The head of international business of VTB Capital, Atanas Bostandzhiev, has resigned, Russian media reported, citing the press service of VTB Capital.
Interfax agency explains that the top manager will pursue his own projects – direct investments in companies from emerging markets. In the press release, the investment bank said that the decision was planned and aligned with the “strategy of the group”.
Atanas Bostandzhiev took over VTB Capital pls., with an office in London, in May 2011 from US investment bank Goldman Sachs, where he was in charge of business in Central and Eastern Europe, the Middle East and Africa. Before that, he was working in London as well – in the office of Merryl Linch.
After a year at the top manager post in VTB Capital pls., Bulgarian Atanas Bostandzhiev, said he intended to achieve contributions of the international business of the group in the range of 10% – 20% of the profits of “VTB Capital”. In 2013, VTB Capital pls earned slightly over $ 4 million in net profit. Moreover, the profit of the entire investment-banking business of VTB Group was 34.8 billion rubles – between $ 900 million and $ 1 billion. Thus, the profit of VTB Capital pls. did not exceed even 0.5% of the entire profit of “VTB Capital.” And the profit of VTB Capital pls. shrank times over – in 2012 it was $ 33.7 million.
The main reason for the profit collapse was the increase of labor cost – in 2013, the London office of Bostandzhiev spent on salaries a total of $ 246.2 million, compared with $ 191.2 million in 2012
“The London office does not generate sufficient income to support expensive bankers. They ended up spending 90% of the revenue and this indicator is usually much lower,” says a source close to Bostandzhiev before RBC. The newspaper assesses costs of VTB Capital pls. at $ 318 million while the revenue was $ 352 million.
In November 2013, Bostandzhiev has reported to his boss – the first Deputy Chairman of VTB, Yuri Soloviev – -that the international business of “VTB Capital” failed to meet earning targets and proposed to reduce customers from 1000 to 300, and the staff by about 40%, Bloomberg agency reminds.
Then, the President (Chairman of the Managing Board) of VTB Andrey Kostin announced his intention to shrink the cost of “VTB Capital” by 15%. “Atanas is an expensive banker and I think he was displeased by those job and activity cuts; even then his departure seemed to me to be one of the possible solution options,” commented another “acquaintance” of Bostandzhiev.
On the backdrop of the escalating conflict between Moscow and Kiev in the spring, the subsidiary of VTB received from the British financial regulator additional requirements for capital and liquidity, the majority of which were lifted after the elections in Ukraine, said recently the Chief Financial Officer of VTB, Herbert Moos, quoted by the British agency Reuters.
Asked by RBC whether the resignation of the head of the London office was not related to falling profits, the press service of “VTB Capital” reiterated that Bostandzhiev left to engage in his own projects.
Bulgarian Corporate Commercial Bank (KTB) – the “trigger” that propelled Bostandzhiev out of VTB?
The question whether the resignation was not related to the bankruptcy of Bulgarian Corporate Commercial Bank (KTB – in RBC it is written as Corporate Commercial Bank, CCB), in which 9% are owned by VTB, received the same response. Before his resignation from VTB, Bostandzhiev reiterated he had no intentions of rescuing KTB. “Now the share of VTB in KTB will have to be nationalized,” RBC commented.
Also, RBC did not forget to ask if Bostandzhiev had a direct relation to the purchase of a stake in KTB. “The transaction for the acquisition of shares was complexly structured; the volume of VTB Capital’s investment in KTB from the outset did not exceed 10 million euro, which was subsequently fully hedged,” is how VTB justified their actions.
An insider source from VTB explained that “if it has been decided that Bostandzhev should be dismissed for the failure with these investments (in Bulgaria – in partnership with the “bad apple bank” – KTB – of majority shareholder, Tsvetan Vasilev – editor’s note by Bivol), it would have become known later in order not to create the impression of a connection between these events.”
London bankers, approached by RBC, claim that “the story around a Bulgarian bank served as trigger.” Atanas Bostandzhiev refused to comment before RBC, saying he was busy with other things,” said RBC at the end of the article.
The office in Sofia was opened after Bostandzhiev landed in VTB Capital. He attended in person the inaugural press conference in Sofia. The office in the Bulgarian capital is managed by the former Finance Minister in the Cabinet of King Simeon Saxe-Coburg, Milen Velchev, and his former Deputy, Krassimir Katev. RBC clarifies that this way Sofia became up to par with London, New York, Hong Kong, Dubai and Singapore – all megacities with offices of VTB Capital pls.
Vedomosti, the joint Russian edition of the American “The Wall Street Journal” and the British “The Financial Times”, however, paid more attention to the case “KTB” and wrote that “investments in the Bulgarian bank are at risk of disappearing in the course of bankruptcy proceedings.” It is recalled that since the opening of the offices in Bulgaria, VTB Capital Bulgaria registered several acquisitions – shares in “BULGARTABAC” and in Bulgaria’s leading telecom – Bulgarian Telecommunications Company (BTC with the brand name Vivacom).
Africa: The call of the jungle!
Bostandzhiev worked on many Asian and African markets and intends to continue with his own projects, including those with participation of VTB Group, commented before Vedomosti an associate of the State-owned bank.
“Africa is one of the main destinations for the international expansion of VTB Capital”, said Atanas Bostandzhiev, himself, during the official announcement of bidding in a tender, along with Rostec and Tatneft, to build a refinery in Uganda. At the time, Bostandzhiev did not miss to boast that “VTB Capital is ready to provide services and expertise in the investment-banking sector in Africa, including financial consulting services.”
