Russian bank, VTB, prices popular IPO near top of range

VTB, the second largest bank of Russia, set a relatively high price Friday for shares in an initial public offering that has drawn portfolio and retail investors - from businessmen to babushkas - hoping to profit from the country's booming banking sector.

State-owned JSC Bank VTB - a successor of the Soviet Union's foreign trade bank - set the price at 13.6 kopeks a share, or US$10.56 (EUR7.83) per 2,000-share Global Depositary Receipt.

VTB said it would sell a 22.5 percent stake, raising around US$8 billion (EUR5.9 billion) to help bolster its retail and investment banking divisions. The pricing was near the top of the indicative range of 11.3 kopeks -13.9 kopeks per share, or US$8.77-US$10.79 (EUR6.50-Ђ8.01) per GDR.

The placement ranks as Russia's third-largest stock sale after last year's IPO by state-controlled oil producer JSC Rosneft and a March capital increase by state banking giant JSC Sberbank.

VTB's aggressive expansion into the retail segment makes it a key beneficiary of banking-sector growth fueled by an economic upturn that has put car loans, credit cards and mortgages within reach of more Russians. Consumer lending soared 75 percent last year, according to the central bank.

Some of the same Russians being eyed by consumer lenders - people with a bit of money to spend - were targeted by VTB's relatively low minimum bid size of US$1,200, straightforward purchasing procedures and an aggressive, US$29 million (EUR21 million) ad campaign.

Thousands of people, from young entrepreneurs to grandmothers, lined up to buy VTB shares at retail branches and centers set up for the purpose, one at an exhibition hall just outside the Kremlin.

During a subscription period extended by a day due to demand, more than 130,000 individual investors in Russia pledged US$1.6 billion for VTB shares, eclipsing the combined retail bids made for Rosneft and Sberbank.

Observers said that although VTB is pushing into retail - Chief Executive Andrei Kostin recently promised to open an average of one new branch a day in 2008 - Sberbank is likely to remain the country's premier banking stock in the short term.

While close to the top of the range, the pricing left some space for an increase.

"It is likely that the price was set at a discount to the higher end in order to leave room for post-IPO performance, which is crucial for retail investors," Alex Kantarovich at MDM Bank told Dow Jones Newswires.

Analysts said VTB's post-IPO performance probably poses little danger for retail buyers.

"As a 'people's IPO,' many political futures would be at risk in the event the stock price turned south," said Anton Tabakh, chief strategist at brokerage UralSib.

President Vladimir Putin has backed the idea of selling shares to in state companies to the masses, a program that is also likely to used at next year's planned listing by Gazprombank, the banking arm of gas monopoly JSC Gazprom.