May 8, 2020 / 10:41 AM / 19 days ago

UPDATE 2-Russian banks face more pain as bad loans rack up - central bank

* Sberbank, VTB report Q1 profit falls

* Both banks sharply increase provisions

* Central bank sees bad loans peaking in H2 or early 2021 (Recasts with central bank comments, details)

By Tatiana Voronova and Katya Golubkova

MOSCOW, May 8 (Reuters) - Profits at Russian banks are set to come under further pressure as bad loans will not peak until later this year, the central bank said on Friday, after top lenders set aside billions of roubles in provisions and cast doubt over financial forecasts.

The economic fallout from the coronavirus pandemic is taking its toll on Russian banks, with both sector leader Sberbank and number two VTB reporting falls in quarterly net profit, spurred by higher provisions.

On Friday, VTB posted a 14% drop in first-quarter net profit to 39.8 billion roubles ($540 million) after tripling its loan loss provisions and revaluing its assets.

Last week, Sberbank saw its quarterly net profit halving after it increased provisions eightfold to 138 billion roubles.

“The COVID-19 pandemic began to negatively impact our results as we started to build up additional provisions and mark down investment assets,” VTB Chief Executive Andrey Kostin said in a statement.

VTB has set aside 45 billion roubles in provisions for non-performing loans (NPL), while its NPL ratio has risen to 4.9% of its 12.1 trillion rouble loan book.

Central bank governor Elvira Nabiullina said NPLs were expected to peak in the second part of the year or in early 2021. The central bank sees Russia’s gross domestic product falling by as much as 6% this year.

“The preliminary data and banking poll show that banks’ interest income ... (and) their profits will decline,” she told a weekly briefing, adding that thanks to capital and liquidity buffers banks were expected to cope.


VTB’s Kostin, for whom the current crisis will be the third since he took office in 2002, said that while it was hard to predict how the pandemic would hit the sector, his bank was prepared.

VTB said its January-March results were supported by a 15% increase in net interest income and a 48% jump in net fees and commissions income.

Dmitry Pyanov, a member of VTB’s board, said the bank could adjust its net profit guidance for this year and change its dividend payout ratio on 2019 results to make up for losses caused by the coronavirus crisis.

The bank had set its dividend payout ratio at 50% of earnings, while forecasting net profit of 220-230 billion roubles in 2020.

Sberbank withdrew its 2020 forecasts last month.

VTB’s corporate lending is seen falling by 1.2% this year, Pyanov told reporters, while retail lending is seen in a range of up 1.8% to down 2.7%, depending on how the virus pandemic develops in Russia.

The number of new coronavirus cases in Russia rose by more than 10,000 for the sixth consecutive day on Friday, bringing the nationwide tally close to 188,000 - the world’s fifth highest total.

$1 = 73.7065 roubles Reporting by Tatiana Voronova, Elena Fabrichnaya, Gabrielle Tétrault-Farber, Andrey Ostroukh, Alexander Marrow and Darya Korsunskaya Writing by Katya Golubkova Editing by Louise Heavens and Mark Potter

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