May 17, 2018 / 9:39 AM / 6 months ago

Russian bank VTB makes record profit in first quarter

MOSCOW (Reuters) - VTB (VTBR.MM) almost doubled net profits in the first quarter of 2018 to a record 55.5 billion rubles ($897.59 million) and forecast higher profits for this year as a whole, Russia’s second-biggest bank said on Thursday.

FILE PHOTO: A police officer stands guard near a sign with the logo of the Russian lender VTB at the Moscow International Business Centre also known as "Moskva-City" in Moscow, Russia November 21, 2017. REUTERS/Maxim Shemetov

Russia’s banks have had a turbulent year with the country’s central bank stepping in to rescue three major lenders in 2017 and to shut dozens of smaller banks in a crack-down on reckless lending policies.

In contrast, VTB’s first-quarter net profit almost doubled, beating market expectations.

“This is a record net profit, in fact, for the VTB Group in its public history,” Deputy Chief Executive Herbert Moos said.

VTB is on track to make at least 150 billion rubles in net profit this year, VTB Senior Vice President Dmitry Pyanov said.

VTB’s net profit for 2017 was 120.1 billion rubles.

“We believe VTB may achieve over 170 billion rubles net income for 2018. The only potential pressure on the stock in May is the upcoming rebalancing of MSCI Russia Index on May 31, in which VTB’s weighting will materially decline,” analysts at Aton brokerage said in a note.

Analysts polled by Reuters had on average expected VTB to report net profit of 34.3 billion rubles from January to March, up from 27.6 billion rubles in the first quarter of 2017.

“This is mainly because of low provisioning, with implied costs of risk at just 0.9 percent,” the Aton analysts said.

VTB’s cost of risk, which relates to the level of bad debt provisions, fell to 0.9 percent from 1.9 percent in the first quarter of 2017.

Analysts said one of the reasons for the decrease was the impact of new accounting standards under IFRS, which have a different approach to provisions.

VTB said profit increase was driven by growth of net interest income and net fee and commission income as well as efforts to keep costs down. Stable asset quality also played a part, VTB also said.

VTB said the provision charge for bad loans stood at 20.7 billion rubles in the first quarter, down from 45.9 billion rubles a year earlier.

The bank’s first-quarter net interest income rose 2.9 percent on the year to 116.3 billion rubles.

“VTB Group’s first-quarter performance gives us full confidence that we are well on track to meet our targets for the year, and to deliver on our three-year strategy,” Andrei Kostin, VTB’s CEO, said in the report.

Shares in VTB were up 0.45 percent at 1307 GMT.

Reporting by Andrey Ostroukh and Polina Nikoslkaya; editing by Elaine Hardcastle and Jane Merriman

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