Russia VTB restructured 15 pct of loan portfolio -paper

MOSCOW. April 21 (Reuters) - State-controlled VTB (VTBR.MM), Russia's second biggest lender, has already restructured 15 percent of its loan portfolio and sees "problem debt" at around the 7 percent mark, its CEO was quoted as saying on Tuesday.

"I think it is 15 percent (the share of the loan portfolio that has been restructured so far). It is no use to milk a cow if there is no milk," Andrei Kostin told Kommersant business daily.

VTB was entrusted by the state to act as clearing house for credit resources for Russia corporates at a time when the global financial crisis has effectively blocked wholesale credit markets.

"VTB during six months of the crisis has increased its loan portfolio by 50 percent," Kostin said.

Analysts questioned the economic wisdom of VTB aggressively expanding its loan book, given the difficult environment for Russian corporates, as souring assets are likely to spill over into hefty losses.

"I am always ready to give loans once my departments tell me this is an awesome loan with a return, an entry, an exit and everything works out," Kostin said.

VTB is expected to show a net loss of $316.7 million in the fourth quarter of 2008 as provisions on bad loans soar as the economy shrinks, forcing the state bank into the red. [ID:nLH692798]

The bank went public in May 2007 in an $8 billion IPO and its shares have lost around 75 percent of their initial price so far bringing losses and angering thousands of Russians who had believed in a high-level promoted "people IPO".

VTB is considering compensation to those individual investors who had bought its shares during the placement but no concrete solution has so far been proposed.

"The core principle should be the same as for Deposit Insurance System. It means there is a minimal amount (as a base to calculate the compensation) which should be the same as for small as for big investors," Kostin said. (Reporting by Dmitry Sergeyev; editing by Mike Nesbit)