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A.Kostin: "We expect the very healthy growth this year"


KIRYL SUKHOTSKI: Welcome back to the St. Petersburg International Economic Forum where we're speaking to biggest names in Russian emerging markets. I'm joined now by the Chief Executive of Russia's second biggest lender, VTB, Andrey Kostin. Mr. Kostin, what's the outlook for VTB's growth in 2011-2012? Has the bad debt cycle been clearly reversed?

ANDREY KOSTIN: Yes. We expect the very healthy growth this year. For example, our net profit will, should grow by 60% from USD2 billion to USD3 billion. We expect that the loan book will be growing by at least 15%. As far as NPLs, they stabilized and we expect that the figure will go down.

KIRYL SUKHOTSKI: Sberbank's privatization is in the cards. They are your main competitors. Do you think that the competition will intensify as the investors may prefer them over you?

ANDREY KOSTIN: No. We are the only institution this year which successfully privatized 10% of our stake in February raising USD3.2 billion. We made clear to investors, at that time, that we would not be having any further sales during this year. So I think Sberbank goes to the market in autumn, there's a good chance for us probably to go next year.

KIRYL SUKHOTSKI: Some question your recent acquisitions. How problematic are the assets of Bank of Moscow for instance?

ANDREY KOSTIN: I would say that the Bank of Moscow needs some repair work because the previous occupant, you know, damaged this building. But this is, this damage could be handled. And I see not a very big problem. The bank will stay, and I think it's a good institution. It will play a very important role in Moscow, in Moscow economy. So I'm quite optimistic on the future of the Bank of Moscow.

KIRYL SUKHOTSKI: Don't you regret that you have bought it?


KIRYL SUKHOTSKI: How much added value will those recent acquisitions bring in terms of profits and margins?

ANDREY KOSTIN: Well, it's very hard to say. We, for example, with TransCredit Bank, their return on equity is about 30% so it's a good, I think, addition as Bank of Moscow might be more problematic for the profit. But if we don't have a loss, I think overall we'll have further increase of our forecast for the group profits.

KIRYL SUKHOTSKI: Will you be looking for more acquisitions in the next 18 months?

ANDREY KOSTIN: No. I'm saying that if you have this food, you have to digest that first. So I think for the next 12 months, we'll be digesting our recent acquisitions.

KIRYL SUKHOTSKI: Speaking generally, what risks do you see as prevailing in the Russian financial sector?

ANDREY KOSTIN: Well, I think there's a couple of things. One is the outside risk and the situation in Europe and the general state of international financial markets. The crisis show that we are not isolated from this. Second, I think Russian financial market desperately needs better regulations. So on part of the central bank, I think there should be not more, but better regulation. That's for sure.

KIRYL SUKHOTSKI: Do the upcoming elections - parliamentary, presidential - add to any risks in the financial sector?

ANDREY KOSTIN: No, frankly speaking, I mean I speak a lot on the subject with my colleagues in business, inside Russia no one has very big concern about the results. I think everybody knows the situation and there's no concerns. I mean probably outside investors, they are more concerned. They have their own ideas about this. But definitely, not the Russian business community.

KIRYL SUKHOTSKI: Your business speaks to investors and you're thinking about further privatizing say maybe next year, if Sberbank's certainly small, is successful. Then what's top, what is the top question investors ask you?

ANDREY KOSTIN: Well, a lot of questions about Russian economy, about the institutional bank itself. But I think it's a learning process. I think the more they know about Russia and ourselves, I mean the more investors we might have. I think that's the process.

KIRYL SUKHOTSKI: Many thanks to the Chief Executive of VTB, Andrey Kostin, here at the St. Petersburg Economic Forum. And you can watch more interviews in our platform, Reuters Insider. I'm Kiryl Sukhotski. This is Reuters.

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