VTB secures Bank of Moscow bailout, taking stake to 81%

VTB increases its stake in Bank of Moscow to 81% (VTB press office photo)
VTB has increased its stake in the Bank of Moscow to 80.52%, complying with a requirement that it increase its stake to more than 75% in order to secure a bailout.

Valery Miroshnikov, deputy generaldirector of theDeposit InsuranceAgency (DIA), told reporters that VTB had increased its stake beyond the limit needed for VTB to access DIA support funding for the Bank of Moscow.

"We've received the documents, that the VTB group has increased its stake in Bank of Moscow to 80.52%.”

VTB said in July that it would increase its stake as part of a range of measures, including at 295 billion rouble loan from the DIA, to support the Bank of Moscow after its effective takeover earlier this year. After

Miroshnikov said that the DIA would be looking to place the support funds as early as possible.

"If we can, we'll provide the money as early as today."

VTB has held 46.48% in Bank of Moscow since February 2011, which was purchased from the Moscow city government, as well as a blocking share packet in Capital Insurance Group, which owns around 17% of the shares in Bank of Moscow. After the purchase of the Moscow government stake VTB discovered a major hole in the Bank of Moscow’s lending books, amidst claims of related party lending.

An additional share issue is planned for Bank of Moscow worth 100 billion rubles by the end of 2011.

Investcafe analyst, Nikita Ignatenko, says the VTB move is a major step in turning around Bank of Moscow.

“Consolidation of the stake exceeding 75% + 1 share opens up the chance to sanitize Bank of Moscow. Moreover, to complete the intended strategy in time, VTB Group will need to have consolidated the remaining 19.43% by the end of the year. Also, it’s supposed to complete sanitation of the capital city bank by this time. In 2012 Bank of Moscow will be actively developing in close cooperation with VTB. During this time the structure of business operations of the capital city bank could be significantly modified, and also unification of  the line of products and services with VTB 24 can follow, and even rebranding. In any case Bank of Moscow is again turning into a perspective and attractive asset.”