UPDATE 1-VTB gets preliminary nod to cut back dividends – sources

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(Adds details, VTB comments, context)

By Tatiana Voronova

MOSCOW, Feb 14 (Reuters) – VTB, Russia’s second biggest bank, has received preliminary approval from the finance ministry to pay around 15 percent of its 2018 net profit as dividends, two bankers who work at state-controlled banks told Reuters.

This would mark a big reduction on last year, when state-controlled VTB had to pay dividends on its 2017 net profit of more than 50 percent. Dividends from state firms are a significant source of revenue for Russia’s budget.

Russian banks have argued that they will struggle to meet tough new global capital rules if they have to give up a large part of their profit as dividends.

One of the bankers said there was not yet an official government decision on the 15 percent dividend, and that there were likely to be further discussions inside the government and the central bank. The finance ministry declined to comment.

VTB bank said that discussions regarding its dividend payout ratio for the last year were continuing and no there was no final decision yet.

“Meeting (central bank’s) regulatory requirements given planned organic business growth is a priority,” VTB said in emailed reply to a Reuters request. “The rest of the net profit will be spent on dividends.” VTB did not provide figures.

The finance ministry has said VTB could adjust its dividend payout ratio to meet the international capital rules, known as Basel III. These were conceived in the aftermath of the global financial crisis that force banks to hold more capital and cash to avoid a repeat of the 2008 crash.

VTB had previously asked the central bank to relax the Basel III rules, saying it would have to amass substantial funds to meet them.

But in November, VTB CEO Andrey Kostin said that the bank “lost a battle” with the central bank over Basel III requirements for banks’ capital and was now building up its capital. (Reporting by Tatiana Voronova Editing by Christian Lowe and Jane Merriman)

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