Russia's second-largest bank VTB reports record 2023 profit of $4.7 billion

FILE PHOTO: The logo of VTB bank is seen at the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg, Russia, June 3, 2021. REUTERS/Evgenia Novozhenina/File Photo

By Elena Fabrichnaya

MOSCOW (Reuters) -Russian bank VTB reported a record 2023 profit of 432.2 billion roubles ($4.68 billion) on Tuesday, rebounding from a revised, sanctions-induced loss of 667.5 billion roubles the year before.

Chief Financial Officer Dmitry Pyanov told reporters that the state-owned lender was eyeing another record year in 2024, hoping to earn 435 billion roubles.

Last year, Russian banks collectively made record profits of 3.3 trillion roubles, driven by sharp rises in mortgage, consumer and corporate lending even as the central bank jacked up interest rates to their current level of 16%.

CEO Andrei Kostin blamed the bank’s 2022 losses on sanctions, acknowledging the blow to Russia’s financial sector wrought by sweeping Western restrictions, including depriving many banks of access to the international SWIFT payments system.

This year, Pyanov said, VTB would rely on “one-time effects” in a deteriorating macro environment, including bringing in 100 billion roubles in net profit through efforts to unblock assets frozen in the West.

Without one-time effects, VTB’s net profit in 2024 would amount to 275 billion roubles, he said.

“This is VTB Group’s organic net profit in conditions when interest rate risk alone took away around 100 billion roubles from us in 2023,” Pyanov said. “We are, of course, magicians, but going forward our magic doesn’t work.”

One headwind facing banks is subdued loan portfolio growth amid double-digit interest rates.

“The banking sector will have a hard landing in loans,” Pyanov said, forecasting year-end inflation at 6.2%, above the central bank’s 4% target, and rates dropping only to 13% by end-2024.

Pyanov also said VTB would propose a share split at the annual shareholder meeting in June.

“We would like to expand, primarily for the future convenience of operating our shares, today’s nominal value of one kopeck to 50 roubles.” Pyanov said. “That is, we want to enlarge it by 5,000 times.”

Pyanov said VTB would accumulate some resulting fractional shares on its balance sheet, combine them into whole shares and sell them back to the market. The whole offer will be conducted at market price and carried out in July, if approved.

($1 = 92.3810 roubles)

(Reporting by Elena Fabrichnaya; writing by Alexander Marrow; editing by Sonali Paul, Jason Neely and Shri Navaratnam)