VTB Net Income Rises 15% on Retail Lending, Beats Estimates

VTB Group, Russia’s second-largest lender, said third-quarter profit climbed 15 percent due to an increase in consumer lending.

Net income attributable to shareholders rose to 23.4 billion rubles ($760 million) for the three months through Sept. 30, from 20.4 billion rubles a year earlier, Moscow-based VTB said today in a statement. That beat an average estimate of 19.7 billion rubles from 15 analysts surveyed by the lender. Net interest income, the difference between what a bank earns from ending and what it pays on deposits, rose to 49.2 billion rubles for the quarter from 46 billion rubles a year earlier.

VTB, which is almost 76 percent owned by the state, plans to raise as much as $3 billion selling new shares in the first half of 2013 to boost capital adequacy levels after acquisitions of domestic lenders and a share buyback last year. In September, Russia’s central bank sold a minority stake in OAO Sberbank, the country’s biggest lender, raising about $5.2 billion.

“VTB’s results are mixed,” Natalia Berezina, a banking analyst at UralSib Financial Corp. in Moscow, wrote in e-mailed comments today after the results were published. “They beat consensus and our expectations but costs and provision charge were higher than expected.”

VTB’s staff and administrative costs jumped 49 percent to 134.9 billion rubles in the first nine months due “to the consolidation of Bank of Moscow,” according to the statement.

Capital Ratio

The lender said its Tier 1 capital ratio, a measure of financial strength, rose to 9.3 percent from 9 percent at the start of the year after it raised $1 billion from the nation’s first perpetual bond in July. Perpetual bonds pay more than securities with set maturities because issuers must compensate investors for the risk of holding notes that may never be redeemed. The central bank requires a Tier 1 ratio of 10 percent.

“We feel very comfortable with our capital position, which means we do not have to go to the market,” Chief Financial Officer Herbert Moos said in an analyst call today. “It will depend on our level of growth.”

VTB and Sberbank, Russia’s two biggest banks, will be fully privatized in five to 10 years, the RIA Novosti newswire reported last month, citing First Deputy Prime Minister Igor Shuvalov, in comments confirmed by his office. Russia’s central bank reduced its stake in Sberbank to 50 percent plus one voting share with the September sale.

Non-performing loans increased to 5.6 percent of total lending from 5.4 percent at the start of the year, the bank said in the statement. Retail lending jumped 25 percent in the first nine months, while corporate lending fell by 10 percent.

VTB’s shares dropped as much as 1.4 percent and last traded 0.5 percent lower at 5.46 kopeks by 6:01 p.m. in Moscow. The bank’s market value has plunged 60 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.

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