Afraid of falling behind its erstwhile rival, Russia's second-largest bank VTB Bank is negotiating a joint venture with Chinese e-commerce major Alibaba, Vedomosti daily said on June 19 citing unnamed sources close to the deal.

Reportedly, VTB wants to create a digital platform and catch up with sister state-owned bank Sberbank, which dominates the sector and is way ahead with its digitally-driven strategy. "VTB has strong logistics (controls the Post of Russia), off-line branch chain, financial competencies, and cooperation with Alibaba would fill in the missing know-how gaps," the sources told the daily. 

In turn, a JV with Russia's major bank would help Alibaba to potentially dodge the levy on cross-border commerce which is reportedly being prepared by the government to boost domestic competitiveness on largely foreign and Chinese dominated e-commerce market.

"The news is neutral for VTB shares at this stage, but the creation of a JV could be very interesting from a strategic standpoint," Aton Equity commented on June 19, while reminding that previously Sberbank considered Alibaba as a partner to develop an e-commerce platform, but later decided to set up a JV with Yandex.Market. 

Over 20mn Russians conduct purchases using Alibaba (through AliExpress), while its annual turnover from Russia exceeds RUB100bn ($1.6bn). In the meantime, Russians receive their purchases mainly via Russian Post, which together with its subsidiary, Post Bank, is a key partner for VTB. 

Therefore, Aton believes that "healthy synergies could be achieved by combining VTB as a financial company, Russian Post, and Alibaba as a leading e-commerce platform" and sees the established JV as possibly presenting "strong competition to the Sberbank/Yandex.Market JV."