VTB Group Chief Executive Officer Andrey Kostin said Russia’s second-largest lender plans to pay investors a dividend similar to the previous year’s even after profit plunged in 2014.
“Position of management is to keep the level of dividends in absolute figures at least the same level,” Kostin, a former Soviet diplomat, said in an interview with Pimm Fox Tuesday from Moscow. “We have to wait until our shareholder meeting to see what will be the final decision.”
State-controlled VTB paid a dividend of 0.116 kopecks per ordinary share, or about 15 percent of net income for 2013. The bank, which reported a 96 percent drop in profit last year, is among Russian firms hit by sanctions restricting it from doing business with the U.S. and the European Union. VTB may be able to maintain the dividend level using retained earnings from previous years, Kostin said. The supervisory board will make a recommendation May 15 after talks with the government, he said.
OAO Sberbank, Russia’s biggest lender, said last week that it will reduce its dividend to the lowest level in five years to avoid having to raise new capital. VTB is discussing with the government and the central bank how much it might draw from a 900 billion-ruble ($17 billion) recapitalization program.
“We still need to define how much we need,” Kostin said. A requirement that banks increase lending 12 percent a year to qualify for the aid is “unrealistic,” he said.
Falling oil prices and Western sanctions on Russia over the conflict in Ukraine sent the ruble plummeting 46 percent against the U.S. dollar last year, fueling inflation and forcing the central bank to raise the key interest rate to 17 percent to shore up the currency. The rate has since been cut to 14 percent.
“We have negative margin in our business and the sooner rates come down the better,” Kostin said. “The 10 percent level is much more acceptable than 14 percent.”
Bank of Moscow, which VTB acquired in 2011, will “cease to be” in a year as it is integrated, Kostin said. VTB is only interested in acquiring large banks and has no current plans to buy, he said.
“We are keeping our eyes open, and if there’s a good opportunity, we may get involved,” Kostin said.