Finance

Finance

Russiaâ€™s VTB posts $660 million net loss

04 August 2009 14:07 (UTC +04:00)

Baku -APA-Economics. Russia’s second-largest bank VTB on Tuesday posted a 20.5 billion ruble ($660.2 million) net loss for the first quarter of the year as it had to boost its provisions for bad debts. The bank said it would raise more capital with a $5.8 billion share issue and would not see profits this year.

VTB’s net profits in the first quarter of 2008 stood at $121 million.
The first quarter loss is much worse than most analysts expected and nearly twice as big as VTB-produced consensus estimate of 12 billion rubles ($387.2 million). Loan losses were also much higher than expected.

Russian banks have been under serious stress from the world financial crisis, which has seen foreign investors flee Russia and the price of oil, a pillar of the economy, fluctuating. The goverment has even contemplated bailing out the banks in return for shares.

The provisions for bad debts also were higher than expected. The share of non-performing loans rose to 4.3 percent of its overall portfolio from 2.4 percent at the end of last year, the bank said.
VTB started increasing provisions last year as it faced a rapidly worsening environment after Russia’s stock markets collapsed and the credit crunch seized up the market last fall.

Provisions went up 4.8 percent compared to the fourth quarter of 2008 to 7.1 percent of the average gross loan portfolio.

Despite the net loss, what the bank calls core income rose an annual 30 percent to 38.6 billion rubles ($1.2 billion) in the first quarter.

The bank said, however, that the provisions would not allow it to turn profit this year.

"The level of provisions is to remain high in 2009 and we would not expect to return to profit this year," VTB’s president Andrei Kostin said in a statement.

VTB’s chief financial officer Nikolay Tsekhomsky told reporters on Tuesday that more provisions would come. "We expect provisions to grow faster than income, which means the capital will contintue to decline," he said.

Tsekhomsky added, however, that the bank has no problems refinancing its debts.

Russia’s second-largest bank is planning a new share issue to raise at least 180 billion rubles ($5.8 billion) in an attempt to offset the losses as bad debts threatens its capital and profits. The bank on Tuesday announced the sale to be open for its exisiting shareholders.

Tsekhomsky said the share issue in the second half of the year would help to give the bank’s capital a boost.

Moscow-based investment bank Troika Dialog in a note to investors described Tuesday’s earnings report as "disappointing" and said the "results will put a brake on the stock’s strong rally over the past month".

VTB’s shares were down 5 percent at the MICEX stock exchange Tuesday afternoon â€” one of the market’s worst performers.

Russian companies tend to be slower producing their quarterly reports than their foreign counterparts which are presenting their second-quarter results this month. Source: AP