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Vneshtorgbank [VTB]

VTB [ Bank / Vneshnyayaa Torgovlyaa Bank - Foreign Trade Bank], Russia's second largest public sector bank by assets, was established in 1990 as a close joint-stock company with Government-run ownership. By decision of the First People's Deputy Assembly of Russia, the Bank was established to ensure a solid economic basis for Russian sovereignty under the disintegration, and later, the collapse of the USSR. Vneshtorgbank was intended to efficiently handle foreign trade transactions in favor of Russian companies and institutions. The Bank was born on 12 October 1990, the date its Articles of Association were registered. Shortly after, it was granted General banking license for transactions in domestic and foreign currencies, and VTB started its operations. In 1998, the Bank was transformed into an open joint-stock company. The Russian Government held the majority stake amounting to 99.9%.

The top management of the Bank is composed of professional banking executives who cherish both their good names and corporate reputation. Many of them began their employment in the days of the USSR. Vneshtorgbank can reasonably regard itself as successor of the professional traditions of the Bank for Foreign Trade. At the same time, the Bank has recruited many other skilled experts with professional record of operations under emerging market economy in Russia.

The Russian government is the major VTB shareholder, with a 77.5 percent stake. Another 22.5 percent of VTB's shares were sold to Russian and foreign investors during its IPO in May 2007. The aggregate amount of funds raised approximated US$8 billion, making the VTB's IPO the world's largest public offering in 2007. It also proved to be most public in the history of the Russian stock market, since more than 120 thousand Russians have become VTB shareholders during the IPO. Individual investors waited in line for as long as five hours to buy shares with cash. The bank's securities are traded on MICEX, the RTS and the London Stock Exchange. With an authorized capital of RUR67.2bn (approx. USD2.746bn), VTB's funds stood at RUR137bn (approx. USD5.6bn), and its net assets equaled RUR865bn (USD35.4bn) as of 01 April 2007. By November 2007 ther shares had dropped 22 percent since the May 2007 IPO.

VTB has close relationship with almost all leading aviation enterprises and holdings, among which are Sukhoi Company (JSC), Irkut SPC, "MIG" Russian Aviation Corporation, Ulan-Ude Aviation Plant (JSC), Rostvertol PLC, "Salyut" Moscow Machine-Building Production Plant, "Saturn" Scientific and Production Association and many others. To facilitate financing of exports under Russia's military and technical cooperation with foreign state, VTB closely cooperates with the Federal Service of Military and Technical Cooperation of Russia, Russian Defence Ministry, Rosoboronexport Federal Unitary Enterprise, and Federal Industry Agency. VTB is also engaged in various structured deals. For example, together with its subsidiary, VTB-Leasing, VTB is an active participant in the project with the total value of tens of USD millions aimed at technical overhaul of such aircraft manufactures, as JSC KNAAPO and Irkut SPC.

There recently was an upsurge of activities in the partnership between VTB and space enterprises, among which are the Federal Space Agency, Khrunichev State Research and Production Space Centre, NPO Mashinostroeniya Federal Scientific and Production Centre, Votkinsky Works, Krasnoyarsky Machine-Building Plant, and others. The Bank's cooperation with the Federal Space Agency is developing under the previously signed Cooperation agreement which implies VTB participation in the Agency's projects within the Federal Space Program and raising funds for building space vehicles and equipment, especially those with a long production cycle. The Agreement also provides for a comprehensive banking servicing of space industry enterprises, supporting their working capitals, raising finance for their investment projects and programs, and also servicing their foreign economic activities. The Bank also intends to co-finance programs aimed at modernization and construction of in-orbit satellites, space vehicles and carrier rockets, at upgrading production capacities of space enterprises, including leasing of manufacturing equipment.

One of top priorities in VTB activities is its cooperation with air transport enterprises. Total volume of the Bank's credit risks under transactions with air transport companies has exceeded USD 400 mln over the last two years. Cooperation in this sphere includes financing operational and investment needs of the companies, including pre-export lending and import supply lending with foreign export credit insurance agencies being actively involved. Among the Bank's customers are the largest air companies of Russia, such as: Aeroflot - Russian Airlines, Sibir, KrasAir, Polyot, UTair, Volga-Dnepr Group, Aeroflot-Cargo, and Transaero. The total documentary credit facilities opened by the Bank for aviation companies have exceeded RUR 13 bln. Jointly with Donau Bank AG (Vienna) and Citibank, VTB arranged a USD 60 mln syndicated loan for Aeroflot - Russian Airlines company. The Bank also arranged UTair-Finance bond issue for RUR 1 bln. Air companies which are customers of VTB account for 47% of passenger and 62% cargo air flights.

