Government-owned VTB bank shows spectacular results

Today’s edition of Gazeta.ru reports on VTB bank’s financial results for the third quarter of 2012, which was one of the most successful quarters in the bank’s history. While VTB’s income from corporate loans declined, approximately half of the bank’s total net profit of 26.6 billion rubles (USD 865 million) in the third quarter came from non-core activities, such as leasing, insurance and development. VTB’s third quarter net profit exceeded analysts’ expectations by 25 percent and was 40 percent higher compared to the same period in 2011.

VTB’s President Mr. Andrey Kostin stated that the VTB group’s net profits for the third quarter of 2012 represent the second best financial result in its history. According to Kostin, such results are attributable to efficient expansion of retail banking and adequate risk management policies. Analysts remarked that the contribution of VTB’s non-core activities to the group’s overall financial result were extraordinary. However, the VTB group’s net profit for the first nine months of 2012 was 17 percent lower than in the same period in 2011 – 60.2 billion rubles (USD 1.96 billion) against 72.6 billion rubles (USD 2.36 billion), respectively. The bank justified this by higher personnel costs as a consequence of the integration of the Bank of Moscow, acquired in February 2011. Analysts agree that the acquisition and related integration costs were not accompanied by corresponding organic growth – group’s assets increased by a mere 4.1 percent in the first nine months of 2012, to 4.8 trillion rubles (USD 156 billion). In addition, the bank had to increase its provisions by 80 percent compared to the same period last year, to 25.3 billion rubles (USD 822 million). Non-performing loans represented 5.6 percent of the bank’s total loan portfolio.

VTB’s management stated that the bank’s retail business increased significantly during the first nine months of 2012 – loans to citizens amounted to 1.03 trillion rubles (USD 33.5 billion), increasing by 24.6 percent from the beginning of the year and contributing 35.6 billion roubles (USD 1.15 billion) to the bank’s total net profit in the respective period. Corporate lending brought disappointing results, adding 18.7 billion rubles (USD 607 million) to the bank’s net profits. VTB suffered a loss from its investment banking activities and reduced its securities portfolio by 25.9 percent to 201.3 billion rubles (USD 6.54 billion) from the beginning of the year. The bank’s capital adequacy ratio on September 30, 2012, was 12.9 percent.

VTB is the second largest Russian bank in terms of assets and the largest bank in the country according to its equity. The Government is the largest shareholder with a 75.6 percent stake. After the acquisition of the Bank of Moscow in 2011 for 251 billion rubles (USD 8.15 billion), some VTB officials complained about the deal, referring to a „hole“ of 366 billion rubles (USD 11.89 billion) in the Bank of Moscow’s balance sheet.

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