Russian retail investors were looking at instant profits alongside Western institutions yesterday as the flotation of VTB, the biggest global IPO so far this year, got off to a flying start.

Shares in Russia’s second-biggest bank surged by 7.5 per cent in conditional dealings in London, giving average profits on paper of about $900 (£454) to each of the record 131,000 small investors who bought shares.

The shares were priced near the top of the 11.3-13.9 kopeck range at 13.6 kopecks (0.27p) and at that price the issue was oversubscribed seven times. The Global Depository Receipts (GDRs), packages of 2,000 shares trading in London, were priced at $10.56 and immediately soared to $11.35 in conditional dealings.

The placement of $8 billion of shares, or 22.5 per cent of the enlarged bank, values the business at $35.5 billion, but leaves the Kremlin still controlling the majority of the shares.

VTB declared the flotation “the most successful Russian retail offer to date by number of applicants and value of demand”. Of the $8 billion of new shares offered for sale, retail investors received their full allocation of $1.6 billion, or about $12,200 per shareholder.

Although only modestly popular by the standards of Western privatisations, the retail offer was more popular than the IPO of the energy group Rosneft, which attracted 115,000 investors buying $810 million of stock, and the secondary offering of the savings bank Sberbank, which was taken up by 30,000 investors buying $550 million of shares.

The $10.6 billion flotation of Rosneft was regarded as a disappointment with small domestic investors, and foreign oil companies and oligarchs were drafted in to get the issue away. Sberbank’s $9 billion rights issue had to be underwritten by the Russian central bank. The VTB flotation was marketed to ordinary Russians and retail investors queued up at VTB branches to put in applications.

VTB is the second-largest bank in Russia, established in 1990 as the Bank for Foreign Trade of the Russian Federation. Last year it posted record net profits of $1.179 billion. It owns Moscow Narodny Bank in London. With a firmly established corporate customer base, it is looking to expand its retail division. It has 524 branches in Russia, as well as subsidiaries in Ukraine, France and Germany.

Last year it expanded its loan portfolio by 47 per cent to $29.3 billion, building market share. Russia is regarded by some investors as an exciting banking market because growing prosperity is making millions of people eligible for mortgages, car loans and consumer credit.

Andrei Kostin, the chairman of VTB, said: “The strength of demand for our shares is a clear endorsement of our strengths and growth strategy.” VTB plans to use the proceeds of the share issue to support expansion of its domestic retail network, which trades under the VTB24 name.

The float is expected to yield substantial fees for the three co-ordinators – Citigroup, Deutsche Bank and Goldman Sachs – and for the joint bookrunner Renaissance Capital.

Unconditional dealings in the GDRs begin on Thursday.

True survivor

— VTB shares made their debut in London yesterday, but one of its subsidiaries has a long-established presence in the City

— Moscow Narodny Bank, last year renamed VTB Bank Europe, was founded in London in 1919

— It is a direct descendant of the first Russian cooperative bank, Moskovski Narodnyi Bank, which was set up in 1912

— Moscow Narodny’s first registered branch opened at 81 King William Street. The aim was to develop trade between Russia and the UK and other Western European countries

— Despite all the political turmoil of the last century, it has continued to operate and grow in the West. It expanded rapidly in the late 1950s, playing a major role in the establishment of the Eurodollar market

— Before being merged into VTB, it had established a presence in Singapore and China

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