60 second interview

Face to face | 1 June 2016
Igor.Ostreyko.jpg

TFR talks to VTB’s Igor Ostreyko about his bank’s rising levels of trade and export finance deals with China    

 

Where do you see the opportunities in financing trade? 

In the current market environment we are busy meeting conventional trade finance demand with short-term financing solutions such as guarantees and letters of credit (LCs). VTB partners with global and international banks who confirm the LCs we issue and discount them for their own clients. Alongside this, we are developing our export finance business, working with a range of export credit agencies as well as Russia’s EXIAR. 

Can you tell us more about your Russian/Asian flows? 

Since 2008 VTB has been present in the region through our Shanghai branch, making us the only Russian bank with a full banking licence in mainland China. The branch serves as a local hub to realise trade financing transactions and enhances our capabilities to build our Asian franchise. VTB aims to support the Sino-Russian trade flows by providing trade finance facilities such as LCs in a range of currencies, including the RMB, ruble, euro and US$ for our Russian and Chinese clients implementing export-import operations. In addition, the branch acts as an insurant under Sinosure’s export credit agency (ECA) cover and has the ability to arrange direct buyer’s credits for importers. 

What recent deals are you particularly proud of?

VTB and EXIAR, the Russian export credit agency, joined forces in December 2015 to arrange financing for Uralchem Group’s export sales. Uralchem is one of the largest Russian mineral fertilisers exporters. VTB provided it a loan of more than US$100m with EXIAR coverage. 

Building on our work with EXIAR, VTB arranged RUB7bn (more than U$100m) financing for Atomstroyexport’s “Kudankulam” nuclear power plant construction project in India in March 2016. Turning to other ECAs, VTB approved long-term credit facilities for RUB15bn (US$225m) for TELE2, one of the largest Russian mobile operators. TELE2 needs the facility for the import of high-tech telecommunications equipment, as well as software, licences and other related services. 

How do you see the market over the next 12 months? 

The current economic situation has made it difficult for Russian financial institutions and corporates engaged in foreign trade, which dropped significantly in 2015, compared with 2014. The devaluation of the Russian ruble negatively impacted importers’ plans. And in 2015 a lot of companies froze or postponed their capital expenditure

On the other hand, there are still a lot of opportunities to leverage trade and export finance solutions in Russia, and we plan to increase our portfolio this year.

One of the main drivers is deals with EXIAR coverage. We also see the potential in ECA-covered and LC finance, including ruble-denominated financing, as these instruments hedge risks of borrowing in foreign currency. 

Our plans for the coming year include continued support of trade flows between Russia and China, a strategic long-term initiative with a range of benefits for Russian exporters and importers, and we are looking to place new transactions through VTB’s European and Chinese offices. 

What’s in the deal pipeline?

Our EXIAR pipeline is extensive. The flows are mainly infrastructure and machinery products because the Central Bank of Russia prioritises manufactured goods. There are some interesting structures shaping up with Sinosure and European ECAs through our Shanghai and European offices. And of course there are hundreds of smaller ticket conventional transactions. 

How have trade corridors adjusted to current conditions? 

As trade finance bankers we have to follow customer needs and today we have product solutions for companies trading over the world. Currently, we see increasing potential for Asian-Russian trade finance, and in light of this, we are constantly enhancing our product line and professional expertise in Asian markets. The relations we built with Asian, in particular Chinese, banks in recent years and the agreements signed to support Russia-China trade significantly contribute to this. 

At the same time, historically, substantial import flows from EU are supported by VTB’s trade finance instruments which are always adjusted for our customers’ needs.

 

Igor Ostreyko is managing director of VTB’s trade and export finance department

 

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