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UPDATE 2-VTB forecasts lower loan growth for Russian bank sector
April 2, 2014 / 5:46 PM / 4 years ago

UPDATE 2-VTB forecasts lower loan growth for Russian bank sector

* Says expects Crimea situation to normalise

* Does not expect more sanctions on Russian business

* Sees slower lending this year, slower economic growth

* VTB meets its profit forecast of 100 bln roubles

* Profits driven by one-off items and loan book growth (Recasts with comments from conference calls, adds analyst)

MOSCOW, April 2 (Reuters) - Russian lender VTB forecast lower loan growth across the country’s banking sector this year due to a sluggish economy, and said the Ukraine crisis could affect its ability to pay dividends.

The environment for Russia’s banks has been challenging because of a sharp slowdown in the economy, forecast by the central bank to grow by less than 1 percent this year. The crisis in Ukraine and Western sanctions have hurt the country’s stocks and currency and accelerated capital outflows.

“We realise that in a stress scenario, (GDP) growth could come down and potentially be zero,” said VTB chief financial officer Herbert Moos, adding the most likely scenario was for GDP growth of 1.25 percent this year.

“Our loan growth assumptions are relatively modest,” he said. He forecast corporate loan growth across the sector of about 10 percent this year and retail loan growth of about 20 percent - a slowdown versus 2013 when corporate loans grew in the high teens and retail loans by over 30 percent.

Moos said growth in VTB’s own corporate loans would be in line with the market while retail lending would outpace it, without being more specific. For 2013, VTB - the country’s No.2 bank behind Sberbank by assets - reported corporate loan growth of 21 percent and retail loan growth of 36 percent.

NATO suspended all practical cooperation with Russia on Tuesday in protest at its annexation of Crimea, and ordered military planners to draft measures to strengthen its defences and reassure nervous Eastern European countries.

Moos said he expected the situation in Crimea and Ukraine to normalise, adding: “We do not expect additional sanctions against Russian enterprises or banks.”

“There are a number of discussions going on regarding how the crisis in Ukraine will end,” he said. “Depending on it, the group will or will not have to form any additional reserves and this will of course influence our capital and our ability to pay dividends.”

VTB has previously said it has exposure to Ukraine of 20 billion roubles and that its operations there amount to about 2-3 percent of the bank’s total operations. Moos said that VTB still considers Ukraine to be one of its key markets.

Russia’s weak economy has prompted lenders to set aside more money to cover potential losses on high-risk loans. VTB recorded a 97 billion rouble debt impairment provision charge last year, compared with 59.4 billion roubles in 2012.

VTB said its cost of risk increased to 1.6 percent in 2013 versus 1.2 percent the previous year and that it tightened its risk-management policies to focus on high-quality borrowers in large and medium-sized corporate lending. It also tightened lending policies in retail lending, it said.


VTB reported full-year 2013 net profit in line with its expectations on Wednesday after sceptical analysts had pointed to previous missed targets. It said stronger net interest income from an expanded loan book helped to lift it to 100.5 billion roubles, against a forecast of more than 100 billion roubles.

Some analysts had expressed doubts that VTB would be able to meet the profit target after it fell about 10 billion roubles short of the same target in both 2011 and 2012.

“(The earnings) were partly driven by one-offs ... but the core line is good - VTB is gradually building up on its interest line,” said Andrey Klapko, banking analyst at Gazprombank.

He said the results were boosted by a revaluation gain on Tele2 Russia, the country’s fourth-biggest mobile operator which VTB bought in April last year from Sweden’s Tele2 for $3.55 billion. VTB sold 50 percent in October.

VTB said it recorded a 5.4 billion rouble gain primarily due to its ownership of Tele2 Russia. In the fourth quarter its private equity business sold the White Gardens office centre in Moscow and raised $95.2 million from the sale of its stake in software developer Luxoft.

For the fourth quarter, VTB had net profit of 54.5 billion roubles, up 79 percent on the same period a year ago and beating analyst expectations of 39.6 billion roubles.

$1 = 35.0870 Russian roubles Reporting by Katya Golubkova, Maria Kiselyova, Megan Davies and Oksana Kobzeva; Writing by Megan Davies; Editing by Pravin Char

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