VTB Sees Significant Losses for Bank in 2015 Amid Russia Slump

VTB Group, Russia’s second-biggest lender, faces significant losses this year as high interest rates drag the economy into a slump, said Deputy Chief Executive Officer Herbert Moos.

Profit last year was almost wiped out, dropping to 4.1 billion rubles ($67 million) from 101.5 billion rubles in 2013, the Moscow-based lender said Friday. VTB added “significant” provisions on loans to OAO Mechel, Russia’s largest coking coal producer that may go bankrupt, Moos told reporters.

Russia’s central bank on Friday lowered its main interest rate by one percentage point to 14 percent, a move that is “insufficient” to revive lending, Moos said. VTB has been hurt by higher borrowing costs as the central bank raised rates last year to stem the ruble’s collapse. VTB has also been shut off from international funding because of sanctions imposed by the U.S. and the European Union over Russia’s role in the Ukraine conflict.

The shares fell as much as 3.1 percent and were 1.1 percent lower at $2.048 as of 12:45 p.m. in London trading.

The bank said provisions more than doubled to 275 billion rubles in 2014, in part because of Ukraine-related risks.

“During 2014, our clients were affected by an economic slowdown and tough geopolitical environment, as well as by the rapid depreciation of the ruble and subsequent spike in interest rates,” VTB President Andrey Kostin said in the statement.

Capital Injection

Net interest income rose 9.7 percent to 354 billion rubles, less than the average forecast of 373 billion rubles from 10 analysts surveyed by Bloomberg. Net interest income for the fourth quarter slid 4.3 percent to 86 billion rubles, the bank said in a separate presentation.

VTB’s cost of risk rose to 3.4 percent of average gross loans and advances to customers from 1.6 percent the previous year, the bank said.

The proportion of nonperforming loans increased to 5.8 percent from 4.7 percent a year earlier, the bank said.

VTB received a 100 billion-ruble capital injection from the state last year, and will probably get 450 billion rubles in further state support this year.

It also got a five-year extension of the 294.8 billion ruble loan from the central bank and the Deposit Insurance Agency for the support of the Bank of Moscow, according to VTB’s consolidated financial statement. The loan, which VTB took out in 2011 after bailing out the Bank of Moscow, is now due in 2026. It costs 0.51 percent a year.

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