VTB Third-Quarter Profit Misses Estimates on Bad Loan Provisions

VTB Group, Russia’s second-biggest bank, said third-quarter profit slid 24 percent, missing analysts’ estimates, as it increased bad loan provisions.

Net income attributable to shareholders fell to 17.9 billion rubles ($541 million) from 23.4 billion rubles a year earlier, Moscow-based VTB said in a statement today. That missed an average prediction of 22.2 billion rubles among seven analysts surveyed by Bloomberg.

“The group has continued to build loan provisions, which affected the bottom line,” VTB Group Chief Executive Officer Andrey Kostin said in the statement. “While macroeconomic factors continue to challenge financial institutions in our home market, VTB Group has achieved further healthy balance sheet growth and strong year-on-year performance.”

Russia’s $2 trillion economy grew less than estimated in the third quarter, extending its worst slowdown since the 2009 recession. The expansion “doesn’t inspire optimism” and the government can no longer afford additional budget spending increases, Finance Minister Anton Siluanov said last month.

The charge for bad debts increased to 22.1 billion rubles from 12.7 billion rubles, the bank said. Non-performing loans declined to 5.4 percent of total lending compared with 5.5 percent at the end of the second quarter, VTB said.

Shares Fall

VTB’s shares dropped as much as 1 percent and traded less than 0.1 percent lower at 4.57 kopeks at 3 p.m. in Moscow. The bank’s market value has plunged about 66 percent since it raised $8 billion selling stock at 13.6 kopeks in an initial public offering in 2007, the world’s biggest that year.

Russia’s economic slowdown is taking its toll on the finance industry. The Central Bank revoked the licenses of OAO Master-Bank and OAO Volga Social Bank in the past two weeks for failing to satisfy regulations, while it has approved a recapitalization plan with OAO KB Solidarnost in Samara to boost “trust in the region’s credit organizations.”

Net interest income, the difference between what a bank earns from lending and what it pays on deposits after provision for impairment, advanced to 60.8 billion rubles from 49.2 billion rubles a year ago, VTB said. Net fee and commission income rose to 13.3 billion rubles from 12.4 billion rubles.

Consumer lending increased 8.1 percent from a year earlier to 1.42 trillion rubles. Lending to companies climbed by 6.4 percent to 4.6 trillion rubles.

The Russian government’s stake in VTB shrank to 60.9 percent from 75.5 percent on April 29 after the sale of shares valued at $3 billion.

Capital Adequacy

The bank said its Tier 1 capital ratio, a measure of financial strength, slid to 10.3 percent from 10.8 percent on June 30. The central bank requires a Tier 1 ratio of 10 percent.

VTB has been selling assets this year to boost earnings. It sold half of its stake in Tele2 in October to billionaire Yury Kovalchuk after acquiring the nation’s fourth-largest wireless operator for $3.6 billion in March.

To contact the reporter on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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