Russia's VTB plans to expand grain business and then exit - CEO

Kernel Holding SA

19/11/2019 12:16

* VTB buys grain infrastructure in Russia 
    * Plans to start wheat trading via Zug - CEO 
    * VTB wants grain market to be 'civilised, transparent' -
CEO
    * Plans to exit grain assets once expansion finished 
    * To see Kostin's full quotes in Russian please click
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 (Adds details, quotes, background)
    By Tatiana Voronova and Katya Golubkova
    MOSCOW, Nov 19 (Reuters) - Russia's VTB bank  VTBR.MM ,
which is expanding in commodities in a bid to create a national
grains champion, will exit the sector once it has built up the
assets in the next few years, its CEO told Reuters.  
    Andrey Kostin also said in an interview that VTB plans to
start trading wheat via its Swiss operation and that it is in
the final stage of talks to purchase half of the Taman grain
terminal on the Black Sea.
    VTB, Russia's second largest bank, is now a major physical
grain exporter after buying a local grain trader in August, and
became the largest operator of Russia's grain export terminals
and other infrastructure this year.  urn:newsml:reuters.com:*:nL5N25U0I5
    "Oil is going to run out one day but not the grain," Kostin
said in the interview, conducted last week and authorised for
publication on Tuesday. "With that in prospect over the next few
years, while the business is being built, we will still act as a
player in the grain market."
    In June the state-controlled bank asked President Vladimir
Putin to help it create a Russian grains champion to curb the
role of foreign traders and give the state greater control over
exports, according to a June 26 letter seen by Reuters. However,
Kostin told Reuters that once the business has been built up,
VTB plans to hand it over.  urn:newsml:reuters.com:*:nL5N25H4HR
    "We have not finished the expansion yet. We do not rule out
building new grain terminals in the Black Sea," Kostin told
Reuters.
    "After we consolidate and wrap up this business, we will
exit these assets," he said. He did not elaborate on the options
to leave the business or potential future owners. 
    In its letter to Putin, VTB said it would need another two
to three years to consolidate and acquire more grain assets. 
    The bank plans to start trading wheat through its "fairly
well-developed commodities trade business in Zug (Switzerland)",
Kostin said, adding that supplies to Russian traditional buyers
- the Arab countries and Vietnam - have been its main focus.
    VTB is also in the final stage of talks to purchase half of
the Taman grain terminal from Ukraine's Kernel group  KER.WA ,
Kostin said. Global trade giant Glencore  GLEN.L  owns the other
half of the terminal, located in Russia's part of the Black Sea.
    Kostin, who said he sees his bank as a "kind of investment
fund" backing the state in big and complicated deals, told
Reuters he believed the grain market "should be civilised, with
transparent processes." 
    "Recently, Vietnam suspended Russian wheat imports due to
its low quality... In the end the reputation of all Russian
grain exporters suffers," Kostin said, adding that VTB's goal
was to create trust between grain producers and buyers over
margins and quality. 
    "To achieve this, you need a qualitative infrastructure,
serious and quite large players, including in trade." 
    
    BIG CLIENTS 
    This month, VTB exchanged debts with Sberbank  SBER.MM ,
taking on the latter's 50 billion rouble ($784 million) exposure
to steel and coal producer Mechel. The miner said in August that
it had asked VTB, Sberbank and Gazprombank to push back debt
payments to 2024-2026 from 2020-2022.  urn:newsml:reuters.com:*:nR4N27M00I  urn:newsml:reuters.com:*:nL8N25B47X 
    
    The debt exchange deal left VTB and Gazprombank as Mechel's
two biggest creditors. Mechel has also agreed to pay around 30
billion roubles for Gazprombank's 34% stake in the Elga coal
project and needs to find cash to pay for it.  urn:newsml:reuters.com:*:nL5N26O2YW 
    "We said this from the very beginning: we don't want to
manage Mechel. Looking into the future, Mechel is quite an
effective company," Kostin said. VTB does not plan to give
Mechel a loan to buy Gazprombank's stake in Elga, he said. 
    VTB also holds a 22% stake in En+ Group  ENPLq.L , after the
bank became part of the deal helping En+ avert U.S. sanctions
imposed on Russian tycoon Oleg Deripaska, who controlled the
company, last year. The sanctions were lifted in early 2019.
 urn:newsml:reuters.com:*:nL5N2097C3 
    Kostin said that VTB may consider selling its stake in En+
once the company's shares rise in price from the current $9 per
share, adding that the bank may also consider selling its En+
stake to another state entity if such an opportunity arises.   


($1 = 63.7730 roubles)

 (Reporting by Tatiana Voronova and Katya Golubkova; writing by
Katya Golubkova and Polina Devitt; editing by Veronica Brown and
Susan Fenton)
 ((ekaterina.golubkova@thomsonreuters.com; +7 495 775 1242))