World Economy

Putin hasn’t got vast secret wealth and I don’t work for the Kremlin: VTB chief

I don't believe Putin has $2 billion: VTB CEO

The head of a top Russian state-backed bank downplayed media reports suggesting President Vladimir Putin has a vast secret wealth, stressing that the leader was "very much dedicated to his job," in an interview with CNBC on Tuesday.

Speculation on Putin's personal wealth increased in April when a massive anonymous leak of financial papers, known as the Panama Papers, allegedly showed a $2 billion money trail linking close Putin aides with offshore firms.

Andrey Kostin, the chief executive of Russian state-owned VTB Bank, poured cold water on the $2 billion sum on Tuesday.

"I don't believe that Mr. Putin has 2 billion, because even if he wanted to have, I don't know how he is going to spend them. I think those people are doomed for the rest of their life to live a life where everybody will be screening them or watching them and I don't think he is that kind of person," Kostin told CNBC in Moscow.

"He is very much dedicated to his job. He really wants to change Russia. And I don't think that earning the private wealth is something among his priorities in life … nobody ever saw this billion or even millions of Putin's money," he added.

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Putin's United Russia party scored a landslide victory on Sunday in a parliamentary election, which could help the former KGB officer run for a fourth term as president in 18 months' time, if he so wishes.

VTB Bank is Russia's second-biggest by assets after Sberbank. The Russian state has large stakes in both banks (60.9 percent in the case of VTB). This has led to suggestions about government interference, which Kostin denied on Tuesday.

"For these 20 years, I have never had a call from the Russian president saying 'you should give a loan to this or that person' … my relationship with the government is just (the) relationship with the majority shareholder," he told CNBC.

While Kostin admitted corruption remained a problem in Russia, he said that was not the case at VTB.

"I am working for the bank and I'm not paying any money to anybody. We definitely are big enough and strong enough not to increase corruption in the country. I very much believe I am serving the interest of the Russian economy and my shareholders, 40 percent of whom are private investors," he told CNBC.

The Russian government has had a long-term plan of privatizing state-owned assets like VTB Bank, but this was stalled first by the global financial crisis and then by Russia's more recent recession and the imposition of international sanction. Russian individuals and companies with close ties to the Kremlin — like VTB Bank — have been under sanctions since Russia's annexation of Crimea in 2014 and the pro-Russian uprising in Ukraine.

Pro-Russian activists seize the main administration building in Donetsk, Ukraine.
Alexander Khudoteply | AFP | Getty Images

While a lower government stake might improve global investors' perception of VTB Bank, Kostin said the time was not yet right for full privatization.

"As soon as we leave this time of uncertainty, I think that we are again quite ready to raise the question of the full privatization of VTB, which is quite possible, but I don't think today the conditions for this are very good," Kostin told CNBC.

He suggested the right time would be in two-to-three years, when he forecast the bank would be more profitable, the Russian economy would be growing again and sanctions would be removed.

"Sanctions (are) not something which is related to the bank. It is something that is related to geopolitics and at the moment I don't see too much changes in the geopolitics ... and with the American elections coming I think we will have to wait a little bit longer to see any improvement in the relationship between Russia and the United States for example," Kostin told CNBC.

"As far as Europe is concerned, yes, there is a different opinion among members with regards to sanctions, but I don't know, it is very hard for me to predict (for how long sanctions will last). For the moment, we perceive … the sanctions will stay for another year or so," he told CNBC.

VTB Bank posted a second-quarter net profit of 14.8 billion rubles ($229 million) in August, up from 1.2 billion rubles in the same period in 2015.

The Russian economy has slowed steadily since 2010 and shrunk on-the-year in 2015. It has been hit by the drop in oil prices and the international sanctions. Poverty has increased while inflation remains high standing at 6.9 percent year-on-year in August.

Russian bonds provide a handsome margin: VTB CEO

On Friday, Russia's central bank cut interest rates, as expected, by 50 basis points to 10 percent in a bid to stimulate the economy through gradual rate-cutting. The bank signaled that no further rate cuts were likely this year.

Kostin described himself as a "moderate critic" of the central bank on Tuesday, saying he had hoped it would cut rates to 9 percent in 2016.

"The central bank promised further rate cuts next year and I think there was a very good reason for this because we see inflation going down … I think there is a good reason why the central bank should continue to cut down the interest rate," he told CNBC.

Prices for crude oil, of which Russia is a major producer, tumbled from mid-2014 onward, hitting a nadir below $30 per barrel early this year. Light crude and Brent crude futures are currently trading in the forties.

On Tuesday, Kostin said he believed oil prices had bottomed and that prices for some commodities were already rising.

"For oil … we don't expect any further drastic cuts of prices to $20 or $30 or some such awful scenarios and also we see the increase in some such as coal, particularly coke, and some other important commodities of Russian export and Russian production," he told CNBC.

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The International Monetary Fund sees the Russian economy shrinking by 1.2 percent in 2016, before returning to growth in 2017.

"The negative growth of the economy doesn't encourage enterprises to invest more money and to borrow more money … but … we see a lot of growth of profitability for the bank," Kostin told CNBC.

The banker forecast the economy would grow by 1-2 percent for the next couple of years. On Friday, S&P Global Ratings upgraded its outlook on the Russia's credit rating to "stable" from "negative."

"External risks to Russia have abated to a significant extent, while the country's economy continues to adjust to the dual shocks of a lower oil price environment and sanctions imposed by the European Union and the U.S.," S&P said in a report on the revision.

To read Kostin's views on Trump and Clinton, click here.