GEOFF CUTMORE: Russia's En+ has set a price range for its much anticipated stock market listing. The business, which manages commodity tycoon Oleg Deripaska's aluminium and hydropower businesses, set a range of $14-$17 a share, as it hopes to raise $1,5 bn in its London and Moscow debut. VTB Capital holds a little under 5% of En+, and we are pleased to have with us Riccardo Orcel, the head of VTB International, he joins us now from Moscow and VTB's major economic pow-wow there. Riccardo, nice to have you with us on the program this morning, just on En+, VTB obviously has a stake in the game here. How do you think this IPO is going to be received in London?
RICCARDO ORCEL: Good morning, Geoff. Well, clearly it's a very important transaction in terms of size, one of the biggest in several years, we are testing the appetite of the international investors across different regions, from US, Europe, Asia. We started the road-show just yesterday. Clearly, there are limitations in terms of communication of details that I can do at this time, but it is clearly a great test for the appetite for Russian risk from international investors.
GEOFF CUTMORE: I mean, it's fascinating, a trial run here, because it will be the first major Russian IPO on the London market since Ukraine in 2014. Do you think that investors are able to look beyond some of the geopolitical risk now and re-engage with the Russian economy?
RICCARDO ORCEL: Well, in 2017 we had an increase in the equity capital market transactions of around 80%, in volume terms. There were large transactions done, for example, for Polyus Gold, the first quarter was extremely active. So yes, I do believe that investors can look through, let's say, the political risks that have been fully priced in the valuation of Russian companies.
GEOFF CUTMORE: Just on another tack, let me just take another run at this with you, before Karen comes in. Obviously, we've had a number of high-profile banking problems in recent months, Otkrytie, I think, took the major share of the bad news. Is the Russian financial economy stable and should international investors worry that as of today, the Central Bank really still hasn't dealt with remaining weakness in the system since sanctions were imposed?
RICCARDO ORCEL: Well, the Russian economy had just too many banks, and some of them were very weak, it is something that we saw in Europe 20-30 years ago. I remember, even Italy had a thousand banks, Russia had a thousand banks when the new Governor of the Central Bank arrived, and there was a clear focus in trying to reform the financial sector. I think, it was a common view that too many banks were too weak, not monitored correctly, so this is what happened in the last few years, and for Governor Nabiullina, I think, it's a great achievement to have reduced the number of banks by at least a third. The process will continue, as we know, it's only through a very strong financial backbone that an economy can flourish. So we will see more concentration, more consolidation and the process will keep going.
KAREN TSO: Riccardo, can I ask you about the monetary policy regime globally, because there is a feeling that central banks are certainly moving towards the exit now, that may not be positive for some of the emerging markets, despite the fact it's been OK in this window of time. If the Fed keeps on hiking, you have the need to try and trim the balance sheet size. How cautious are you around the opportunities in the emerging markets, when you've been slowly wading through the opportunities in some of those markets in recent years?
RICCARDO ORCEL: The interesting development for VTB Capital is that not only we consolidated out position in Russia, where we have a dominant market share, but we went outside Russia. Maybe it's not entirely seen by the international community, but we developed into a leading player in the emerging markets. We decided, when many banks were pulling out, to go into emerging markets, and this is our core business. So, we are very positive on the emerging markets, clearly these, like Russia, emerging markets go through cycles, very sharp cycles. But at the same time we see that in large regions like Central and Eastern Europe or Africa, sometimes there are no investment banks that can really support companies in their requirements to raise debt or equity financing. This is what we are trying to do, we are very focused on this EMEA region, India and China, and we remain extremely constructive for the future of the emerging markets.
KAREN TSO: Riccardo, while we have you, I want to ask you about Bitcoin as well, because there's been a huge amount of interest from some investors globally in this form of alternative currency. How much appetite are you seeing from your clients, and do you think Russians are more likely to want to invest in a cryptocurrency than other clients elsewhere?
RICCARDO ORCEL: Sorry, if I understand correctly, it's the interest from international investors to Russian investment?
KAREN TSO: Into Bitcoin and to cryptocurrency like Bitcoin or some of the other ones that exist?
RICCARDO ORCEL: I'm sorry, I couldn't hear very well, we're in the middle of our floor here at the conference. To be honest, yes, there was some interest reported in the press, but I've not seen in Russia a lot of interest in Bitcoins, to be honest. Yes, there were some speculations that there was some buying coming from Russian investors, but more than that, more than these reports, as a bank we've not seen much in terms of those.
KAREN TSO: And what about, more broadly, on the fintech, because a number of banks are saying the challenge from a number of start-ups online, as well as in some of the capabilities that digital technologies can unlock in terms of cost savings of a bank, how far progressed are you down that pathway of adopting some of the technological changes?
RICCARDO ORCEL: Clearly fintech is the future for the banking industry. For a country of the size of Russia, clearly, having branches around the entire country is just not possible, and fintech is the future. I think, the largest banks in the country have made significant investments already. I think there could be some consolidation that we've seen in the past, even with some specialist high-tech companies that can, maybe, be bought by banks, so that the banks can speed up the process of investing in IT. But the answer is we believe that fintech is definitely the future for banks in general and Russia in particular.
GEOFF CUTMORE: Riccardo, just before we let you go, while you're there at "Russia Calling", we're also monitoring the future investment initiative out in Saudi Arabia, and last time I was up in Moscow, I shared a platform with the Oil Ministers of both Russia and Saudi Arabia, the relationship is getting tighter. Do you think you guys gonna have any chance of participating in this major Saudi Aramco IPO? Are you in talks, can you tell us a little bit about what your participation could be?
RICCARDO ORCEL: Well, clearly for us, VTB Capital, the energy sector is the number one area of expertise in terms of M&A, in terms of capital markets. However, clearly, it's a transaction that has been the target for all our competitors, global competitors. If we can get on this transaction, showing our ability to maybe add some value across the markets we cover, that would be fantastic, but I think we were extremely positive of this discussion with Saudi Arabia. We are already working with the company in Saudi Arabia for possibly bringing investment into Russia…
GEOFF CUTMORE: Riccardo, I'm afraid I've got to cut you off there, but thank you very much. We will watch with interest, it sounds like things are moving on the ground there. Riccardo Orcel joining us from "Russia Calling".