VTB finalizes sale of number of frozen assets, profit from deal to total 16 bln rubles

MOSCOW. June 28 (Interfax) - VTB has finalized the sale of part of the assets blocked owing to sanctions to a third party and will record revenue from the deal of 16 billion rubles in its H1 2024 financial statements, VTB First Deputy Management Board Chairman and CFO Dmitry Pyanov told reporters.

"It is a Russian counterparty, we are not allowed to name the entity. Accordingly, the profit or essence of the transaction is VTB Bank selling the rights to cash flows from blocked assets, selling at a discount," Pyanov said, without disclosing the amount of the discount.

"There are very few counterparties on the market that have an excess of blocked liabilities over assets. There are many contrary situations, but when liabilities exceed assets, we have been searching the market for these counterparties for the second year already. This indicates that this is a buyer's market. (...) And, yes, in a situation where this is a buyer's market, the discount is large owing to the fact that the government, among other matters, is approaching the understanding that these assets are rather non-recoverable," Pyanov said.

Profit from the deal will total 16 billion rubles and be recorded in the financial statements for the first half of the year.

VTB has prepared four strategies for working with assets frozen owing to sanctions, and the volume has been estimated at 900 billion rubles at the end of 2023. The first strategy is to transfer part of the blocked assets and liabilities of VTB and Otkritie to the balance sheets of specially created structures under federal law No. 292-FZ. The second strategy is legal proceedings against VTB subsidiaries in Europe and the UK, over which the bank lost control in 2022. The third strategy is a deal with another bank, which, unlike VTB, has a large volume of blocked liabilities, but a lack of blocked assets, which would generate the bank a profit of 16 billion rubles. The bank has not disclosed details about the fourth strategy.

These strategies together were expected to bring VTB possibly around 100 billion rubles in additional profit. However, Pyanov said that the figure would be higher. Only the allocation of blocked assets and liabilities into a separate legal entity should generate net profit of 92 billion rubles, he said.

"And a total of 16 billion rubles plus 92 billion rubles; this will be 108 billion, meaning slightly more than we had targeted," Pyanov said.

He recalled that VTB is conducting a number of lawsuits regarding blocked assets, which could also generate a certain profit.

"When we, through our chairman, introduced the option for an earlier dividend issue, some analysts began to call it VTB's dividend surprise. Perhaps the judicial strategy will be an additional surprise in terms of profit, since both the timeline for trials, taking into account cassations and appeals, and how much money we could find available for collection from the defendants is a very difficult amount to foresee. Therefore, two strategies will definitely play out, and I digitized this as 92 [billion rubles] and 16 [billion rubles]. They generate more than we targeted in total, and the judicial strategy will be similar to the dividend surprise," Pyanov said.

VTB will include 108 billion rubles in additional revenue in the updated net profit forecast for 2024, which will be announced following the publication of the financial statements for the first six months.

"Accordingly, you need to wait another month for the increase in the annual target, when we present six-month results. If the key rate remained at 16%, it would be slightly more than 500 billion rubles. We have to wait and adjust the target accordingly based on the decision of the Central Bank," Pyanov said.