialog in February. Both banks have become noticeably more aggressive in building its business after the 2008 crisis. Several foreign banks have withdrawn from Russia due to increasing competition, the last was HSBC, which announced April 26 it was abandoning a two-year journey to build a sale at retail in Russia. "The recession was more difficult for foreign banks that have operated only in the Russian market for a few years that foreign banks were established in late 2000 during the period of rapid economic growth. Banks were the most recently arrived affected by the recession, if not to increase market share enough to overcome the crisis, "said Seija Lainela, an analyst at Bank of Finland. The Kremlin said that increased participation in the banking sector is temporary and can not do anything to stop it. "Technically, this agreement has increased state involvement in the banking sector, but the plan is to sell the State's actions in [VTB and Sberbank] and increase competition in the sector. The other side of the coin is that the state Sberbank may not restrict the market place, how can we say to the minority shareholders, there is no limit to the bank's ability to compete? "Arkady Dvorkovich, economic adviser to President Dmitry Medvedev said in an interview. And the state has been busy selling shares in both banks. VTB Group raised eight billion U.S. dollars with an initial public offering in May 2007 from the sale of a 22.5 per cent and the bank sold another 10 percent in February, raising another $ 3 billion. The state has said it wants to sell another 10 percent as soon as possible. Similarly, the government owns 60.25 percent of Sberbank, and shortly after the purchase of Troika Dialog, Russia's National Banking Council signed a decision to sell another 7.58 percent to the public, probably later this year . Investors are happy to see both banks grow in size and power. "On one hand, the state is making it more difficult for private banks to operate, but on the other, we're starting to see the beginning of much-needed consolidation in the banking sector. Take charge of banks clearly do not run in commercial lines, but for the benefit of the owners is all said and done a good thing, "said Roland Nash, chief information officer of Capital Verno.