Andrey Kostin Russian Bank VTB’s Plans for Europe

Andrey Kostin, the chief executive of VTB, spoke with Handelsblatt about globalization, the Russian economy and his plans to base European operations in Frankfurt.
Quelle: Bloomberg
Andrey Kostin, chief executive of the VTB Group.

Russia’s second-largest bank, VTB, is pushing ahead with plans to bundle its European businesses in its new headquarters in Frankfurt.

In a wide-ranging interview, the bank’s chief executive, Andrey Kostin, discussed his hopes for an improved Russian economy and why Donald  Trump is right to seek a good relationship with Moscow.

Mr. Kostin, you wrote your doctorate on globalization.

That was 16 years ago, when globalization was still on the rise.

Now it seems to be in decline. Why is this?

Globalization did not bring enough prosperity and quick economic growth. That is maybe because economic globalization did not coincide with a necessary political structure for global governance. Take the political integration of the European Union, for example. In my view, it has not been very successful.

Are we in danger of entering a period of trade wars? 

I am not sure about trade wars, but it seems that the trend for more national and protectionist policies will prevail for some time.

One of the explanations for the populist upsurge is the squeezed and anxious middle class. How big a problem is that in Russia?

When the economy grew really fast from 2000 until 2007, there were more opportunities for the middle class. But now, when you have a squeeze in the economy, and less foreign banks and companies invest, the middle class suffers. But we believe that Russia is back on course for economic growth.

What is your forecast?

We could see the economy grow by 1.2 to 1.5 percent this year. That will create new opportunities for the middle class.

Is there a similar anger among Russia's middle class as there is in Europe and the U.S.?

No, I do not think that anger is the right word. We have a very stable political environment in Russia. On the other hand, people believe that the conditions have worsened because of the unfriendly environment from the West. People at the moment think that all evils come from the West and not from Moscow.

Is the rise of populism in the West a good thing for Russia? Some populist leaders are even being actively supported by Russia.

I do not think that populism is the right word. To have a good relationship with a superpower like Russia is simply realism.

But it is mostly populist leaders such as Marine Le Pen and Donald Trump who tend to be friendly towards Russia.

Rightly so. The policies of Europe in the past few years have created a lot of tension, and we are now living in a worse world. It is less safe and we have more troops in Europe. But Russia has no intention of fighting the West; it has no intention of starting a conflict with America. I agree with Mr. Trump that only silly people can have a worse relationship with Russia. Quite the opposite, we should cooperate.

If the sanctions were to be lifted, would you start expanding again in Europe?

It is too early to say when the sanctions will end, although I think it is possible that it will happen soon. But yes: The one thing we would like to do is work more with our European partners. For example, when the Russian government plans the next share sale in VTB, we would like to offer those stocks not only to Russian investors, but also to shareholders from the U.S. and Europe.

Will this next privatization happen anytime soon?

In the current environment, with sanctions still in place, this is Mission Impossible Part Six. I would rather like to see a lifting of sanctions before that will happen.

And how much would the government eventually sell?

It currently owns 60.9 percent in VTB and it could go down to just below 51 per cent. At the moment, the government does not plan to give up a majority stake.

How far advanced are you with your plans to consolidate VTB's European business?

We are going to restructure our business here. So far we have three licenses in France, Austria and Germany. We would like to turn that into one European SE with different subsidiaries. We want Frankfurt to be the headquarters for this bank because we believe that this city will become an even more important center for financial activity after Brexit.

When will you make a final decision?

We are in intense negotiations with the European Central Bank. This is a very positive dialogue. Given that it is supported by the ECB we have already decided that we will move in this direction.

Will you start the new bank this year?

We hope so, yes.

And how many people will you move from Vienna and Paris to Frankfurt?

We would gradually increase the number of people working in Frankfurt. We are talking about hundreds of employees, not thousands. We do not want to diminish the other locations, but to redesign them. Given the amount of regulation, it is too expensive to continue with three separate banks.

What about the investment banking business in London?

At the moment we are quite happy with our London operations. Before we know what the consequences of Brexit will be, we will not make a decision.

But if you would have to move from London, would you go to Frankfurt?

Frankfurt is Frankfurt, London is London. Even after Brexit, London will probably remain an important financial center. What the exact role of London will be is too early to predict.

You have been at VTB's helm for 15 years. Your third term expires this year. Are you planning to continue?

I am, but it does not depend on me. It will be decided at the next annual general meeting this summer. But when I see a political candidate in America going for a new job at the age of 70, I do not think I should stop at the age of 60.

 

This interview was conducted by Daniel Schäfer, who heads Handelsblatt’s finance desk in Frankfurt. To contact him: [email protected]