VTB Second-Quarter Profit Rises to Record on Higher Lending

VTB Group, Russia’s second-biggest bank, more than doubled second-quarter profit to a record as it boosted lending and recorded fewer bad loans.

Net income climbed to 27.4 billion rubles ($948 million) from 11.6 billion rubles a year earlier, Moscow-based VTB said today in a statement.

Russia’s economy may grow 4.1 percent this year from 4 percent in 2010, spurring corporate demand for financing. Prime Minister Vladimir Putin’s government approved a record $14 billion bailout for the Bank of Moscow in July, as VTB acquires control of the country’s fifth-biggest lender.

“They look good -- credit growth picked up in the second quarter, and coupled with a slight pickup in margins, this highlights a strong underlying quarterly revenue performance,” David Nangle, head of equity research at Renaissance Capital in Moscow, said by e-mail.

VTB fell 2.5 percent to 7.3 kopeks as of 12:58 p.m. in Moscow trading. OAO Sberbank, Russia’s largest bank, dropped 1.6 percent to 83.42 rubles.

“Banks in general are getting hit,” Luis Saenz, chief executive officer of the U.S. unit of Moscow-based brokerage Otkritie Financial Corp., said by e-mail. “The results are not bad. I would say they’re marginally better than expected.”

One-Time Gain

VTB’s lending rose 7 percent in the period to 3.28 trillion rubles, while non-performing loans declined to 7.7 percent of total lending from 8.6 percent at the end of last year. The bank set aside 9.6 billion rubles to cover impaired loans, about 18 percent less than in the year-earlier period.

“We have taken important steps towards the integration of the group’s new businesses,” VTB President Andrey Kostin said in the statement. “We believe these will provide strong support to the group’s franchise and deliver further value to shareholders.”

The lender’s earnings were boosted by a one-time gain of 10.3 billion rubles from the recovery of provisions for loans VTB had expected to write down. Excluding this revenue, the bank’s net income was 18 percent below the estimate of analysts at Citigroup Inc.

This was “on the back of higher-than-expected operating costs and higher-than-expected provisioning,” Citigroup analysts Simon Nellis and Maria Semikhatova wrote in an e-mailed note. “We view the results as neutral as strong core revenue trends were offset by higher costs and provisions.”

VTB’s staff costs and administrative expenses climbed 58 percent to 34.3 billion rubles from 21.7 billion rubles a year earlier. Assets increased 10 percent to 4.72 trillion rubles at the end of June.

To contact the reporters on this story: Jack Jordan in Moscow at jjordan22@bloomberg.net; Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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