Talk about keeping it in the family. In March, Riccardo Orcel was working to secure an investment from sovereign wealth fund Qatar Holding in his bank, Moscow-based VTB Group. He found himself negotiating against his older brother, Andrea, CEO of UBS Investment Bank, who was representing the Qataris.
The two spent more than a decade at what is now Bank of America Merrill Lynch and have worked together since, says the younger Orcel, deputy CEO of VTB, whose 7.4 trillion rubles ($243 billion) in assets as of last December make it Russia’s second-largest bank. But this was the first time they were on opposite sides of the table, he notes. They could match wits again if the VTB executive succeeds in making the firm “a major headache for the world’s investment banks.”
To that end, Orcel also runs VTB Capital, its corporate and investment banking division. “We want to change the perception among clients and rivals and move from being seen as a domestic Russian boutique,” he says. VTB ranked second in Russian M&A in 2012, advising on 21 deals worth a combined $68.3 billion, according to Dealogic. That’s a 374 percent increase over its first-place finish in 2011, when it worked on 20 deals worth $14.4 billion.
Orcel, 47, got to know VTB as head of corporate and investment banking for Central and Eastern Europe, the Middle East and Africa at BofA Merrill. After the Rome native worked on the Russian bank’s $3.3 billion partial privatization in 2010, VTB persuaded him to leave London for Moscow. In late 2011 he was
named deputy CEO of VTB, which is majority-owned by the Russian government. Orcel compares VTB Capital to a 1990s merchant bank. “We have the flexibility to combine advisory with direct investments and private equity to co-invest with our clients and shareholders,” he says, noting that VTB is forging relationships with sovereign wealth fund China Investment Corp. and U.S. private equity giant TPG Capital.
VTB’s $3.2 billion rights issue, which closed in May and garnered investment from the Qataris as well as Norges Bank Investment Management, the State Oil Fund of Azerbaijan and China Construction Bank, has boosted its tier-1 capital ratio and total capital ratio to 11.9 percent and 16.3 percent, respectively.
Orcel completed a doctorate in economics at the University of Rome in 1987, writing his thesis on integration in M&A deals. Following a trip to London, he joined Merrill Lynch & Co. in 1989. Orcel was part of several financing teams at Merrill. After being named head of the structured-finance special industry group in 1998, he switched to investment banking. Orcel jokes that he got interested in emerging markets to avoid working for his brother, who became Merrill’s head of European investment banking in 2004. He moved to New York to run the bank’s Latin American investment banking business, then took over Ceemea in 2005. Focusing on Russia, he worked on transactions including the $2.2 billion IPO of United Co. Rusal, the aluminum producer owned by billionaire Oleg Deripaska, on the Hong Kong Stock Exchange in 2010.
“At VTB I am gaining a much wider perspective than I had working for a global investment bank,” says Orcel, whose team has masterminded the firm’s overseas expansion through a series of joint ventures. So far, they have negotiated alliances with U.S. boutique investment bank Evercore Partners and Brazilian brokerage and investment bank BTG Pactual, and they are close to an agreement with a Chinese partner. “The JV model is a low-cost way of building a global offering in investment banking as well as providing global industry perspective to our client base in Russia,” Orcel says.
The deal maker, who moors a yacht in Montenegro, will keep steering VTB through foreign waters. Orcel says his bank has taken advantage of other firms’ retrenchment from emerging markets: “We want to grow selectively outside our domestic market and export our EM expertise.” • •
