VTB Drops to Four-Year Low in London on Moody’s to S&P Outlooks

VTB Group’s London-traded shares fell to a four-year low after Moody’s Investors Service and Standard & Poor’s said Russia’s weakening economy will hurt lending and erode earnings of the nation’s second-biggest bank.

VTB’s global depositary receipts declined 0.6 percent to $2.62 at the close in London, the lowest since August 2009. The stock lost as much as 1.6 percent in Moscow, before ending down 0.2 percent at 4.22 kopeks ($0.13). Volume climbed to 30 percent above the three-month daily average.

Profitability of Russian lenders will decline this year and in 2014 amid slower economic growth and rising bad debt, Moody’s said in a report today. The World Bank last month cut its forecast for Russia’s economic growth to 1.8 percent in 2013, the slowest pace in four years, from a previous estimate of 2.3 percent. The loan portfolios of banks will probably deteriorate, according to an S&P report today.

“Investors have a cautious view on the market and they are avoiding riskier assets like VTB,” Mark Rubinstein, head of research at IFC Metropol, said by phone from Moscow.

VTB’s second-quarter profit rose to 12.6 billion rubles ($390 million), missing the 15 billion-ruble average estimate of nine analysts compiled by Bloomberg, after the lender more than doubled provisions for non-performing loans to 28.7 billion rubles.

Declining asset quality after a period of “aggressive” growth will be the “main threat” over the next 12 to 18 months to the capital sustainability of Russia’s largest banks, S&P said. Moody’s kept its “negative” outlook for the country’s banking system.

Moscow-based VTB and OAO Sberbank manage 45 percent of the country’s banking assets, according to S&P. Shares of Sberbank, the nation’s biggest lender, added 0.3 percent to 100.50 rubles in Moscow, having retreated as much as 1.1 percent earlier. The London-traded stock was little changed.

Sberbank’s nine-month profit increased 6.3 percent to 286.2 billion rubles, according to statement on its website today.

Before it's here, it's on the Bloomberg Terminal.