Bank of Moscow won't reflect rescue loan in 2010 financials
MOSCOW. July 27 (Interfax) - Bank of Moscow will reflect the financial results for a rescue loan of 295 billion rubles from the Deposit Insurance Agency (ASV) in its IFRS accounts for 2011, Mikhail Zadornov, the CEO of VTB 24 and a member of the Bank of Moscow board of directors, told journalists on Wednesday.
"You will not see it in the accounts for 2010," Zadornov said.
Bank of Moscow has still not published IFRS financials for 2010. Many analysts expected those financials would include provisions for the loans made by the previous management team and that the expense would be covered using the ASV loan.
Zadornov said the bank would publish the 2010 IFRS financials before the end of July.
The bank has already completed its Russian accounting standards (RAS) financials for 2010. They have been submitted to the auditor, BDO.
Bank of Moscow is required to publish IFRS financials for the previous year by June 30, under covenants for three issues of Eurobonds totaling just over $1.65 billion.
Thus, those bonds are already in technical default. In order to avoid an actual default, the bank must publish the financials by July 30.
VTB purchased the city of Moscow's 46.48% stake in Bank of Moscow and a blocking stake in Capital Insurance Group (the owner of about 17% of Bank of Moscow shares) in February for 103 billion rubles. VTB plans to boost its stake to 100% by the end of 2011.
The low quality of the loan portfolio became apparent after VTB took control of the bank. VTB estimates that about half of the portfolio is problem loans and almost a quarter is unrecoverable. The rescue loan will be used to cover this hole in the balance sheet.
Under the rescue plan agreed with the Central Bank and VTB on June 30, the ASV will provide a 10-year loan of 295 billion rubles to Bank of Moscow at 0.51% interest. The rescue will commence when VTB consolidates 75% of Bank of Moscow shares. VTB is currently in talks on acquiring shares with Bank of Moscow minority shareholders.
ASV chief Alexander Turbanov said previously that it would begin disbursing the loan to Bank of Moscow in the first half of August.
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