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Russia's VTB says quarterly net profit down 93%, could slash dividends

Russia's VTB says quarterly net profit down 93%, could slash dividends

Russia's secondlargest lender VTB said on Friday its secondquarter net profit fell 93% as provisions against bad loans mounted amid the coronavirus crisis, prompting management of the staterun bank to recommend slashing dividends.   

MOSCOW Russia’s second-largest lender VTB said on Friday its second-quarter net profit fell 93% as provisions against bad loans mounted amid the coronavirus crisis, prompting management of the state-run bank to recommend slashing dividends.  Â

The Russian banking sector has taken a hit from the coronavirus and related lockdowns, which are expected to have pushed the economy into recession and pressured prices for oil, its key export, while weakening the rouble.  Â

VTB said its net profit shrank to 2.1 billion roubles ($28.5 million) in April-June from 30.3 billion roubles in the same period of 2019.

VTB’s management will recommend cutting dividends to 10% of 2019 net profit, VTB board member Dmitry Pyanov said.

    State-controlled VTB had planned in February to spend 50% of its 2019 profit on dividends but said in May the figure could be revised due to the coronavirus crisis.   Â

VTB shares fell 1.2% by 0824 GMT, underperforming the benchmark MOEX index that was down 0.3%.   Â

In the second quarter, provision charges against bad loans rose to 68.8 billion roubles from 30.2 billion roubles a year earlier, the bank’s results under International Financial Reporting Standards showed.  Â

The non-performing loans ratio rose to 5.1% as of June 30, up from 4.7% as of early 2020.  Â

Return on equity (ROE) from continuing operations – an indicator of how much profit the bank generates from money invested by its shareholders – was 0.5% in the second quarter, down from 7.9% in the same period of 2019.

The bank has slightly increased its 2020 net interest margin forecast to 3.5% from 3.4%, Pyanov said, declining to provide net profit guidance.  Â

“The current recovery in economic and business activity gives grounds for cautious optimism,” Andrey Kostin, VTB President and Chairman of the Management Board, said in the earnings statement.  Â

($1 = 73.6550 roubles)

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