The Russian government’s decision that Russia’s second largest bank VTB should hold a share buy-back to compensate losses to shareholders in the bank's "people’s IPO" was taken to protect the bank’s reputation in the eyes of society and investors,  in the words of Prime Minister Vladimir Putin. Putin instructed state-controlled VTB last week to devise a buyback plan for the people's IPO, which targeted members of the general public.

Almost 120,000 retail investors in Russia bought shares in May 2007, part of a larger offering in which VTB floated 22.5 % of its stock, raising some $8 bn. Mikhail Zadornov, head of the bank’s retail arm, VTB-24, said that VTB, intended to buy back shares sold in a  "people's IPO" in 2007 at the original offer price of 13.60 kopeks per share, or almost double the current market price. "If you believe that for some reasons it is better for you to get rid of these assets, I can instruct the bank’s management to think about a share buyback scheme from minority shareholders so that you do not sustain any losses,” Putin told participants in the Russia 2012 Investment Forum, addressing VTB minority shareholders.

VTB CEO Andrei Kostin said last week that the plan to buy back shares from some 115,000 minority shareholders would cost 15-18 bn roubles ($480-580m). (RIA Novosti)