UPDATE 3-Retail lending boom lifts VTB profit past forecast

Thu Dec 20, 2012 11:40am EST

Related Topics

* Q3 net profit up 40 pct, beats forecast

* Boost from fast retail lending

* CFO sees retail lending growing over 25-27 pct in 2013

* VTB sees further share issue next year to support growth

* Shares down 0.7 pct on share issue fears (Recasts lead, adds Sberbank, share price)

By Katya Golubkova and Oksana Kobzeva

MOSCOW, Dec 20 (Reuters) - VTB, Russia's second biggest bank, plans to issue more shares to support further growth in retail lending which drove third-quarter profit up 40 percent and beyond forecasts.

Russian banks have been aggressively expanding into retail loans, riding economic growth, rising incomes and a consumer splurge on new TVs, cars and other items.

VTB sees its retail lending rising by at least 25-27 percent next year, with loans to large companies expanding by 10-15 percent, Chief Financial Officer Herbert Moos said on Thursday.

To support the growth, VTB is continuing to consider an additional share issue next year, although the state, which owns 75.5 percent of VTB, does not plan to participate, Moos said.

Moos said VTB, which first disclosed plans for the share issue in February, would go ahead if market conditions allowed.

The state sold a 10 percent stake in VTB last year for $3.3 billion and plans to cut its stake by another 10 percent. CEO Andrei Kostin has said that the offering could raise at least $2 billion. VTB's shares fell 0.7 percent to 5.4 kopecks on fears of a stock overhang, underperforming the wider market which closed up 0.6 percent.

VTB is trading below the price of its two share issues in 2007 and 2011, reflecting its ill-fated Bank of Moscow takeover and decision to partly buy back small shareholders.

LENDING GROWTH

The growth in retail lending - already exceeding 30 percent across the domestic banking system this year - is raising concerns that Russians are overstretching themselves and banks will be stuck with bad loans.

Rival Sberbank's latest quarterly results showed strong retail lending with the fastest pace coming from unsecured loans to purchase items such as TVs.

Sberbank sees its retail lending growing 19-25 percent next year, with corporate loans up 13-15 percent, its Chief Financial Officer Anton Karamzin told Reuters on Thursday.

VTB said provisions for possible non-performing loans rose to 12.7 billion roubles for the third quarter from 8 billion a year ago, reflecting increase in lending.

Its loan growth before provisions stood at 4.1 percent since the start of the year with the corporate book down 0.4 percent and retail lending up 24.6 percent, lifting net interest income (NII).

NII, the difference between interest earned and interest paid, rose almost 15 percent year-on-year to 61.9 billion roubles in the third quarter, raising net profit to 26.6 billion roubles ($864.5 million) and beating forecast.

VTB's net interest margin stood at 4.1 percent in the third quarter, flat from the previous quarter. Its Tier 1 capital stood at 9.3 percent as of Sept. 30, up from 9.0 percent from Dec. 31.

The bank's full-year profit - which it earlier forecast at over 100 billion roubles - could be supported by selling a 20 percent stake in iron ore miner Metalloinvest it bought last year for a price of between $2 billion and $3 billion.

Dmitry Pyanov, senior vice-president, said the bank would likely make only a small profit on the deal.

($1 = 30.7687 Russian roubles) (Additional reporting by Maya Dyakina; Editing by Megan Davies and David Cowell)

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