Improved capital for VTB: Projected profits of 500 billion dollars
In a recent announcement, VTB Group, one of Russia's largest banks, has revealed its plans for the upcoming year, forecasting a net profit of over 500 billion rubles under International Financial Reporting Standards (IFRS) for 2025.
Dmitry Pyanov, the First Deputy Chairman of VTB, has stated a serious intention to make dividend payments regular. This move, according to Pyanov, has already activated trading in VTB's shares.
The increase in net profit is attributed to several key factors. The positive effects of cuts in the Central Bank of Russia’s key interest rate are a significant contributor. Every 1% cut in interest rates contributes an additional 20 billion rubles (around $250 million) to VTB's net profit.
Moreover, growth in commissions from cross-selling and fee-based services is another driving force. As the bank expands its non-interest income streams, it is expected that these commissions will grow by nearly 10%.
Another factor is a shift in the investor base. With retail investors becoming dominant in the Russian stock market, there is growing pressure to maintain dividend payments at 50% of net profit. This incentivizes VTB to sustain strong profitability.
Operational efficiencies and a relatively stable credit environment, despite some rising problem loans in specific sectors, also play a role. However, VTB’s management acknowledges challenges in particular industries like coal.
Slower growth in the credit portfolio, which VTB expects to be less than 5%, is viewed as a positive rather than negative development. Dmitry Pyanov has stated that this will lead to a more balanced and harmonious development for VTB Group.
In addition to the forecasted net profit increase, VTB also revised its return on capital forecast for 2025 to 17%, up from 15%. The updated plan does not mention any changes to VTB's expectations for the growth of its credit portfolio for the year.
The bank's plans for the current three-year period include the completion of the merger of banks - RNCB, Post Bank, and BM Bank. Pyanov also mentioned that after the completion of the bank mergers, reorganization, and corporate actions, the integration could be completed.
Consumer loans are expected to decrease by 10% or more over the year. The USD exchange rate at the end of the current year, according to the updated plan, is expected to be in the range of ₽86-90.
The updated plan does not mention any changes to VTB's net profit forecast for 2025, which remains at 500 billion rubles. Dmitry Pyanov's remarks suggest that VTB is aiming to become more appealing to retail investors.
In conclusion, VTB Group's forecasted net profit for 2025 is supported by both macroeconomic factors, such as lower interest rates and more diversified income sources, and strategic responses to market conditions and investor expectations.
Dmitry Pyanov's aim to make regular dividend payments might attract more investors in the finance sector, contributing to an increase in VTB's business by stimulating trading in its shares. The bank's strategy for the upcoming year, which includes diversifying its income sources through growth in commissions from cross-selling and fee-based services, also aligns with its goal of boosting business.
