Middle East is an important capital pool in the world

The CEO of investment bank VTB Capital, which has set up shop in Dubai, sees the region as one of the most important capital pools in the world. "The changed world is no longer dominated by the Western markets and has moved to become dependent on a number of very important capital pools," said Herbert Moos. "One of them is Asia, another is the Middle East."

VTB Capital – part of Russia's VTB Group – is targeting large investors and expects to start completing major transactions by the end of the year.

Moos spoke to Emirates Business about the bank's plans for the region.


How do you plan to obtain business in this region amid the challenges of the global economic downturn?

We aim to build a Russian investment banking champion. Looking at Dubai, we notice a significant number of banks but to our knowledge there are no banks offering Russian investment banking products. So what we are offering are very unique and specially-designed products. In that sense, the current environment presents us with very appealing opportunities. We are offering a comprehensive set of investment banking products focused on Russia. What we are offering within that are market products, investment banking and investment management products. These would range from fixed income and equities, derivatives, credit to commodities. In investment banking, we have a team of coverage bankers for all the key Russian industries – financials, metals and mining, oil and gas etc – mergers and acquisitions, debt capital markets and equity capital markets teams. In investment management, our role would be to manage investments for third parties and we have interests in infrastructure, real estate funds, venture capital funds and some public funds. Across each of those product lines, we see specific investment opportunities.

How does the region fit into your growth strategy?

VTB Bank is a very established organisation, and VTB Capital is a new project for the bank. We reflected on the opportunities available to us rather than looking to replicate anything. We also reflected that, apart from that we needed comprehensive geographical coverage. Part of that strategy is a reflection of what we call internally "multiple world". We believe the world has changed fundamentally after the crisis. It is no longer dominated by the Western markets and has moved to become dependent on a number of very important capital pools. One of them is Asia, another is the Middle East. As part of this strategy we recently established a presence in Singapore and now in the Middle East.

You are looking at selling Islamic bonds, or sukuk. In the current challenging economic climate, how optimistic are you about the market for these bonds in Russia?

We are very actively pursuing sukuk issuance and are looking to be the first bank to be Russian issuer in the sukuk market. Realistically we are looking at Q4 this year for the market to open up. The fact that it slowed down doesn't mean the market is disappearing. On the contrary, the market will grow with the potential addition of the Russian investor base. We have had some discussions with large institutional investors there and also potential issuers. There is significant appetite for investing in properly structured Shariah-compliant products.

How will your recent memorandum of understanding with Kuwait Finance House contribute towards that?

We don't have our own expertise [in this area]. We signed an MoU with Kuwait Finance House so they can provide that expertise to structure the investment in appropriate manner.

How will you facilitate the flow of investments to and from this region?

From Russia to the Middle East our clients would be clients of the VTB Group, which is the second largest group in Russia. Almost 60 per cent of Russian corporates use VTB Bank. We are able to advise them on new opportunities that emerge here. Russia has significant expertise in energy and a number of companies are active on that front. There are lots of companies looking for opportunities. In this region, we are targeting institutional investors and sovereign funds. As the VTB group is close to 80 per cent owned by the government, investors would have political assurances about those investments. We are talking to large institutional investors and sophisticated investment projects.

Why do you think Russia offers attractive opportunities to Middle East investors and which are the most attractive sectors?

Russia is a great producer of energy, and so is this region. We both need to diversify away from our traditional dependence. In that respect, even the projects that are dealing with energy and exploration in geographically diverse sector will present opportunities for investors on both sides. Russia needs significant investment in infrastructure, it's an area familiar to investors in this region where there is a lot of spending on infrastructure-related projects. In fact we are bidding for the third-largest airport in Russia in conjunction with Frankfurt airport. As this would require heavy investment, if we win we would be looking at a large number of partners to come in and it would certainly create lots of interest among Middle East investors. This region is dependent on agriculture projects. Russia has a tremendous amount of fertile soil but the yields on that soil are low, it just needs investment and intensive methods of cultivation – it's a great opportunity.


PROFILE: Herbert Moos CEO, VTB Capital

Moos joined VTB Capital in August 2008 after spending 14 years at Lehman Brothers, where he was most recently Chief Financial Officer, Asia-Pacific ex-Japan and Treasurer, Asia-Pacific. He was based in Tokyo and Hong Kong, having started his career at Lehman's London office. In his past six years with Lehman in Asia-Pacific, he played a key role in building the Asia investment banking franchise from a satellite to an operation annual net revenue of more than $3 billion. Moos has a master's in finance from the London Business School. He also holds an AMCT professional qualification and is a CFA(R) charterholder.

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