7 Apr 2022 17:22

Russian MinFin to suggest state banks pass on 2021 dividends

MOSCOW. April 7 (Interfax) - The Russian Finance Ministry will suggest that government-related banks not pay dividends for last year, Finance Minister Anton Siluanov told reporters.

"We as the Finance Ministry will be suggesting that banks do not pay dividends for 2021," he said.

"We believe that the issue of bank dividends has, it could be said, practically been resolved in favor of banks, since they need a capital base. We understand this very well, banks have lost quite a lot in the current conditions. I'm not talking about those banks that are simply on the SDN [list]," Siluanov said.

The biggest government-related banks, Sberbank and VTB , were planning to pay half of their net profit to International Financial Reporting Standards (IFRS) as dividends before they were hit by Western sanctions.

Sberbank boosted net profit to IFRS 60% to 1.246 trillion rubles in 2021 and VTB's profit soared 4.3-fold to 327.4 billion rubles.

VTB is waiting for a joint decision by the Russian government on state bank dividends amid the need for capital. "The government is looking at this currently. It's not just us, they are considering whether dividends should be paid at all amid conditions when there is need for banking sector recapitalization. This is likely to be a systemic decision, more or less," VTB chief Andrei Kostin told reporters this week, when asked about the possibility of VTB paying dividends for 2021.

Kostin and Sberbank chief Herman Gref wrote to Prime Minister Mikhail Mishustin in the middle of March, saying the banks had estimated their potential losses from participating in state support measures for the economy that have been adopted or about to be adopted in response to Western sanctions. The aggregate losses of the country's largest banks, which are themselves subject to severe restrictions, could amount to almost 600 billion rubles, they said. The letter states that, according to the Bank of Russia, the banking system's losses in 2022 will be between 3.5 trillion and 5.8 trillion rubles, excluding a negative revaluation of securities in the amount of about 2 trillion rubles.

The United States and UK imposed blocking sanctions against VTB at the end of February. The U.S. on April 6 imposed full blocking sanctions on Sberbank: the action will freeze any of Sberbank's assets touching the U.S. financial system and prohibit U.S. persons from doing business with the bank. The U.S. imposed milder correspondent and payable-through account sanctions against Sberbank in February. The UK has also imposed blocking sanctions against Sberbank.