14 Jan 2010 15:48

VTB 24 not planning to release reserves in 2010; will increase them to 10.5%

MOSCOW. Jan 14 (Interfax) - VTB 24 will maintain the pace of loan provisioning in 2010, increasing loan loss reserves to 10.5% of the loan portfolio from 8.5% at the end of 2009, bank CEO Mikhail Zadornov told Interfax.

"In 2009 VTB 24 increased reserves by about 23 billion rubles, which boosted reserves to 8.5% of the loan portfolio. This year we plan to allocate another 24 billion rubles or so, raising the reserves to 10.5% of the loan portfolio," he said.

The majority of the reserve increases will come in the first and second quarters. "We don't plan to release reserves before the end of 2010," he said.

VTB 24's parent, VTB , began to reduce the amount of reserve increases in the second quarter of 2009. According to VTB's IFRS financials, the bank increased reserves at a 4.3% annualized rate in the third quarter of 2009, down from 7.1% in the first quarter and 6.6% in the second. At the end of the third quarter the reserves amounted to 7.9% of the loan portfolio.

VTB Deputy CEO Gerbert Moos said in mid-December that the bank planned to further cut reserve increases. "We have already reduced reserve increases in the latest two quarters. We will continue doing that," Moos said.

Zadornov said the overall bank sector would continue to see the overdue loan rate increase at least until mid-2010, due to rising unemployment and continuing cost-cutting in many economic sectors. "The approaching deadlines for repaying restructured loans will also be a factor," he said. "Banks will either have to negotiate a repeat restructuring or take possession of loan collateral, litigate," he said.

Zadornov forecast that loan portfolios in the bank sector would increase by about 10% this year. "2009 was a year of stagnation in the bank sector overall. This year we expect cautious growth in bank loan portfolios, but growth all the same, of about 10%. That is, the portfolios will grow, which will tend to damp continuing growth in overdue loan rates," he said.