Russian PM signs order to convert NWF subordinated loan to VTB into shares

MOSCOW. Feb 3 (Interfax) - Russian Prime Minister Mikhail Mishustin has signed an order that sets out the procedure for converting a subordinated loan of 100 billion rubles that was issued to VTB from the National Welfare Fund (NWF) in 2014 into shares in the state bank.

The order has been published on the official website for legal information.

VTB shareholders voted at an extraordinary general meeting in January to approve an issue of 30.196 trillion new shares totalling 302 billion rubles. The new shares can be paid for with cash, a contribution to assets in the form of shares in Russian National Commercial Bank or claims on the subordinated loan from the NWF.

VTB's supervisory board set the placement price for the new shares at 0.017085 rubles, which will enable the bank to raise up to 515.9 billion rubles.

Under the order, the Federal Treasury will enter into an agreement with VTB in 2023 to convert the subordinated loan into shares. The Finance Ministry is supposed to submit a draft act to the government within three months that sets out the procedure for the ministry to exercise shareholder rights on behalf of Russia on the shares received as a result of the exchange.

Russia's Federal Property Agency holds a controlling interest in VTB of 60.93%. Other major shareholders were the State Oil Fund of Azerbaijan with 2.95%, Qatar Holding LLC with 2.35% and the Otkritie nongovernmental pension fund with 3.2%. Current information about VTB shareholders has been closed to the public due to sanctions imposed against the bank by the United States, the European Union and the United Kingdom.

If minority shareholders do not exercise pre-emptive rights to buy the new shares, the Russian government's share of VTB's common shares will increase to 83.8% from 60.9%, Alfa Bank analysts said. If the government buys out the whole approved share issue, its stake in the bank could reach 88.3%.

VTB will close 2022 with a loss due to sanctions and the difficult economic situation, but it will become profitable again in 2023, the head of the bank, Andrei Kostin said earlier. In addition to losses, the bank's capital adequacy ratios could come under pressure from its purchase of Otkritie Group from the Central Bank for 340 billion rubles. However, the bank has said that the acquisition will have a "positive impact on VTB's financial results and ratios."