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28 Sep, 2007 05:16

Public rebuke takes shine off VTB’s results

Russia's second largest bank, VTB, has announced its results for the first half of the year. Profits of US 504m were in line with market expectations, but VTB’s stock price fell after critical comments about the bank by the new Prime Minister, Viktor Zub

The new Prime Minister asked Finance Minister Aleksey Kudrin to survey the lending practices of Russian banks and referred to one particular instance involving VTB.

“A paper factory had been begging for a loan from VTB for several months. First they were promised one at an interest rate of 14%. Then it seemed VTB was pulling its leg. They then increased the rate – and in the end they pulled out altogether. The factory borrowed money from a Czech bank instead – at 4.5% interest. That’s a shame!” stated the Russian Prime Minister.

Andrey Kostin, VTB’s President and Board Chairman, said he would look at the issue, but added the loan the company had received in the end was subsidized: “The company mentioned has received a subsidized loan, while VTB has to act in the framework of the market,” he said.

After raising more than $US 8 billion in an IPO (initial public offering) only last May, VTB says it isn’t facing a liquidity problem with market turbulence having no effect on its ability to fund its operations.

Mr Kostin also said the authorities have indicated their readiness to back Russian banks if need be: “In Sochi president Putin said the Government will support Russian banks if necessary. And Kudrin has outlined several sources of liquidity, and there’s an understanding that the current situation will be monitored,” he said.

The actual results for the first half were US 504m generally in line with market expectations. They showed a 12.5% drop in net profit to $. On the positive side total assets are up, and its loan portfolio grew more than 21% to $US 36.8 billion.

Russia's second-largest bank does not expect the current market crunch to continue over the longer term. And investors are looking for a better performance in the second half with the share price of VTB currently below its May’s listing figure.