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. Last Updated: 07/27/2016

Goldman Apologizes to VTB for Valuation

Goldman Sachs Group CEO Lloyd Blankfein apologized to VTB Group CEO Andrei Kostin for an analyst's "sell" recommendation on the Russian bank's shares, VTB said Tuesday.

Jernej Omahen, a Goldman analyst in London, last week started coverage of VTB, saying in a note to clients that "we see better value elsewhere."

Blankfein told Kostin in a telephone call that he did not "share that point of view," said VTB spokesman Sergei Kopytov, confirming a report in Kommersant.

Goldman spokesman Lucas van Praag declined to comment on the conversation between Blankfein and Kostin.

The situation highlights the tension U.S. investment banks face wooing clients in developing markets while complying with regulations at home that compel them to publish independent research. Goldman, which lags behind competitors in Russia, is adding 25 bankers in Moscow this year to tap what it considers the country's "huge potential."

Blankfein said in June that the rapid growth of countries such as Russia means that "if you forgo the opportunities in emerging markets, you're putting your global franchise at risk."

Goldman received a license for brokerage operations in Russia last year, joining Citigroup and Morgan Stanley in Moscow.

"It's good to see that Goldman is allowing analysts to value companies independently, but in Russia research typically remains subservient to investment banking," said James Beadle, a portfolio manager at Pilgrim Asset Management who bought VTB shares in the IPO. "If Goldman is not prepared to support stocks post-IPO, there are plenty of other underwriters that will."

Goldman in May helped manage state-run VTB's $8 billion IPO.

"The recommendation was about the attractiveness of investing in banks with ratings below VTB, which the analyst believed had considerable upside potential," Goldman spokesman van Praag said.

"Our research is completely independent of our advisory business."