UPDATE 1-Russia VTB heads market sell off as buy back unlikely

* FinMin says VTB is unlikely to buy its shares back

* Shares in VTB fall 10 percent underperforming the market

* VTB supervisory board to discuss the buy back Wednesday

(Adds fund managers, analysts comments, background)

MOSCOW, May 13 (Reuters) - Shares in Russia's state-controlled VTB bank (VTBR.MM) fell deeply into the red on Wednesday heading the downward move of the market as investors fixed the profit.

VTB shares have jumped almost 30 percent since last Thursday, mostly on news that the bank would buy back shares at the IPO price -- roughly four times more than they are worth now, said Rustam Botashev, analyst at Unicredit Securities.

Shares in Russia's second biggest lender plunged nearly 9 percent at 1356 GMT after surging more than 6 percent during trading earlier in the day.

The broader MICEX stock index lost 5.57 percent.

VTB supervisory board was unlikely to support the buy back, Alexei Savatyugin, a senior Finance Ministry official and a member of the bank's board, told reporters.

His comments triggered a massive sell off in VTB shares.

VTB supervisory board will discuss the share buyback Wednesday afternoon and the eventual decision on the buyback is still unclear, Rye, Man & Gor Securities said in a flashnote.

"I doubt that VTB has been surging on buy back news. It is hard for me to believe in this nonsense (buyback)," said Vadim Ogneshchikov, portfolio manager at Deutsche UFG.

The Russian stock market has been rallying for more than two months cheered by rising oil prices and growing investor risk appetite and the benchmark RTS .IRTS scaled a 7-month high above 1,000 points during Wednesday's trading session.

"VTB is the poster child for the so-called unloved stock. It has outperformed the market long enough to become eye-catching for the speculative trading," Andrei Kilin, portfolio manager at Troika Dialog said.

Russian banks have been badly hit by the stock market collapse last year and rising bad loans are consuming profits and capital as Russia's economy faces the first contraction in a decade.

VTB, one of Russia's clearinghouses for state aid to the economy, is under pressure from the government to continue lending through the crisis and expects a 180 billion rouble ($5.6 billion) capital injection from the state in the coming months.

This amount is only 20 billion roubles ($620 million) less than the amount all privately-owned banks will need in additional capital injections this year, according to the Finance Ministry's estimates. [ID:nLD47928] (Reporting by Yelena Fabrichnaya; Writing by Dmitry Sergeyev; Editing by Sharon Lindores) ($1=32.28 Rouble)