Azernews.Az

By Bloomberg

VTB Group, Russia’s second-largest bank, posted its first profit in three quarters after reducing loan- loss provisions and containing staff costs.

Net income attributable to shareholders rose to 2.5 billion rubles ($38 million) in the second quarter from 1.9 billion rubles a year earlier.

The bottom line was supported by a “recovery in interest margins, lower cost of risk,” as well as “stringent cost discipline, as we are delivering on the various cost-cutting initiatives,” Andrey Kostin, VTB president and chairman of the management board, said in a statement Tuesday. He also cited a 19 percent increase in income from fees and commissions.

Russian banks are struggling with a toxic combination of high funding costs, falling demand for credit and mounting losses on existing loans. The central bank has lowered its key interest rate five times this year to spur lending needed for growth as the country slid into its first recession since 2009. For the first half of the year, VTB still showed a net attributable loss of 11.8 billion rubles.

Net interest income, the difference between what the bank makes on lending and what it pays to customers with deposits, fell 23 percent to 67.1 billion rubles from a year earlier. VTB’s loan book shrank 5.9 percent in the first six months of the year, with non-performing loans accounting for 7 percent of the total compared with 6.4 percent three months ago.

At the same time VTB managed to keep staff costs at 56.2 billion rubles in the second quarter, unchanged from a year ago. It reduced loan-loss provisions to 31 billion rubles from 48.7 billion rubles in the second quarter 2014. Net income from fees and commissions increased to 17.2 billion rubles from 14.5 billion rubles.

Early Signs

VTB’s capital buffers were eroded by a combined loss of 22.3 billion rubles during the two previous quarters. The bank raised 307 billion rubles in new equity in July as part of the state-sponsored recapitalization program.

The Bank of Russia more than doubled it policy rate last year after sanctions over the Ukraine crisis and falling oil prices sent the ruble into freefall. That prompted banks to raise their own rates, making loans too expensive for many businesses. With inflation soaring, the central bank still charges double-digit interest on its benchmark one-week funding.

Following “extraordinarily challenging” first quarter VTB saw “early signs of improvement in the operating environment,” Kostin said in the statement.