MDM Bank expects losses of 3 bln rubles in H1 on reserve increase - source
MOSCOW. June 27 (Interfax) - MDM Bank expects to post a loss of roughly 3 billion rubles in the first half of 2013 owing to an increase in loan provisions, a source familiar with the situation told Interfax.
The bank will have to add 2.7 billion rubles to loan reserves following a check by the Central Bank, an amount that is less than 1% of bank assets, which stood at 315.5 billion rubles as of June 1, 2013.
A bank representative confirmed to Interfax that it had received an instruction from the Central Bank, but declined to specify the size of the prescribed reserve adjustment. However, he said the size of the loss would be comparable to the size of the additional provision.
MDM Bank posted a net profit of 2.7 billion rubles in the first quarter of 2012 under Russian accounting standards.
After the additional provision, the bank's H1 capital adequacy indicator will fall to about 11.5% from 12.5% on June 1, still above the minimum allowable level of 10%. Capital will decline to about 36 billion rubles from 39 billion rubles before the additional provision.
The additional provision applies predominately to restructured loans, not to non-performing loans, the source said. Most of the loans were issued in 2009. The Central Bank prescription did not concern the bank's sale of "bad assets" in the first half, the source said.
The increase in reserves in the first half was also affected by legislative changes concerning reserves for real estate, which resulted in a net increase of about 600 million rubles.
Owing to the flexibility of IFRS rules, the bank's capital adequacy under that standard will be 18%. No additional capital is required under Basel rules either, because practically all of the bank's capital is Tier 1 capital, the source said.
MDM Bank was the 21st biggest Russian bank by assets as of the end of the first quarter of 2013 according to the Interfax-100 ranking compiled by the Center for Economic Analysis.