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Shares in VTB, the state-controlled Russian bank, jumped 3.3 per cent on Monday after the government announced the successful completion of sale of a 10 per cent stake.

It was never very likely that the Kremlin-backed offering would fail despite the collapse of three non-state Russian IPOs in the last 10 days. But the $3.3bn sale has not gone as smoothly as the bankers involved would have liked.

The shares were sold at close to the market price – but the market itself had itself fallen by 13 per cent in the month or so before the sale.

Catherine Belton reports for ft.com that there was demand in the market, with some analysts atttributing it to Russian oligarchs buying on the Kremlin’s's orders and others commenting on good international demand.

Vladimir Putin, Russian prime minister, was quick to take the credit. According to Bloomberg, he told VTB chief executive Andrei Kostin: “This move to attract investors clearly demonstrates confidence in our financial system as well as in our economic policies.”

The deal, in which the state’s stake in VTB drops to 75 per cent, is the first big disposal in a three-year privatisation plan in which Moscow aims to raise about $34 billion to help plug its budget gap and lessen its role in the economy. It was the largest state asset sale since VTB’s $8bn IPO almost four years ago.

The per-share price of 9.1468 kopeks is 33 percent less than the 13.6 kopeks the government got in May 2007, when it raised $8 billion in that year’s biggest IPO. But the price is hugely higher than the record low 1.94 kopeks in the depths of the global crisis in March 2009.

The government bought 180 billion rubles of new VTB shares at 4.82 kopeks a piece in September 2009, boosting its stake in the lender to 85 percent. The shares gained 3.3 percent to 9.76 kopeks at 10.49 am in Moscow in early trading on Monday. They were later trading 2 per cent up.

However, Moscow will do well to examine how this sale was handled. VTB shares fell 13 per cent from the early January as officials issued conflicting comments on how many shares would be sold and switched between a private placing and a secondary market offering.

Russia’s private entrepreneurs have to take their chances when they know the Kremlin is in the market. The fact that three non-state issues were pulled reflects badly on the sellers and their advisers – the prices they sought were clearly too high. But the Kremlin should be concerned about the damage done to Russia’s reputation in the market. It is the country’s interest that offerings are more carefully timed – especially with so much riding on the privatisation programme and on the country’s hopes of attracting more foreign capital.

Further reading
Russia file, beyondbrics
Offer puts VTB’s past under the spotlight, FT