VTB Group’s $1.5-bn loan may be hit by sanctions

01 Aug 2014


VTB Group's planned $1.5 billion loan is likely to be scrapped after the US sanctioned the Russian bank, and the EU cut off state-owned lenders from capital markets.

The second-biggest Russian bank by market value sought to sign the deal last week with a group of lenders led by Barclays Plc, including Bank of America Corp and Citigroup Inc.

Under the latest sanctions VTB would struggle to raise funds from international lenders, according to London-based lawyers at Slaughter & May and Devereux Chambers.

Bloomberg quoted Jonathan Fisher, a barrister specialising in financial services as saying he could not see how the bank was going to be able to proceed. He added, EU banks, wary of US sanctions, would not want to touch it and the US banks plainly would not breach their own laws. He added, the  sanctions were going to bite.

The US measures announced this week would hit VTB Group, its Bank of Moscow unit and Russian Agricultural Bank, and add to the EU's escalating penalties for Russia over its actions in Ukraine.

The rules outlining restrictions on state-owned banks in international capital markets were published by European leaders yesterday.

Meanwhile, Reuters reported that Russia's largest lenders, Sberbank and VTB, were likely to see their biggest share price declines among Russian companies Friday with the sanctions biting, and a slump in US markets on global economy concerns and tensions.

Sberbank, VTB and Russia's third-largest state bank, Gazprombank, criticised sanctions imposed by the EU yesterday that cut them off from raising funding on the bloc's capital markets, even as they dismissed the measures.

Sberbank's American Depository shares were down 2 per cent on the Nasdaq in New York, ending July as its worst trading month in two years.

Global Depositary Receipts (GDR) of VTB were down 1.5 per cent down at close in London.

The inclusion of the Russian banks on the EU's list of companies to be punished for Moscow's support of rebels in Ukraine came as anticipated, as the bloc had earlier this week said it was going to target state-controlled Russian banks.

Sberbank was 0.1 per cent down at close yesterday in Moscow on the rouble-denominated MICEX, before the EU published the list o publication of the list of banks targeted.

"Sectoral sanctions on Russia ... which include restrictions of movement of capital increase the risk of exclusion of Russian stocks from a number of stock indexes," Oleg Shagov, an analyst at Promsvyazbank in Moscow, wrote in a note.

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