Russia's VTB aims to double its gold trade in three years

By Katya Golubkova

MOSCOW (Reuters) - VTB Capital, the investment banking arm of Russia's second-biggest bank, plans to double its gold-trading volumes over the next three years from around 110-150 tonnes a year currently, Atanas Djumaliev, head of global commodities at the firm, told Reuters.

VTB is one of the biggest players in the Russian gold market alongside Sberbank, Russia's biggest lender.

"In Russia we currently trade 70-90 tonnes (of gold) a year; in the international market, another 40 to 60 tonnes, so our volumes are between 110 and 150 tonnes a year currently," said Djumaliev, who previously worked at Goldman Sachs.

"We are looking to double this amount over the next three years mostly by growing our international operations."

VTB Capital provides finance to gold producers in Russia, getting some of their gold output in return. VTB has to offer gold produced at home to the Russian central bank first, its biggest customer, before exporting it.

Djumaliev's team, now consisting of 35 people focusing on different type of commodities and operating mainly from Moscow, Zug and London, plans to expand its access to physical gold and increase volumes acquired from producers outside Russia.

"This should also create a synergy for us to be more competitive in supplying precious metals to the Chinese and Indian markets," he said, adding that the commodities unit plans to expand its activity via the banking group's offices in Asia.

Russia is among the world's top three producers of gold and the second-biggest oil exporter. Djumaliev said that VTB is now aiming to trade around 10 million tonnes of oil a year by 2019, up from "several million tonnes" of crude and oil products in the first half of 2016, through prefinancing and other deals.

INDIA AND CHINA

Gold is expected to post its highest average annual price in four years in 2017, on the back of improving physical buying by China, the world's top gold consumer, and India, the world's second largest consumer.

"India has historically been our largest market for physical gold and silver supply, and we plan to bring our market share there up to 10 percent," Djumaliev said, declining to say what its current market share is.

In 2015 VTB supplied the country with 40 tonnes of gold from certain global producers, he said.

Indian gold imports in the first nine months of 2016 are estimated to have slumped 59 percent from a year ago to 268.9 tonnes, although purchases are expected to improve in the last quarter of 2016.

"We are currently exploring potential credit facilitation activities either through VTB's India branch or partnerships with local banks in order to further grow our share among domestic consumers of gold," Djumaliev said.

Meanwhile VTB despatched its first batch of gold to China in April, becoming the first Russian bank to start direct supplies of physical gold to the world's largest buyer and consumer of the precious metal.

It aims to supply between 80 and 100 tonnes (2.57-3.22 million troy ounces) of gold to China per year, boosting deliveries of the metal in the next 12 months.

"The Chinese market is one of our priorities in terms of investment of our resources, and we plan to become one of the major foreign players in the local gold market through increasing our trade volumes there," Djumaliev said.

(Editing by Greg Mahlich)