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. Last Updated: 07/27/2016

VTB Wants 300% Premium on Shares

Russia's second-biggest lender, VTB, wants the government to pay three times the current market price for the bank's shares during a planned capital injection this year, chief financial officer Nikolai Tsekhomsky said Thursday.

The government has allocated 200 billion rubles ($5.52 billion) to buy shares in VTB to help the bank meet capital requirements in an environment of deteriorating loan portfolio quality and rising bad loan provisions.

The debate over the shape and amount of the government's support for the banking sector has become one of the reasons Russia still does not have a 2009 budget, with the main issue being the pricing of VTB's new share issue.

It is not yet clear how much the government is prepared to pay for VTB's shares. Tsekhomsky said the bank wanted to place new shares at a premium to the market.

"Our proposal is that it makes sense to talk about a premium, not discount, to the current market price," Tsekhomsky said, adding that he saw 2008 dividends as "not very significant."

Analysts were skeptical about the proposed valuation since it assumed the placement price at about three times the current market price of VTB shares, which have lost over 80 percent since the $8 billion public offering in 2007.

"This valuation is not realistic. But of course, the placement at premium to the market would be positive for VTB. As far as we understand, it is VTB's proposal, not the government's," said Natalya Pushkina from UBS.

UBS estimates that VTB's book value is about $4 per GDR as of end-2008 in comparison the market price of $1.16. A government source said VTB's proposal was "optimistic."