Interview with Andrey Kostin, President and Chairman of VTB Bank Management Board

Wednesday, 12 October / Bloomberg

NEJRA CEHIC: President and Chairman of VTB Bank Management Board Andrey Kostin, speaking to me exclusively at VTB Capital “RUSSIA CALLING!” Investment Forum in Moscow.
Low rates being an issue for banks in Europe, now in Russia, of course, the rates are high, exactly, entirely a different problem, you heard comments from Elvira Nabiullina, who spoke to me exclusively, and you know, of course, that last month the Central Bank pledged to keep rates on hold until the end of the year, is this enough for you, the fact that they actually did cut the rate from 10,5% to 10%, or do you want more cuts?
ANDREY KOSTIN: It is not enough for us, but on the positive side we definitely see very decisive measures on the part of the Central Bank and the government to bring inflation down, and the Central Bank also stated that bringing the inflation down, they will bring the key rate down also. Maybe they'll keep it two percent above, but with the expectation of something like 6% and something around 4% next year, I think we have chances for the key rate to lower next year maybe at the level of 7 or 8%, which I think will be much better for the economy than 10% which we have now. Definitely, the economy needs cheaper money in order to promote economic growth, that's what we need. But I support the Central Bank in their caution, maybe sometimes they are too cautious, but the trend is there, the rate will be going down. 

NEJRA CEHIC: I want to ask you about privatization in Russia as well. Rosneft byuing a government stake in Bashneft, was this the right decision? 

ANDREY KOSTIN: I think it's a normal decision, you know, any company with state participation should act in the same environment and on the same principles as any other, if a private company can buy something from the state, a company with gopvernment participation should do the same, I think, particularly as Rosneft is itself on sale for privatization, the same as VTB, for example, so I think it's quite normal.
NEJRA CEHIC: Speaking of VTB's privatization reports, just today that there may be a sale of convertible bonds, the stake sale may be to strategic investors on the market, can you give us any more details? 

ANDREY KOSTIN: No, I don't know who said this, but we never actually rely on strategic investors, we had some transactions with the funds, but normally we prefer the open market, and I think both strategic investors sale and open market sale are quite difficult because of the sanctions. So, my personal opinion is that we should wait till the sanctions are removed and go for privatization. But if the owner, if the government insists, I think we can structure some deals, maybe some time next year, but I think it's too early to say anything about this.
NEJRA CEHIC: Briefly, you've also said that VTB is going to double its profit next year, how are you going to do that? 

ANDREY KOSTIN: Well, there's a number of reasons why we think it's possible, the first is of course that the key rate will go down, we're sure about this, and that's very essential for VTB. Secondly, we also would like to adjust our model of development, we'll put more emphasis on retail, which is a high-margin business, we would like to cut costs and we would like to restructure our bank in order to provide better management and lower costs. 

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