July 2 (Bloomberg) -- VTB Group, Russia’s second-biggest lender, said profit tumbled 33 percent in the first quarter as a slowing economy led to increased provisions for loan losses.
Net income dropped to 15.7 billion rubles ($470 million) from 23.3 billion rubles in the year-earlier period, the Moscow-based bank said in a statement today. That missed the average 15.4 billion-ruble estimate of five analysts surveyed by Bloomberg.
Russia’s economy grew 1.6 percent in the first three months of 2013 from a year earlier, decelerating for a fifth consecutive quarter as corporate investment cooled. VTB Chief Financial Officer Herbert Moos said at a briefing that the bank is sticking to its target for annual profit of more than 100 billion rubles even though he expects “a deterioration” in asset quality.
“Achieving their 100 billion-ruble guidance will be challenging after a slow first quarter,” Jason Hurwitz, senior analyst at Alfa Bank, who has an equal-weight rating on the stock, said in an e-mail. “Deterioration of asset quality will put pressure on earnings through provisioning, which will make profit growth challenging this year.”
VTB shares fell as much as 1.6 percent and traded 0.1 percent lower at 4.7 kopeks by 4:16 p.m. in Moscow. The Micex Index slid 0.4 percent.
VTB allocated 22 billion rubles to cover potential bad loans in the first quarter compared with 20.4 billion rubles a year ago, according to the statement. Its gain from dealing in foreign currencies shrank to 5.9 billion rubles from 25.4 billion rubles, VTB said.
Bad loans remained unchanged at 5.4 percent of its lending. Corporate gross loans rose 3.4 percent to 4.1 trillion rubles, while consumer gross loans gained 3.5 percent to 1.2 trillion rubles.
The bank said its core Tier 1 capital ratio, a measure of financial strength, fell to 10.2 from 10.3 percent at the end of December.
The Russian government’s stake in VTB declined to 60.9 percent from 75.5 percent on April 29 after the sale of shares valued at $3 billion.
Russia will further reduce its stake in VTB to 50 percent plus one share over the next three years, Economy Minister Alexei Ulyukayev said on June 27.
-- Editors: Jon Menon, Steve Bailey
To contact the reporter on this story: Jason Corcoran in Moscow at firstname.lastname@example.org;
To contact the editor responsible for this story: Frank Connelly at email@example.com