VTB Bank Deputy President Yuri Soloviev: Bulgaria Is Perfect for Starting Operations in the Balkans
An exclusive interview with Yuri Soloviev, First Deputy President and Chairman of the Management Board of VTB Bank, Chairman of VTB Capital holding companies Board of Directors.
Оn March 1, 2012, VTB's investment business VTB Capital announced the opening of a Bulgarian office of VTB Capital, with which the Russian bank VTB has entered the Balkan market.
What made VTB and VTB Capital decide to enter the Bulgarian banking market at the present moment? Why didn't you come to Bulgaria earlier – or later?
Generally speaking, VTB has been developing over the past decade by either purchasing, or growing organically in a number of countries and different regions.
We are present in Asia – in Singapore, Hong Kong, China, Vietnam, and India; we are present in the Middle East where we chose Dubai as a hub; we are present in the United States where we opened our offices last year; we are obviously present in Europe – in Vienna, Frankfurt, Paris, London; in Cyprus; we are present in most of the CIS – or former Soviet Union countries.
We had a certain list of priorities which was dictated by the size of the market opportunity, the level of competitiveness of the international economy, the maturity of the markets. For instance, last year we chose Hong Kong and the USA as the most important new markets for us in 2011.
We started looking at the Balkan region about a year ago, and even though we have been growing relatively fast, there are always priorities of resource management. The Balkans are opening up for us because the level of global competition there has been reduced dramatically. Most of the European banks are withdrawing because they have home problems. We see global banking institutions reducing their presence as well.
For VTB Capital, this is a natural expansion of our presence in the former Soviet Union countries. We have worked on this particular goal gradually, and we are privileged to have found partners among Mr. Milen Veltchev, Mr. George Veltchev, and Mr. Krassimir Katev. So the combination of all those factors has led VTB Capital to open an office in Bulgaria and the Balkans.
You mentioned market competitiveness as a key factor. How do you view the competitiveness of the Bulgarian banking market? What is your strategy for the Bulgarian market?
Let's look at the different sectors. I would say that retail banking is very competitive in Bulgaria. But if you take corporate or investment banking, it's not that competitive.
We are a leading investment banking institution in the region. VTB Capital issues most of the debt and equities out of the former Soviet Union countries, and we have achieved that position within a relatively short period of time of three years. We have attracted more than USD 100 B of investments into the Russian economy alone, and we are basically transporting this particular model to other countries which we are adding to the collection of our local presence.
I used to work for a global investment banking firm, a number of my colleagues used to work for global investment banking franchises, too, and back in 2002, for instance, I actually started working on a number of Balkan deals for global institutions. Now I know they don't have any plans for this region. And we do see a lot of opportunities. Every single week we do capital market transactions in either equities, or debt.
We do not expect that frequency from Bulgaria. However, we are very close as countries. We have a very similar culture, language, a very rich and good historical relationship. We believe we understand the Bulgarian economy. Bulgaria combines the unique feature of being very close and understandable to us, while being a part of the European Union. So we feel pretty comfortable in entering this particular market. If you look at the trade relations – Russia is the No. 1 importer and trading partner for Bulgaria. I think last year Russia was the No. 3 foreign direct investor in Bulgaria.
We have a lot of interest in Bulgaria from our client base in some sectors of the Bulgarian economy. And we actually believe there could be some interest towards the Russian market coming from Bulgaria. The Russian market is definitely underserviced. There are a lot of opportunities for Bulgarian entrepreneurs, and we would like to become a house name for the Bulgarian companies, as we have become the house name for the Russian companies.
Where does Bulgaria stand in your global and regional plans? It seems to be shaping as a Balkan hub for VTB Capital?
Yes, we are already looking at a number of opportunities at the Balkan countries. Obviously, we would like to see Mr. Veltchev's team empowered to generate more transactions. They have already presented us with a number of regional opportunities so we see Bulgaria as the first step for entering the Balkan markets. It is unlikely for us to be opening offices everywhere.
But another factor which helped us in making this particular decision is the efficiency of the Bulgarian market. It is a pretty well-managed economy, and the government has a pretty clear structure of corporate governance, a very low tax base, and, again – Bulgaria is very close to us culturally. So from whatever perspective you look at it, Bulgaria is a perfect place for us to start our operations in the Balkans.
As a banker, what is your take on whether Russia and the EU will come together into a monetary union at some point in the future?
That is a very big and complex issue but I personally believe that we – the European Union and Russia – are to be connected in the future, and that there should be much interaction between the two unions. Because I think Russia will first want to get closer to the former Soviet Union countries. You know there is a customs union between Russia, Belarus, and Kazakhstan, and Ukraine is thinking about joining or not joining.
As a country, Russia would like to join the OECD, and I think that after the entry into the WTO a main task for the Russian government will definitely be the achieving of OECD membership.
And we would like to linked much closer with the European Union. This goes all the way from visa restrictions to trade. Historically and geographically we are very connected. Asia is becoming an extremely powerful region. The USA and Latin America are also emerging as very strong in the long run so we should be gravitating towards each other, and altogether this cooperation can be a very formidable force in terms of labor market, natural resources, technology, and so forth.
Obviously, the EU is going through a very difficult period, and there is a need for massive reforms, not only fiscally for the EU but also in the European countries which need to synchronize and make their labor laws much more consistent, etc. But I do believe in the future and cooperation of the European Union and former Soviet Union countries. I don't think we have the choice of not cooperating.
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