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26 September 2012
REUTERS SUMMIT-Russian bank VTB eyes top emerging markets spot


Katya Golubkova, Maya Dyakina (Reuters)

"We are trying to build the number-one emerging market investment bank," said Orcel, who joined state-controlled VTB last year after 15 years with Bank of AmericaMerrill Lynch.

VTB, already Russia's second-biggest bank by assets, plans to expand its investment banking unit to became the leader in emerging markets and fill the gap left by its global peers as they seek to slash costs, its deputy chief executive said on Wednesday.

Its investment banking unit VTB Capital currently holds the No. 6 spot in debt capital markets across the emerging markets with a 3.5 percent market share in terms of deals volume, but is not in the top 10 for equity capital markets, according to Thomson Reuters data.

But the bank is building up its franchise in emerging markets to take advantage of rebounding markets, Riccardo Orcel, told the Reuters Russia Investment Summit.

"We are trying to build the number-one emerging market investment bank," said Orcel, who joined state-controlled VTB last year after 15 years with Bank of AmericaMerrill Lynch.

Global banks have been slashing costs in the financial centres of London and New York as the euro zone crisis has meant companies are less willing to use investment banking services for M&A advice and capital raisings.

JPMorgan Chase & Co's almost $6 billion of derivative losses and the Libor interest rate scandal in the last few months have only added to the agony.

"My view is that global banks will now have to go on cutting ... and say, 'OK, I can not be number-one in the U.S., Europe and Asia," said Orcel. "Infrastructure costs are huge and in bad times it is just not financeable."

VTB Capital already has a global franchise, and has been aggressively hiring both in Moscow and abroad. It employs more than 500 bankers in its offices in London, Singapore, Dubai, Hong Kong, Sofia, Kiev, New York, Paris and Vienna.

"Every single person that we hired for VTB was a loss for competition," said Orcel, brother of another top banker, Andrea Orcel, who co-heads UBS's investment bank.

"The (latest financial crisis) was a great opportunity for us because we attracted some very ... top talent," Orcel said. "It is creating the right infrastructure to take advantage of rebounding markets."

Orcel added that VTB now has 12 wholly international merger deals in its pipeline, coming from Serbia, Slovakia, Romania, Bulgaria, Cyprus, Africa, Switzerland and France.

But he says that VTB doesn't want to go "everywhere in the world," as based on his 17 years of experience as an adviser that would be a mistake.

Russia's two largest state banks, VTB and Sberbank, have only moved into investment banking in the last few years, and now compete head-to-head for deals.

VTB launched its investment bank in 2008, poaching part of a team from Deutsche Bank, while Sberbank got started last year, after buying Moscow's oldest brokerage Troika Dialog for $1 billion.

Orcel said he is frequently asked how VTB will win against Sberbank, which has around 5 trillion roubles ($162 billion) more in assets, but is not concerned.

VTB Capital led the league tables for debt capital market deals in Russia and the Commonwealth of Independent States for the first half of this year, beating Sberbank. However, in terms of mergers and acquisitions (M&A), Sberbank leads while VTB Capital is in fifth place, according to Dealogic data.

In the first half of this year VTB Group posted a 1.2 billion-rouble ($38.8 million) trading loss, which it attributed to volatile markets, having made a net trading gain of 9.5 billion roubles in the same period last year. Net profits fell 37 percent to 33.6 billion roubles. ($1 = 30.9502 Russian roubles)

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