VTB Capital international chief talks about China venture
By Matt Turner
Russian investment bank VTB Capital last month signed a memorandum of understanding with Chinese investment bank Citic Securities. Atanas Bostandjiev, CEO, UK and International of VTB Capital, speaks to Financial News about the agreement, recent hires and his plans for Africa.
VTB Capital international chief talks about China venture Financial News: What does VTB Capital hope to gain fr om the partnership with Citic?
Atanas Bostandjiev: The agreement will facilitate cross border M&A support and other financial advisory services designed to enable Russian and Chinese investors to build on existing opportunities.
This is an important strategic development for both organisations while also underlining the importance of trade and investment relations between the two emerging market giants. The signing of this agreement is an important step in the implementation of VTB Capital’s international expansion strategy which will see our business grow beyond Russia and CIS [the Commonwealth of Independent States].
As trade and investment links between China and Russia continue to grow this deal allows us to build new opportunities and facilitate further growth for Asian businesses looking to invest in Russia and vice-versa.
FN: VTB Capital has now signed agreements in Brazil, China, the US, and Italy. Where next?
Atanas Bostandjiev: Of course we recently signed a memorandum of understanding with Invitalia, Italy's national agency for inward investment promotion, which will allow VTB Capital to promote Italian investment opportunities in Russia. We are also focused on Eastern Europe, the Balkans, and Africa where we have a long term commitment. These will be a focus for us in the near future.
FN: Brazil, Russia and China are all largely defined by their production of, or need for, natural resources. Are there opportunities for VTB Capital outside of those extractive industries?
Atanas Bostandjiev: This is of course a very important sector for the economy but VTB Capital hasn’t built its business purely on natural resource deals.
Our business continues to grow extremely quickly as we move into new markets and build our team of world class international experts. Our office in New York gives VTB Capital two strategic advantages. Firstly, it positions us well to work with organisations and institutions in Latin America, particularly in Brazil with BTG Pactual.
Secondly, our New York team creates an unrivalled bridge to the Russian economy for interested American institutions and investors. That is why we are the partner of choice for so many American clients looking to invest in Russia. Moreover, in March of this year, VTB Capital became the first Russian investment bank to take part in a domestic bond offering in the United States. VTB Capital acted as a Senior Co-Manager on the Bank of America Corporation's $4 billion domestic bond offering, which closed on 22 March 2013. Further, last year VTB Capital invested into Vivacom, the Bulgarian telecoms company, another example of opportunities that we are seeing outside of the extractive industries.
We are on the front line of investment and financing and fr om our viewpoint, we see Russian companies increasingly looking to the markets for funding and foreign investors making great returns in a diverse range of sectors.
FN: VTB Capital recently appointed Andrew Cornthwaite to focus on the expansion of global banking outside Russia and the CIS. On which regions and sectors will he be primarily focused?
Atanas Bostandjiev: Our appointment of Andrew Cornthwaite underlines our commitment to expanding our global banking capabilities. We have opened a number of offices in the past few years and will be solidifying our presence in the markets. In terms of market expansion plans, Asia is extremely important so we’ll continue investing in our Hong Kong operation and working with our CITIC partners to realise new opportunities.
Andrew’s role will be to help expand VTB Capital’s business outside of Russia, especially where VTB Capital already has a strong presence including the UK, CEE [central and eastern Europe], MENA [the Middle East and North Africa], Asia and areas of potential growth including Eastern Europe.
FN: You have been spending some time in Africa, what are your plans for the region?
Atanas Bostandjiev: The African region is an important part of VTB Capital’s international business strategy.
VTB Capital is looking at several countries in Africa wh ere we see opportunities. We see significant potential in the continent, especially in area of natural resources including oil, gas and the mining spheres. Particularly, Angola, wh ere we have an existing presence, is of great interest to us and I am confident that the VTB Capital platform there will allow our business to continue to expand across the continent.
FN: What are the biggest opportunities and challenges in the region?
Atanas Bostandjiev: Our focus is to service our clients and prospects in the region with respect to all investment banking products. Russian clients are increasingly looking to the region on a range of fronts, whether its new consumer market opportunities focused on Africa’s emerging middle class, infrastructure development potential or more traditional natural resource transactions. Our role is to help clients navigate what can be a complex and perplexing market. This means deploying international best practice while understanding local procedures, codes and regulations are carefully factored in.
Beyond this, I think one of the biggest challenges is actually one of perception. There is still a tendency for investors to assume that Africa offers double or triple digit growth prospects with little effort. Good returns are still achievable but they are nowhere close to the deals that were struck in the decade leading up to 2007 and the “traffic jam” of fund managers seeking capital from investors. Fair risk-adjusted return expectations and capital markets liquidity remain key issues facing the investment climate.
And although there is a wide consensus that opportunities exist in Africa, many commentators report that good deals remain hard to find. Market players believe the “promise of the continent” is not being matched by a strong pipeline of deal opportunities – especially for larger projects. Our job is therefore to match the expectations to reality and make sure we can find ways of delivering well-structured solutions for our partners and investors.