VTB Considers Selling its African Business
May 29, 2019
Reuters News Agency has reported that Russia's second-largest bank, VTB Bank, is negotiating to sell its Angola-based Banco VTB África S.A.

"We are considering selling VTB's stake in Banco VTB Africa. At the moment, it is too early to talk about details of the possible deal," VTB said in response to a request from Reuters. According to a source close to the deal, which was cited by the news agency, "VTB does not see any great prospects there today: business environment in Angola, where the bank is located, is challenging because of sanctions.''

Headquartered in Luanda, Angola, Banco VTB África S.A was licensed in 2006 to operate in the African country. VTB owns 50.1% (initially 66%) stake in the bank. António Carlos Sumbula, the former president of Angola's state-run diamond company Endiama, owns 49.87%. As of December 31, 2017, Banco VTB África S.A had assets worth 18.2 billion rubles, its net income was 2.3 billion rubles, while cash flow from operating activities was 7.5 billion rubles. According to VTB financial reports, non-controlling shareholders of Banco VTB África S.A were paid 1 billion rubles in dividend between 2013 and 2017.

VTB has been unsuccessfully trying to sell its asset in Angola since 2014.

In February 2014, the bank and state-owned corporation Rostec announced they were buying a stake in Angolan private bank Banco Privado Atlântico. In a statement, the parties said that under the agreement, Banco VTB África S.A. will merge with Banco Privado Atlântico. According to the agreement, VTB, VTB Capital and Rostec's subsidiary RT-Global Resources were expected to be the shareholders of the newly formed group, after which VTB would withdraw from the capital within three years. The deal was agreed in October 2013 when Russian Deputy Prime Minister Dmitry Rogozin visited Angola.

After Russia was hit with sanctions in 2014, the Angolan partners in the merger deal between Banco VTB África S.A. and Banco Privado Atlântico had first taken a break to assess the legal consequences and then eventually abandoned the negotiations in 2015. In September 2015, VTB announced it was withdrawing from the deal "due to changed market conditions". The real reason was the risks of working with the Russian state-owned bank, which was subject to the US sanctions. Such risks, even on peripheral markets like Angola, are considered much more serious than declarations of cooperation and "strategic partnership".

In an interview in early 2018, VTB President Andrey Kostin told Reuters that the Angolan bank is one of the most profitable in the group — return on equity then exceeded 62%. In December 2018, the VTB supervisory board approved an increase in the authorized capital of Banco VTB-África by 5 billion kwanza (about $16.2 million) from the reserve fund of the subsidiary bank.

According to Angola's anti-monopoly regulator Autoridade Reguladora da Concorrência (ARC), VTB on May 24, 2019, presented for consideration a deal to sell its stake in Banco VTB-África to a certain Russian company listed as Rostang Ltd.

A legal entity bearing the same name (Rostang LLC) is registered in Russia with Natalya Ranchinskaya indicated as the company's owner. Previously, a 100% stake in the company belonged to Leonid Ranchinsky, the final beneficiary of Zdravexport Group. According to the company, the Group operates in Angola under a contract with the country's Ministry of Health, providing doctors with employment in suburban hospitals. Zdravexport Group "is an official representative of the Angolan Ministry of Health in Russia and the countries of former USSR." There are about 350 doctors currently working in Angola through Zdravexport Group.

Leonid Ranchinsky is mentioned on the official website of Angola's War Veterans Association as a member of the organization and "the head of a group of Russian civilian specialists" in Angola during the civil war there.

Earlier, VTB's attempt to conduct business in Namibia through joint venture VTB Capital (Namibia) ended in failure. In 2016, a lawsuit was filed against the bank and Credit Suisse in a fraud involving $2 billion in loans to state-owned companies in Mozambique. According to the charges, between 2013 and 2014, some Mozambican state-owned companies borrowed over $2 billion through loans guaranteed by the government and undisclosed to foreign donors. Most part of this loan ended up stolen.

The sale of the bank in Angola with the reason being "no prospects" is a clear indication of the limitations inherent in the current model of doing Russian state business in Africa.

Vadim Zaytsev