VTB meets 2024 profit target as earnings soar in Q4 on sale of digital business, market rally
MOSCOW. Feb 25 (Interfax) - VTB's net profit to IFRS surged 220% year-on-year to 176.4 billion rubles in the fourth quarter of 2024, including 99 billion rubles in December alone, the Russian state banking group's financial statements showed.
The impressive quarterly profit enabled VTB to meet its target for 2024 and earn 551.4 billion rubles, 27.6% more than in 2023.
The published results beat the Interfax consensus forecast, which projected a profit of 156 billion rubles for the fourth quarter and 531 billion rubles for the year.
Free skate
Speaking about the factors that influenced how VTB achieved its profit target in the fourth quarter, the bank's first deputy CEO, Dmitry Pyanov used a sports analogy.
"All the events that occurred in the last weeks of 2024 forced us to be in the final stage of the relay with an injured jump foot, figuratively, of course. Therefore, due to the limited time, we had to forego quad jumps and concentrate on some simpler elements. [...] This is a kind of Yagudin step sequence, rather than a complicated technical element," Pyanov said, referring to a step sequence used by figure skater Alexei Yagudin.
The Central Bank of Russia (CBR) tightened its approach to banks' work with blocked assets in December, so VTB was only able to transfer about half of the assets it initially planned to the books of a special purpose vehicle, 98 billion rubles instead of 180 billion rubles. Furthermore, due to the regulator's stricter requirements for the spin-off of the SPV, VTB was forced to reverse a deal to sell a portion of blocked assets to an external counterparty that it announced last summer.
The separation of the blocked assets and liabilities into a separate legal entity was expected to generate 92 billion rubles in net profit for the group, but the ultimate figure was a far more modest 21 billion rubles.
Components of December profit
A compensating contribution to VTB's profit in December was made by the sale of a non-bank digital business, which generated almost 46 billion rubles. Pyanov did not name the sold company, saying only that it was created by the group.
The revaluation of the securities portfolio, consisting primarily of shares in Russian companies, generated another 40 billion rubles in profit for the group.
"The December 20 decision of the Bank of Russia's board of directors, which contrary to the consensus [forecast] left the key rate unchanged, not raising it, sharply raised the prices of Russian securities. This generated 50 billion rubles of income on our securities portfolio, or 40 billion rubles in after-tax profit," Pyanov said.
Furthermore, several corporate borrowers paid back loans totalling about 600 billion rubles in December, enabling VTB to release 13 billion rubles in provisions.
Negative factors included the write-off of intangible assets totalling 13 billion rubles and the seasonal increase in administrative and management expenses, Pyanov said.
Annual results
VTB's net interest income fell 36% to 487.2 billion rubles in 2024, including 65.9% year-on-year to 65 billion rubles in the fourth quarter. The net interest margin narrowed to 1.7% from 3.1% in 2023, and fell to 0.8% in the fourth quarter from 2.9% a year earlier.
Net fee and commission income grew by 24% to 269 billion rubles in 2024, including 40.1% to 82.4 billion rubles in the fourth quarter, thanks to the positive effect from forex transactions and transaction commissions related to servicing cross-border payments.
Provisioning expenses totalled 20.1 billion rubles in 2024, although in the fourth quarter the group released 73 billion rubles in provisions.
Amid the release of provisions in the fourth quarter, the cost of risk fell to 0.3% in 2024 from 0.9% in 2023, dropping to a negative 0.6% in the fourth quarter from 0.5% a year earlier.
The share of nonperforming loans (NPL) in VTB's portfolio grew to 3.5% from 3.2% in the fourth quarter. A group of borrowers associated with the coal industry missed loan payments, Pyanov said.
Staff costs and administrative expenses grew by 19.6% year-on-year to 478.8 billion rubles in 2024, including 21.8% to 155.8 billion rubles in the fourth quarter, amid the planned increase of investment in technology and the transformation and scaling of the retail business.
