UPDATE: CEO says situation at Russia’s VEB stabilized

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MOSCOW, Nov 8 (PRIME) -- The situation at Russia’s Vnesheconombank (VEB), which nearly defaulted in early 2016, has stabilized and a draft of the bank’s development strategy has been prepared on the basis of a new business model, CEO Sergei Gorkov said on Tuesday at a meeting of the Federation Council, the parliament’s upper house.

“It is worth noting that the bank was in a dire situation at the beginning of this year, it was on the brink of a default,” he said, adding that the situation was due to VEB’s previous business model and to the Western sanctions against the entity.

“But it should be said that the situation in VEB has been stabilized over the past months and thanks to support of the Finance Ministry, we have prepared a draft of a new strategy of the bank,” he said, adding that the bank will focus on support of industry, infrastructure development, and non–energy exports.

The new business model also encompasses an active search for investment projects and an aim at co-financing. “In conditions of a lack of financing, we will look for different sources and mix them,” Gorkov said.

The supervisory board will study the bank’s strategy at a meeting on December 15, he said.

SALES OF ASSETS

VEB does not rule out selling some non-core and troubled assets to the Federal State Property Management Agency. “We are discussing it. Everything depends on the mechanisms, deals, assets. We do not rule out this possibility, which is possible in some cases,” he said.

“Some troubled assets may be repacked and restructured. Some troubled assets may undergo a default strategy, but it largely depends on the asset. Part of them may be packed in a fund, some may be presented, even to the state,” he said.

The bank also has five investors interested in Sviaz-Bank and Globexbank, and the final buyer will be selected soon. “Until the end of the year, we are to define with whom we will structure the deal, because the deal’s structuring will take more time next year,” he said.

VEB plans to inject more money in Sviaz-Bank in December, and the bank and the central bank have already reached an agreement on a deposit previously provided by the regulator to VEB for financial recovery of the two banks during a crisis. “But sale of the banks is a priority,” he said.

There are three entities interested in the purchase of Ukraine’s Prominvestbank and one more investor may be interested in the asset, including local investors and international players, from whom VEB expects to receive purchase offers until the end of November.

“Speaking of Prominvestbank – we are in the same situation here as with Globex and Sviaz-Bank. We expect offers … until the end of November and after that we will reach (a deal),” he said.

But the bank is not in talks to sell a less than 5% stake it owns in aluminum giant UC RUSAL. “We are not in talks as now is not the time to do that. The macroeconomic situation will make the price of the stake low, so we are not ready to form additional losses from the sale of the package (of RUSAL’s shares),” he said.

FUTURE FORECASTS

VEB expects to receive a smaller net loss in 2016 under the Russian Accounting Standards (RAS) than expected earlier, and it will even have surplus liquidity. “Our financial plan envisaged a significant deficit of liquidity in the year. But we think that we will have a surplus and the profit result will be better than we expected,” he said.

The amount of the loss will be connected with a sale of a 3.59% stake in Gazprom. “The sale of Gazprom’s ADRs is the only loss we will suffer this year, the only factor that will influence our losses, as our remaining portfolio will bring a slight and positive profit. Our margin has increased to about 1.5% from zero since the beginning of the year,” he said.

On Monday, VEB and China Development Bank signed a framework agreement that envisages VEB’s attraction of an up to 6 billion Chinese yuan financing for up to 15 years. Gorkov said that the bank plans to sign two more deals to raise credits from Chinese banks, but it will likely be done in January–June 2017, as VEB plans no more Chinese credits in 2016.

In November 2015, VEB’s liabilities reached 1.3 trillion rubles. The Russian government decided to inject 150 billion rubles in the bank in 2016 to help it redeem foreign debt. Former CEO Vladimir Dmitriyev was dismissed in February. VEB’s new strategy includes sales of non-core assets, including Globexbank and Sviaz-Bank until the end of 2018.

(63.9074 rubles – U.S. $1)

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