February 26, 2020 / 1:09 PM / a month ago

UPDATE 2-Russia's VTB bank reaches 2019 profit target as bad loans shrink

* Net profit for 2019 rises 13% on a year earlier

* VTB aims for 2020 net profit of 220-230 bln roubles (Adds detail, analyst comment)

By Tatiana Voronova and Andrey Ostroukh

MOSCOW, Feb 26 (Reuters) - Russia’s second-largest lender VTB reported on Wednesday a 13% increase in net profit last year, slightly exceeding its own target, helped by a drop in provisions for bad loans and the sale of a stake in mobile phone operator Tele2.

VTB said 2019 net profit hit 201.2 billion roubles ($3.08 billion), a record high that was a touch above the 200 billion roubles it was targeting.

The health of Russian banks has been in focus after the central bank shut hundreds of lenders in recent years. Falling interest rates increased competition for deposits.

VTB’s profit rose as its provisions against bad loans fell to 103.3 billion roubles in 2019 from 154.6 billion roubles in 2018. The share of non-performing loans shrank to 4.7% by the end of 2019, down from 5.7% in late 2018, VTB said.

VTB’s sale of its stake in Tele2 to state telecoms group Rostelecom added 12.5 billion roubles to the bank’s 2019 profit, the bank said.

In 2020, VTB was targeting net profit of 220 billion to 230 billion roubles, the bank said in a presentation.

VTB shares rose shortly after the financial results were released but then pared gains and slipped to 0.0472 roubles, down 0.1% on the day by 1231 GMT.

“There are no clearly negative factors in the report. We think that profit growth will be slow and the base of clients’ assets may go through visible volatility,” Freedom Finance brokerage said, retaining its “hold” recommendation on shares.

In the fourth quarter, VTB’s net profit rose 76% compared with a year ago to 73.2 billion roubles.

Net interest income rose 7.2% year on year in the fourth quarter of 2019 to 116.8 billion roubles, while its return on equity - a measure of profitability - increased to 17.9% from 11.0% in the same period of 2018.

Fourth-quarter provisions against bad loans more than halved to 25.5 billion roubles from a year ago.

The management board of VTB will recommend paying out 50% of the company’s 2019 net income in dividends in two installments, its board member Dmitry Pyanov said on Tuesday.

$1 = 65.3110 roubles Additional reporting by Maxim Rodionov and Polina Devitt; Editing by Carmel Crimmins and Edmund Blair

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