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VTB Keeps Its Word
Vneshtorgbank has taken its first public steps to prevent its stock from losing value. On Monday evening, a statement was issued on the London Stock Exchange by bank board member Nikolay Tsekhomsky saying that the mortgage crisis in the United States would not have a negative effect on VTB operations.
It was noted in the statement that VTB does not have significant loans in mortgage securities and so the American crisis does not have a significant impact on the bank's assets and that the bank is continuing with its strategy of increasing its capitalization through stable development of business in Russia.
Deputy chairman of the VTB board Vasily Titov told Kommersant that the statement was intended to calm investors who were worried that the bank held American mortgage securities in its portfolio. The statement failed to have the desired effect, however. On the RTS, VTB stock fell 1.35 percent (the RTS index fell 1.7 percent) and, on the LSE, VTB stock lost 1.38 percent. Analysts say that the statement would have been more effective if it contained numbers, considering that VTB attracts more than a third of its funding from the foreign market.
It is normal world practice for a company to tell investors when it should cost more. VTB is concerned about its 131,000 small stockholders, especially since the value of its stock has fallen 20 percent in the last month, that is, to a level 15 percent lower than the price of issue. Further loss of value could lead to a eave of dissatisfaction, which would be badly timed in relation to the State Duma elections later this year.
The lack of effect from Tsekhomsky's statement may force the bank to initiate a stock buyback program. Gazprom announced last week that it would be buying back its stock in October and November. That news boosted its price by 3.2 percent in one day, against a general increase that was 1 percent lower. Gazprom, however, intends to spend 1 billion rubles on its buyback. One analyst estimated that VTB would have to spend several million dollars to prevent further erosion of its quotations.
www.kommersant.com
All the Article in Russian as of Aug. 22, 2007
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