By Rustam Botashev, Equity Analyst at UniCredit Securities
VTB Group has placed $1.25bn in 5-year Eurobonds with a 6.465% coupon, Bloomberg reports. Meanwhile both Alfa Bank and Bank of Moscow have launched roadshows aiming to sell their own Eurobonds.
Our view: Falling country risk and an improving economy have attracted credit investors back to Russia. We believe that the VTB deal is just the beginning, with more local banks and nonfinancial companies to tap the credit market shortly.
This should lead to decreasing interest rates and increased financing, which in turn should trigger lending to the economy. We note that the Russian banking system still faces problems with long-term funds, but with a friendly external debt market, this problem should disappear, permitting long-term lending such as mortgages or capital investments.
Conclusion: We see the news as positive for the banking sector in general, and for VTB – which has to redeem $3.2bn in 2010 – in particular. We reiterate our hold recommendation for the bank with a 12-month TP of USD 4.95.
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There is no way VTB can deal with theoir bad assets – that’s the main problem so far…