* Q2 net profit 10.3 bln roubles vs forecast 10.6 bln
* H1 net profit down 37 percent at 33.6 bln roubles
* Takes 1.2 bln H1 loss in equity and security portfolios
* Takes 32.2 bln rouble H1 provisioning charge
(Adds CFO, analyst comment)
By Megan Davies and Jason Bush
MOSCOW, Sept 20 Quarterly earnings at VTB
, Russia's second-biggest bank, dropped 63 percent due
to volatile financial markets and foreign exchange losses,
underscoring the importance of its plan to issue new shares to
The state-controlled bank's capital base has been strained
by acquisitions and lending growth, and chief executive Andrei
Kostin said on Wednesday it was considering a $2 billion share
sale next spring after the successful sale of a $5 billion stake
in larger rival Sberbank this week.
"VTB needs capital, so it is logical that talk about a
potential placement is resuming now," Renaissance analyst
Svetlana Kovalskaya wrote in a research note.
VTB reported on Thursday a dip in its capital strength at
mid-year, but said that including a subsequent perpetual
Eurobond issue, its Tier 1 ratio - a key measure of capital
strength - would have risen to 9.5 percent.
The state owns 75.5 percent of VTB but plans to cut its
holding as part of a wider privatisation drive.
A central bank official has said any share sale could be a
mix of new stock and the state cutting back its holding.
Unlike for Sberbank, which by one estimate is the best
performing large company stock in the world over the past decade
after Apple, investors who bought shares in VTB's $8
billion initial public offering in 2007 are still under water.
VTB's Moscow-traded shares fell 1.3 percent to 5.5 kopeks -
also below the level at which the state sold a 10 percent stake
in early 2011. Its London-traded global depository receipts
fell 2 percent to $3.45.
VTB reported a net profit of 10.3 billion roubles ($330
million) for the second quarter, down from 27.5 billion in the
same period a year earlier and short of analysts' average
forecast of 10.6 billion.
For the first half of the year as a whole, earnings fell 37
percent to 33.6 billion roubles.
VTB said its bottom line suffered in the first half from a
1.2-billion-rouble loss in its equity and security portfolios,
which it attributed to volatile markets. The same time last
year, it posted a net trading gain of 9.5 billion roubles.
It also took an 11.9-billion-rouble provisioning charge for
impairment of debt financial instruments in the second quarter,
larger than the year-earlier provision of 9.6 billion.
This included revaluing, writing down or writing off loans
and advances to customers, investment securities held to
maturity and credit-related commitments.
It also recorded foreign exchange translation losses for the
three months of 11.3 billion roubles, larger than the 8.8
billion roubles recorded the same period a year ago. Expenses
from non-banking activities and staff costs rose as well,
according to a statement on the bank's website.
VTB expects a net profit of more than 100 billion roubles
($3.2 billion) this year, a forecast that Chief Financial
Officer Herbert Moos reiterated.
The bank was recently accused of a "pattern of mismanagement
and questionable practices" by a prominent Russian
anti-corruption campaigner Alexei Navalny, a charge VTB strongly
($1 = 31.2149 Russian roubles)
(Reporting by Megan Davies and Jason Bush; Editing by David
Holmes and Mark Potter)