Azernews.Az

By Bloomberg

VTB Group, Russia’s second-biggest lender, said profit plunged 96 percent on soaring provisions as the ruble collapsed and the economy slid toward recession.

Net income fell to 4.1 billion rubles from 101.5 billion rubles a year earlier, the Moscow-based bank said in a statement on Friday. Net interest income rose 9.7 percent to 354 billion rubles, less than the average forecast of 373 billion rubles from 10 analysts surveyed by Bloomberg.

VTB has been hurt by higher borrowing costs as the central bank raised rates to stem the ruble’s collapse last year and international funding dried up because of sanctions imposed by the U.S. and the European Union over Russia’s role in the Ukraine conflict. The lender was forced to more than double provisions to 275 billion rubles in 2014, in part because of Ukraine-related risks.

“During 2014, our clients were affected by an economic slowdown and tough geopolitical environment, as well as by the rapid depreciation of the ruble and subsequent spike in interest rates,” VTB President Andrey Kostin said in the statement. VTB’s cost of risk rose to 3.4 percent of average gross loans and advances to customers from 1.6 percent the previous year amid Russia’s economic woes and the Ukraine conflict, according to the statement.

VTB received a 100 billion-ruble capital injection from the state last year, and will probably get 450 billion rubles more of state support this year.

“The latest developments show that VTB continues to rely heavily on government support,” Natalia Berezina, a banking analyst at UralSib Capital in Moscow, said in a report before the results this week. UralSib reiterated its sell recommendation on VTB stock. This “indicates that the model is unable to sustain itself organically.”