LDN - Business

VTB sets aside extra $900 million for potential loan losses

[January 22, 2018] By Katya Golubkova and Dmitry Antonov

MOSCOW (Reuters) - Russian lender VTB has set aside 50 billion rubles ($882 million) in additional provisions against losses and agreed with the central bank to monitor a number of riskier loans, VTB's chief executive told Reuters.

Andrey Kostin's comments show that major Russian banks are under tighter scrutiny from the central bank, which is on a heightened state of alert following the rescue of three big private lenders last year.

His remarks come just days before Washington is scheduled to draw up a list of Russian businesspeople close to the Kremlin, on which Kostin himself said he may figure. Inclusion on the list could make it harder for the bank to finance itself.

In an interview cleared for publication on Monday, Kostin said the central bank had been conducting checks on VTB's financial health for 10 months.

"We set aside around 50 billion rubles at the end of last year, of which around a half was recommended by our risk department and around the same amount was set aside based on the central bank's recommendation," Kostin told Reuters.

"The central bank has finished checking us, there were a number of issues where we agreed that for half a year we would study how certain loans perform and would afterwards decide whether any other provisions would be needed," he said.

"I am an advocate of having a well-covered portfolio and feeling relaxed." Kostin did not specify the type of loans which were covered by the additional provisions.

He said despite the provisions the bank would earn a net profit of slightly over 100 billion rubles for 2017, in line with forecasts. The bank would be ready to pay 50 percent of its net profit in dividends on last year results, Kostin said.

TOUGH SUPERVISION

VTB already set aside 118.2 billion rubles in provisions in the first 9 months of 2017, which was 19 percent down on the same period of 2016. The non-performing loan ratio was at 6.4 percent at the end of September, unchanged from the start of 2017.

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VTB Chief Executive Andrei Kostin attends a meeting in Russia, June 1, 2017. REUTERS/Sergei Savostyanov/TASS/Host Photo Agency/Pool

Kostin said that in some cases the central bank acted "a little too harshly" in applying its powers over the banking sector. However, he said VTB had no problems in its dealings with the central bank.

The central bank's tough approach to banking regulation is "better than the weak-willed and spineless supervision that took place under Elvira Nabiullina's predecessors," Kostin said.

Kostin said that VTB, which had a Tier 1 capital level of 13.1 percent at the end of November, planned to support its capital through its profits, and was not planning to raise capital from external sources over the next two years.

On sanctions, Kostin said those already in place constrained VTB's privatization plans and curbed its activities on international markets, but that otherwise they did not affect the operations of the bank.

He declined to speculate about the possibility of the United States imposing tougher sanctions.

The U.S. government is preparing to draw up a list of Russian oligarchs with close connections to Russian President Vladimir Putin by the end of this month.

Kostin said the risk of him being on the new list was "quite high". But he said: "What can I do? Apologize for who I am or aren't? I am who I am, and my role is what it is in this country," Kostin said. "To be honest, I am not very afraid of this."

While inclusion on the new list would not automatically lead to sanctions, it could make foreign politicians, banks, and officials reluctant to have any dealings with individuals named on the list.

(Reporting by Katya Golubkova and Dmitry Antonov; Editing by Christian Lowe)

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