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U.S. Markets

Russia's VTB to focus on organic growth

MOSCOW (Reuters) - VTB, Russia’s second biggest bank, plans to focus on organic growth over the next three years after snapping up smaller peers to expand across the country, the bank’s First Deputy Chief Executive Dmitry Olyunin said.

Dmitry Olyunin, first deputy chief executive of Russian state bank VTB, poses for a photograph during an interview with Reuters in Moscow, Russia November 28, 2018. Picture taken November 28, 2018. REUTERS/Maxim Shemetov

In the past, VTB has relied on both acquisitions and organic expansion. Its biggest deal to date was the ill-fated takeover of Bank of Moscow in 2011, then Russia’s fifth biggest bank, where a big portion of bad assets was discovered during the takeover.

The deal, which included an injection of state funds to save Bank of Moscow from insolvency, allowed VTB to expand in the Russian capital.

VTB, more than 60 percent owned by the government, has acquired a number of smaller banks this year, including Vozrozhdenie which should allow it to expand further in the Moscow region.

“It (the 2019-2022 strategy) is currently in the works but it can be said that its basis will be organic growth. Acquisitions will be optional... At this stage... we don’t have any substantial plans for acquisitions,” Olyunin said.

His boss, VTB Chief Executive Andrey Kostin, said last month that VTB had no plans to buy Alfa Bank, Russia’s biggest private player, as it is too large a target.

VTB is also considering selling its 25 percent stake in Evrofinance Mosnarbank, a Russia-Venezuela joint venture bank, but there is no any firm deal reached yet, Olyunin told Reuters.

CAPITAL AND LENDING

VTB, according to its own estimates, needs to boost its capital by 150 billion roubles ($2.26 billion) next year to comply with so-called Basel III rules - requirements it has asked the central bank to soften.

Olyunin, without providing figures, said that VTB will fully meet the Basel III capital requirements next year, planning to use mainly its profits to boost the capital - a cash cushion against potential shocks.

Earlier this year, VTB raised 20 billion roubles in subordinated bonds which Olyunin said was done at a request of “a large Russian institutional investor” who was interested in a long-term paper.

“We, of course, will be looking at an opportunity to raise funds on the financial market via subordinated tools next year as well,” he said.

He repeated that the bank was on track to meet its full-year profit guidance of around 170 billion roubles and the plans to outperform the market “both in retail and corporate lending” this year.

The recent fall out with Ukraine where the Ukrainian central bank declared a unit of VTB insolvent and put it under the control of a state guarantee fund, is not expected to have any big impact on VTB results in 2018 and 2019, Olyunin said.

“Full provisioning of the outstanding liabilities related to Ukraine will not have a material impact on IFRS results nor this neither next year,” Olyunin said. “We have included the last events consequences to our financial models.”

($1 = 66.3840 roubles)

Reporting by Katya Golubkova; Editing by Keith Weir

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