Press about us

15 April 2013
Distribution the focus as VTB keeps up US build


EuroWeek (UK)

The New York arm of VTB Capital, the investment banking division of the Russian bank, has been busy poaching capital markets bankers from domestic rivals Renaissance Capital over the last year, as well as from western firms like Royal Bank of Scotland and Credit Suisse. And it is not finished yet - it will continue to hire opportunistically.

But although the current headcount of 27 is a 50% increase from one year ago, US CEO Paul Swigart says that the bank's objective in the US remains unchanged - to be a distribution hub. And it is one that plays an important - and profitable - role in the bank's capital markets activity, he says.

"We are very cost efficient, we are very profitable for the firm, and we're integral in primary debt and equity capital market placements," said Swigart. "VTB Capital was top of Dealogic's league table for Russia and CIS bonds at the end of last year and the US was key to that - EM bond funds were taking in huge inflows and the US was accounting for 40%-50% of Eurobond issues."

Within the distribution function though, the bank is building out its product offering. "Our business currently consists of equity security trading, fixed income securities, FX trading and rates," said Swigart. "The one area we're now starting to look at is the distribution of asset management products."

The bank still has no immediate aspirations to originate business from the US office - either from North America or Latin America - although it says it remains flexible. Swigart said that expansion on the origination side for VTB Capital made more sense in the EM countries in which VTB Capital has become more present over the last year, such as Turkey or the MENA region.

Swigart said that the partnerships that VTB Capital has formed in the US with Evercore and in Latin America with BTG Pactual would remain in place for the foreseeable future.

"We've established these strategic partnerships with an eye towards crossborder M&A," said Swigart. "They're very good at what they do and we can't hope to replicate the expertise they have in their local market, which we appreciate because we have that expertise in Russia and the CIS - and which BTG and Evercore are also making use of."

Establishing the US operation was key to VTB's ambition to reach US clients. The bank had a great global franchise, but could not access clients in the US unless it had a US-regulated broker dealer, says Swigart.

"Having established ourselves onshore, it's given us immediate access to this very large pool of institutional investors," he says. "US investors in Russian fixed income and equity securities, which make up our bread and butter, account for around 35%-40% of secondary trading volumes, so they're absolutely key to running a successful franchise."

Swigart says that VTB Capital in New York will also be monitoring appetite for foreign credits in Russia's domestic bond market. But although that market is broadening, he reckons there are not as many issuers from the Americas that would be as willing to tap the local market as there are in Europe.

"If there's a compelling reason for an issuer to want to access roubles, we'll look at anything where we can add value - but there's just not as much appetite for it in the US," he says.

Corporate Communications VTB Capital