December 6, 2012 / 9:46 AM / 5 years ago

Bank St Petersburg profit slumps as bad debt provisions rise

MOSCOW, Dec 6 (Reuters) - Bank St Petersburg, one of Russia’s largest non-state banks, reported a steep fall in nine-month net profit on Thursday, partly due to a big jump in bad debt provisions.

The bank’s results provide more evidence that a slowing Russian economy is reducing corporate lending and forcing banks to compete in the higher-risk consumer market, which is driving an increase in provisions.

Russia’s market leader Sberbank also revealed an increase in loan-loss provisions on Wednesday.

Bank St Petersburg, ranked among Russia’s top-20 by assets, reported nine-month net profit of 930.3 million roubles ($30.20 million), down from 5.6 billion roubles the same period last year.

The bank set aside 4.9 billion roubles in loan loss provisions, up sharply from 1.68 billion in the year ago period.

Its total loan portfolio was up 6.8 percent since the beginning of the year, while net interest income was down 14 percent to 8.9 billion roubles.

The bank’s loan growth lagged overall growth in the sector, where lending was up 20 percent, according to Russian central bank data. Bank St Petersburg’s largest clients are in construction, retail and financial sectors, it said.

“Results were offset by a fall in net interest income and a spike in bad loan provisions,” said Olga Belenkaya, an analyst with Sovlink. “This (earnings) trend shows how difficult the battle for profits is.”

Bank St Petersburg also said its net interest margin stood at 3.9 percent in nine months, down from 5.0 percent in the same period last year, reflecting tight liquidity conditions in the banking sector.

Banks have asked the Russian central bank to help ease this situation by providing them with longer-term funding. Loan growth is outpacing deposit growth and competition for deposits has squeezed interest margins.

Russian banks have also tried to diversify their funding via Eurobond deals this year.

In March, the bank had said it expected to post a 4 billion rouble loss on a non-performing loan, which might negatively affect its net profit. It did not specify the borrower.

Bank St Petersburg shares were up 0.7 percent by 0825 GMT, slightly lagging the MICEX index.

$1 = 30.8030 Russian roubles Reporting by Katya Golubkova; Editing by Lidia Kelly and Jane Merriman

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