In February 2014, VTB and VTB Capital became shareholders in the Angolan bank Banco Privado Atlantico, where, similarly to the investment in KTB, they bought only 9.5%. The idea was to merge the bank in Angola with VTB Africa Bank. An investment banker, who has worked with Bostandzhiev, suggests that the Bulgarian will likely set up a fund as he had experience and reputation in this.
The Moscow Post: Own business with government money?
The influential Moscow English-language newspaper The Moscow Post (MP), for example, writes that “according to rumors, during his work in VTB, Bostandzhiev had created good relationship with the head of VTB, Andrey Kostin.” The article is titled “VTB is without “Capital”?
“Incidentally, Bostandzhiev worked quite a lot on African markets and now intends to continue there with his own projects. In other words, it appears that the former associate of VTB wants to build his own business abroad with the money of the State-owned VTB.”
According to the MP, in the course of a year, VTB Capital literally “swarmed” Africa with subsidiaries, and then the Head of its international business fled there to make his own business with money of the bank. “But, according to experts, this looks a lot like a well-organized (though not quite standard) scheme for disposing of assets from VTB.”
“And what is the benefit to the State in VTB financing Bostandzhiev’s African business? Honestly – nothing! However, the Head of VTB, Andrey Kostin, obtains an excellent mechanism for disposing of assets abroad because, formally, Bostandzhiev is no longer an associate of VTB. And after Kostin poured in his African structure huge amounts from budget finances, no one will accuse of conspiracy the chief of the State-owned bank,” comments the MP. “Isn’t this the work of a genius – to send a subordinate in Africa and pump budget resources in this “black financial hole”? This is what one wants to tell Kostin when analyzing the “African scheme” of VTB, “notes the author from the MP, Nikolay Stasov.
Controversial investments in Bulgaria
Given that VTB Capital pls. has a problem with achieving the required 25% – 30% profit and has 4% – 5% at best, why its assets in Bulgaria, such as the share in offshore companies, controlling the former State holding “BULGARTABAC”, are being sold? When the shares were sold to offshore structures connected to the fugitive majority shareholder and Chairman of the Supervisory Board of KTB, Tsvetan Vassilev, and to Delyan Peevski, lawmaker from the party of the Turkish minority, Movement for Rights and Freedoms, DPS, VTB said they had “achieved the expected return on the investment in “BULGARTABAC”. Given that they privatized “BULGARTABAC” JSC through a public tender in 2011 for only 100.1 million euro ($ 145 million) for 80% stake, how come they covered their investment with their two-year profit and why have they abandoned the easiest “profit” to cover the deficit in Bostandzhiev’s VTB Capital pls., about which he has complained in Moscow? Let’s not forget that the shareholder, represented by KTB and by connected companies, should be making profit from the operations of “BULGARTABAC”?
In this sense, the case KTB should also provide clarity on how much of the money to privatize “BULGARTABAC” is withdrawn from the bank by its great Russian “partner” VTB (they argue that the investments were only 10 million euros). Vedomosti, however, mentions larger amounts – in late June, the edition wrote that VTB lost $ 30 million in investment “in the bankrupt fourth largest Bulgarian bank.”
As early as the summer of 2013, sources of Bivol revealed that VTB was “dissatisfied with the partnership with Tsvetan Vasilev and KTB in their joint projects in Bulgaria.” At that time, the first protests began, associated with the then-main “partner” of Tsvetan Vasilev – Delyan Peevski. The rallies #DANSWithMe (DANS is the abbreviation of Bulgaria’s National Security Agency and protests were sparked by the Parliament’s appointment of Peevski as its head – editor’s note) were reported in Russian media. The business “Know-How” of Peevski in “BULGARTABAC” through Lafka, its newspaper and cigarette stands retail network, began to cause resentment in society last summer. All this “hit” indirectly on the image of VTB, referred to in publications of Bivol as the “Bank of the KGB.”
Parallel with the above, an investigation of Bivol, based on leaked correspondence of Sergei Avakov, established the presence in VTB of billions in deposits of Syrian dictator Bashar Assad, sworn just this past Wednesday as third-term President. This scandalous information was not officially denied by VTB. Meanwhile, TV7, funded by Tsvetan Vasilev, broadcast reports from Syria, in which it openly sided with the regime of the dictator Assad. Bivol also pointed out that Delyan Peevski had traveled frequently to Syria, and this information was not denied by the “successful young man” and lawmaker from DPS either. It is unlikely that all this information has remained unnoticed by the special services, overseeing violations of sanctions against the Syrian regime. Here’s what Bivol wrote on September 18, 2013:
Million-Dollar Question: Has Delyan Peevski traveled to Syria?
One year ago, we clearly formulated concerns about the origin of funds of VTB invested in Bulgaria. We cited the restrictive measures on Syria of the EU countries, in force since April 24 2012, according to which “the assets of the Syrian Central Bank within the EU are frozen and it is prohibited to make funds or economic resources available to it.”
We sent questions about the origin of these funds to VTB, DANS, the Prosecutor’s Office and the European Commission. Not a single answer has been received to date.
Today, we ask these questions again, but are adding one more, which can shed light on a number of shady dependencies.
Has Delyan Peevski visited Syria in recent years and how many times?
A question directly connected with the existence or inexistence of Syrian accounts in VTB. If Bulgarian media and services don’t do it, then someone at the American Embassy can address this quite unordinary question and check flights to Syria.
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