In 2006, Russia's state-owned Vneshtorgbank, or VTB, announced it had acquired 5 percent of European Aeronautic Defence & Space Co. [EADS]. In response, EADS warned that the Moscow bank would not be welcomed as a decision-making industrial shareholder. Some observers said tighter links with Russia could endanger the European defense group's US business, and generate concern about governance at EADS and the transfer of sensitive technologies.

In an interview with the German Newspaper Suddeutsche Zeitung on 10 October 2006, Russian President Vladimir Putin said "As is well known, EADS saw its share price fall. Our financial institutions made use of this opportunity and acquired a five-percent stake. But we do not intend to use our financial possibilities to interfere in the work of any industrial organisations in Europe. Moreover, we are ready to cooperate with EADS on a partnership basis, on an industrial basis, only if we first reach an agreement with our partners. Only in this case could the stake acquired by our bank end up in the hands of the emerging Russian aviation corporation. But if we do not reach such an agreement, the bank will simply continue work on the stock market with its securities and we will not have involvement in the production side of things at all. If the share price rises, the bank will sell its stake and make a profit. In other words, it will do what any other bank would."

EADS controled 10% of Irkut, one of Russia's largest aerospace holding companies and part of the United Aircraft Building Company [UABC], and an EADS official had been on the Irkut board since March 2006. EADS and Irkut had formed a joint venture to convert of A320 passenger jets into cargo aircraft, with deliveries starting in 2010.

In an interview with the German Newspaper Suddeutsche Zeitung on 10 October 2006, Russian President Vladimir Putin said "EADS already holds a stake in one of our aviation corporations, Irkut. We do not view EADS as an ideal corporation. If we take part in this work, we will need to discuss with our partners how the corporation should be organised and on what principles it should function. It should be a market organisation and not an organisation where the state decides everything in advance and years ahead, thereby undermining its market status and effectiveness. We therefore do not have any desire to enter this corporation at any cost. If we do not reach an agreement, we will simply work alone or look for other partners and we will find other ways of cooperating with EADS."

The Bank participates in the development and construction program of SSJ, a Russian Regional Jet. An agreement signed between VTB Bank and Sukhoi Civil Aircraft company envisages raising finance for Sukhoi Civil Aircraft, either joint or syndicated, including resources of the Bank's subsidiaries and affiliates; trade and project financing, and international market borrowing. On 26 September 2007, in the course of presentation of the first Superjet-100 airplane VTB bank and "DalAvia" airline signed an agreement about their cooperation, which stipulated, in particular, that the airline would finance the purchase of six new Superjet-100 airplanes and option for four more such machines. JSC Dalavia makes carriage of passengers, transportation of goods and luggage by interregional, international and local airlines operating both scheduled and charter flights.

On 16 November 2007 VTB's chief financial officer Nikolai Tsekhomsky told the German newspaper Frankfurter Allgemeine Zeitung that VTB was planning to sell off its stake of about 5 percent of EADS NV within the next three months. Asked by the newspaper whether Russia's state-owned aircraft maker United Aircraft Corp (UAC) could be the buyer, Tsekhomsky said: "We would be pleased to sell our shares to a state-owned company, as long as we are offered attractive terms." The European Aeronautic Defense and Space Company (EADS) planned in late 2007 to convert its shares in the Irkut aircraft company into United Aircraft Corporation (UAC) shares. In late 2007 Russian authorities decided to transfer the 5% of EADS shares owned by VTB Bank to the UAC, which was established by a government commission for the integration of Russian aviation companies in November 2006. The UAC unites the Sukhoi Company, Aviaexport, Ilyushin Finance Co., Irkut, Ilyushin aircraft company, Tupolev, and other companies.

On 07 December 2007 Managing Director of the state-controlled VTB Bank Oleg Zhukovsky was found dead at his countryside hoome near Moscow on Thursday. Zhukovsky was found dead, in the empty swimming pool of the house, with his hands and legs tied. Investigators were reported to have found a suicide note, but the condition of the body indicated he had been murdered.




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