May 29, 2019 / 5:52 PM / a year ago

UPDATE 1-Russia's VTB sees no need for more bad loan provisioning

(Adds detail, background)

By Tatiana Voronova

MOSCOW, May 29 (Reuters) - VTB has no need for additional provisioning against bad loans after it set aside 50 billion roubles ($765.85 million) last year at the central bank’s request, a senior bank executive told Reuters.

VTB Chief Executive Andrey Kostin told Reuters early last year his bank had set aside some 50 billion roubles after checks by the central bank, which it carries out regularly to assess the state of the banking system.

Russia’s second-biggest lender and the central bank had agreed to scrutinise its loan portfolio until mid-2018 to see if VTB needed extra capital injections, Kostin said at the time.

First Deputy Chief Executive Dmitry Olyunin told Reuters in remarks cleared for publication this week that VTB has “fully closed” the issues raised during the central bank’s checks though VTB will keep a close eye on some assets.

“Some of the assets, of course, remain under our watch, but there is an understanding that no provisioning is needed for them,” Olyunin told Reuters.

He added that this year, VTB expects its loan portfolio to grow by 8% versus 16.6% in 2018.


VTB and other Russian banks have also been in talks with the central bank over Basel III rules which require stronger capital positions by banks, among other things, than under previous regulatory requirements.

VTB has said that the international ratings system has put it in a worse position by giving assets on its balance sheet a cheaper valuation than other markets not affected by sanctions. An asset rating affects how much capital the bank needs to reserve against potential losses to meet the Basel III rules.

VTB has been under Western sanctions since 2014 because of Moscow’s role in the Ukranian crisis.

Olyunin said VTB would save up to 300 billion roubles if it were using the national ratings scale.

VTB will also pay only 15% of its net profit in dividends for 2018 because it needs to continue lending while meeting Basel III requirements, Olyunin said, but it plans to return to a dividend payout of 50% of net profit this year.

In a bid to safeguard banks from fresh Western sanctions, Russia has turned the once private Promsvyazbank (PSB), bailed out by the central bank in 2017, into a defense sector bank, requiring VTB and its peers to transfer loans they made to the military to PSB.

Olyunin said that VTB had transferred 32.6 billion roubles worth of defense sector loans to PSB as of May 17, without specifying the total number of similar loans it planned to offload to PSB.

$1 = 65.2868 roubles Writing by Katya Golubkova; Editing by Gabrielle Tétrault-Farber and Emelia Sithole-Matarise

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