MOSCOW, Nov 19 (Reuters) - Russia’s state bank VTB expects to meet its net profit forecast of 200 billion roubles ($3.1 billion) this year and to pay half of that in dividends, “unless there are any surprises,” Chief Executive Andrey Kostin told Reuters.
VTB, Russia’s second largest bank, paid just 15% of net profit as dividends last year, an exception to the normal 50% required by the finance ministry of state companies, as the bank needed to boost capital to meet Basel regulatory requirements.
“It is premature to say but they (surprises) may arise,” Kostin said. Citing one example, he said the government was considering partially writing off defence sector loans that banks have made.
“For VTB, this is directly linked to the need for additional capital,” Kostin said.
VTB does not plan to ask the state for a capital injection, he said, something it had benefited from previously.
“We can always solve the capital shortage issue (if it arises) by (adjusting) dividends,” Kostin said.
State banks, led by Sberbank and VTB, could in the past boost capital by raising external funding but since western sanctions largely shut global finance markets to Russia in 2014, they have had to rely mainly on profits and, in some cases, state injections of funds.
Since the initial shock from the sanctions, Russian financial markets have stabilised, while the central bank has reined in inflation and started to aggressively cut its key interest rate - something banks were asking for but which may now backfire.
The central bank has cut its key rate four times so far this year, to 6.50%, something beneficial for borrowers but painful for banks.
“It is obvious that the rates will go down. If so, you can not get a high margin,” Kostin said. “When we were asking for lower rates, the central bank governor warned me that we would rue the day,” he added, referring to Elvira Nabiullina.
VTB’s net interest margin - the difference between funding costs and the rate the bank lends at - was 3.3% in the first nine months of the year, down from 3.9% the same period a year ago.
“In the longer term, the banking sector’s margin will be shrinking, so there is a certain threat to...profitability,” Kostin said. ($1 = 63.8760 roubles) (Reporting by Tatiana Voronova and Katya Golubkova; Editing by Kirsten Donovan)