VTB Second-Quarter Profit Misses Estimates on Bad Loan Provision

VTB Group, Russia’s second-largest lender, said profit rose in the second quarter, missing estimates as it increased provisions to cover problem loans.

Net income rose 25 percent to 12.6 billion rubles ($380 million) from 10.1 billion rubles in the same period last year, Moscow-based VTB said in a statement today. Profit missed the estimate of 15.4 billion rubles of eight analysts surveyed by Bloomberg. The shares fell 1 percent to 4.41 kopeks by 3:54 p.m. in Moscow compared with a 0.5 percent decline in the Micex.

Economic expansion slowed to 1.2 percent from a year earlier in the second quarter after a 1.6 percent gain in the prior three months, stoking concerns a slowing economy may hinder people’s ability to repay debts.

VTB is maintaining its full-year profit forecast of 100 billion rubles, according to its Chief Financial Officer Herbert Moos. “We see the economy stabilizing later in the year, but we will be watching carefully in the second half,” he said in a conference call.

VTB’s provision charge for bad loans more than doubled in the second quarter to 28.7 billion rubles from 11.9 billion rubles a year earlier. Non-performing loans rose to 5.5 percent at the end of June compared with 5.4 percent at the end of 2012.

Net interest income, the difference between what a bank earns on lending and it pays on deposits, jumped in the second quarter to 76.5 billion rubles from 58.4 billion rubles a year ago. Return on equity slumped to 7.8 percent from 10.7 percent.

VTB said its Tier 1 capital ratio, a measure of financial strength, rose to 11 percent from 10.3 percent at the start of the year.

Consumer lending increased to 1.31 trillion rubles at the end of June from 1.12 trillion rubles at the start of year, while lending to companies advanced to 4.33 trillion rubles from 3.96 trillion rubles.

VTB’s market value has tumbled 67 percent since it raised $8 billion selling stock at 13.6 kopeks apiece in an initial public offering in 2007, the world’s biggest that year.

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