VTB Stock Hits Record Low After $363M Loss

12:44, 26 January 2009
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The share of nonperforming...

VTB, the first major Russian financial institution to report results for the third quarter, unveiled a $363 million loss for the period, sending its stock plummeting to a record low, according to Reuters, Bloomberg via The Moscow Times.

The news comes as senior state banking officials said Thursday that a deteriorating economy and rising unemployment will force Russian banks to write down billions of dollars in bad loans in the coming months.

"It was the first really difficult quarter for the world, and I can`t say it`s gotten much better since then," VTB CFO Nikolai Tsekhomsky told reporters.

As foreign funding for the Russian economy has dried up and private banks face funding crunches themselves, state-controlled commercial banks VTB and Sberbank have become clearinghouses for state aid to the economy.

The share of nonperforming loans in commercial banks` loan portfolio will rise to 4 percent to 4.5 percent in the first quarter of 2009 from 3.8 percent as of Jan. 1, a Central Bank official said Thursday.

Alexei Simanovsky, head of the Central Bank`s banking supervision department, said loan provisions would rise to 5.5 percent to 6.0 percent by April 1 from 4.9 percent to 5.0 percent as of Jan. 1.

At VTB, provisioning for bad loans rose to 3.8 percent during the third quarter of 2008, while the nine-month level was 2.5 percent, up from 1.3 percent in the same period a year ago.

Shares in VTB and its larger peer Sberbank fell more than 10 percent on Russia`s stock market on the forecast.

"As a result of the weakening economic outlook for Russia in 2009, combined with an expected increase in unemployment, we anticipate further growth in loan loss allowances in the forthcoming periods," VTB said.

"If you start rolling 4 percent-plus into 2009, VTB will start making ongoing losses," Renaissance Capital analyst David Nangle said.

But Tsekhomsky rejected that concern. "I do not agree with the thesis that we will have chronic losses" because of higher provisioning, he said.

VTB said it was capitalized at 14 percent at the end of September, down from more than 16 percent at the end of the first half, and would continue to review capital needs with the government and Central Bank.

It has so far been a distributor of subordinated loans from the government, but last week chief executive Andrei Kostin raised the possibility of the first capital injection for a Russian bank since the crisis began.

Finance Minister Alexei Kudrin said this week that the government plans to allot another $40 billion to support the banking sector. State banks would be a priority, he said.

The bank has also stopped granting loans in foreign currency to nonexporters "to limit currency risk," Tsekhomsky said.

The bank halted consumer loans in dollars and euros in November. "This means we`re becoming more conservative," Tsekhomsky said, adding that the bank plans to repay $6 billion of debt to foreign lenders this year.

VTB`s stock on Thursday fell 0.34 kopeks, or 13 percent, to 2.33 kopeks, a record low.

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