By Alexander Kolyandr
MOSCOW--Russia's state-controlled bank VTB Bank could sustain
significant losses in 2015 due to the central bank's high interest
rates, VTB's Deputy Chief Executive Herbert Moos said on Friday, as
the bank reported 2014 net profit was almost wiped out.
"The main challenge in 2015 is the unpredictability of the
rate(s)", he said adding that current interest rates are
"prohibitively high" for companies relying on the central bank for
loans in the absence of access to international markets.
The country's second-largest lender, battered by Western
sanctions and high interest rates--imposed to stem the ruble's
plunge--said its profit for 2014 plummeted to 800 million rubles
($13.1 million) from a record 100.5 billion rubles in the previous
year.
While Mr. Moos was giving his outlook the central bank announced
a 100 basis point cut to its key rate to 14%. Mr. Moos said he
welcomed the cut, but still viewed it as insufficient.
Russia's central bank hiked its rate in mid-December by 650
points to 17% to stem a steep devaluation of the ruble and to
prevent a run on banks.
The bank posted its first quarterly loss between October and
November last year--its first loss since 2009.
However, the annual result is better than analysts' expectations
and comes despite a warning from Chief Executive Andrei Kostin that
the bank could post its first annual loss in five years.
Once the flagship of the Kremlin's drive to create a
Western-style global banking giant, VTB has found itself cut off
from world financial markets by sanctions imposed last summer by
the European Union amid the crisis in Ukraine.
Mr. Moos said VTB took a hit of 85.4 billion rubles in one-off
losses during 2014 from Ukraine-related issues, ranging from
revaluation of securities to direct foreign exchange losses.
"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," said Mr. Kostin
as the bank presented its earnings.
This led to higher risk costs despite strong operational
results. The cost of which more than doubled to 4.6% in 2014 from
1.6% in 2013. Mr. Moos said the bank expects the cost of risk in
2015 to remain the same as in 2014, or even decline.
The bank said its provision charge for impairments rose to 275.4
billion rubles from 99.2 billion rubles in 2013, and return on
capital dropped to just 0.1% in 2014 from 11.8% in 2013.
Write to Alexander Kolyandr at alexander.kolyandr@wsj.com
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