Bank of Moscow to issue $3.4 bln worth of shares

Bank of Moscow, recently taken over by Russia's second largest bank VTB, will issue up to 100 billion rubles ($3.41 billion) worth of shares this year as part of a 400-billion ruble bailout, Deputy Board Chairman Alexander Yastrib said on Tuesday. "We are planning to do it before the end of the year... So far the plans have not changed," Yastrib told reporters, adding that the bank needs the share issue to increase business volume. Bank of Moscow, the capital city's investment vehicle under previous Moscow Mayor Yury Luzhkov, was taken over by VTB after President Dmitry Medvedev fired Luzhkov over a loss of trust last fall. A recent check of the bank revealed a significant hole in its assets. Under the terms of the record bailout, VTB must raise its stake in Bank of Moscow to 75 percent from 46.5 percent for the central bank to disburse a low-interest loan of 295 billion roubles. That will help Bank of Moscow to book an accounting gain to cover the worst of its bad loan problem. VTB has to pump a further 100 billion roubles in capital into Bank of Moscow before the end of 2012. Yastrib said the share issue would help boost the bank's business. "There are very aggressive development plans. The shareholder is checking the bank on how to improve the bank's opportunities to grant loans," he said. The Bank of Moscow plans to increase its credit portfolio for small and medium-sized businesses to 200 billion rubles in the next two years from the current 30 billion rubles.