In the second half of the year VTB (MCX: VTBR) may show a net loss due to the growth of reserves for corporate loans, according to a review by the rating agency Moody's. VTB in the first half of the year reduced its net profit under IFRS by 45% in annual terms, to 41.9 billion rubles.
“We expect the bank to post a net loss in the second half of the year, reducing the remaining profit from the previous six months as it raises its corporate loan provisioning costs based on corporate financial performance, which reflects the impact of the restrictions imposed at the end of March.” indicates the agency.
Despite rising earnings and relatively modest asset risks, VTB is likely to operate on the brink of breakeven in 2020 along with the Russian banking sector due to higher lending costs coupled with a significant negative revaluation of non-core assets. This will force the bank to limit the payment of dividends in 2020-2021 in order to meet the minimum capital requirements, the agency believes.
The Central Bank in April recommended banks to postpone the payment of dividends. In August, VTB's Supervisory Board decided to reduce the dividend payout ratio for 2019 to 10% from the originally planned 50%.
Currently, VTB practically does not meet capital requirements, taking into account capital premiums, Moody's points out. As of June 30, the bank's overall capital adequacy ratio at the group level was 11.8%, just 0.3 percentage points above the minimum of 11.5%.
More modest growth in risk-weighted assets will help VTB maintain capital adequacy ratios, the review says.
VTB admits a return to the principle of payment of dividends in the amount of 50% of net profit under IFRS already in 2021 at the end of 2020, said Dmitry Pyanov, a member of the bank's board in August. VTB, within the framework of the strategy for 2019-2021, planned to earn a net profit of 200 billion rubles in 2019, 230 billion rubles in 2020, and 300 billion rubles in 2021.