VTB had 26 bln rubles profit for Aug, could earn 420 bln rubles in year - Kostin

VLADIVOSTOK. Sept 12 (Interfax) - VTB had estimated net profit of 26 billion rubles for August and could earn 420 billion rubles this year as a whole, Andrei Kostin, the head of Russia's second biggest bank, told reporters on the sidelines of the Eastern Economic Forum.

"By and large we are targeting more than 400 billion rubles for the year, probably about 420 billion. We hope so," Kostin said.

"We expect about 20 billion rubles for August and in subsequent months. In August, preliminarily, we think, perhaps 26 billion, for the eight months approximately 351 billion. So we are still on target," he said.

Kostin reiterated that the bank does not plan to pay dividends for 2023. "We have a shortage of capital, so we probably will not pay dividends for this year. This is a Central Bank requirement: we will not pay dividends until we build a sufficient capital base," Kostin said.

Kostin said the bank would be using its profit to shore up capital in the next five years, not share issues. He told RBC in an interview that the bank would need up to 1 trillion rubles over the five years to fulfill capital adequacy ratios, taking buffers into account.

"If we fully capitalize profit this year, then there will already be 400 billion rubles. It is planned that in the next five years a significant portion [of the profit], at least half, will be capitalized, this is what it will consist of," Kostin said when asked how capita might be topped up.

Asked about the possibility of a share issue to strengthen VTB's capital base, he said: "This is impossible right now, and it is not necessary. The state will not buy it, and it is not needed, so no."

Kostin told reporters that VTB's domestic debt market strategy was still to shun classic fixed-income OFZ bonds in current conditions and buy large quantities of floaters.

"We are ready to buy bonds. I've told the Finance Ministry. But only floaters, because with such a rate and the tendency for it to rise then it would be risky to take fixed yields," he said

"But we are ready to increase [participation in OFZ auctions], we've said we can take half a trillion [rubles], or up to a trillion more, but floaters," he said.

VTB announced its decision to limit participation in auctions to floaters about two months ago.

The Finance Ministry plans to offer 1 trillion rubles of OFZ at auctions in Q3 2023. It has gradually raised its targets, from 800 billion rubles in Q1 and 850 billion rubles in Q2, although it fell slightly short of them, selling 738.4 billion rubles in Q1 and 835.9 billion rubles in Q2. The current quarter has presented the ministry e with additional challenges: in August, it had to skip one auction day as market volatility surged, while last Wednesday auctions were announced, but did not take place due to the lack of bids at an acceptable price level. In total, since the beginning of this quarter, securities worth 609.8 billion rubles or 61% of the target have been placed.