VTB has promised to increase revenue to 200 billion rubles in 2019

VTB group expects growth in net profit in 2019 to 200 billion rubles, said the head of VTB Andrey Kostin in an interview with CNBC. “We expect the growth of profitability of the Bank. For example, if last year our profit was about zero, this year we expect a profit of 50 billion roubles in the next three years we expect it will grow to 100, 150 and 200 billion rubles, which, according to our estimates, a fairly realistic scenario,” he said.

This is significantly higher than the financial results expected by Bank analysts. According to the consensus, in 2016, experts predict a profit of VTB at 39 billion rubles, at the end of 2017 it will grow to 90 billion rubles, and in 2018 will amount to 126,3 billion rubles. “We were more conservative forecasts for profit growth of VTB, associated with expectations of a slower recovery of the interest margin. The European Central Bank looks very optimistic,” – says a leading S&P analyst Roman Rybalkin. He said that the Bank’s financial results also depend on what provisions for possible losses will be generated before the end of the year.

“To achieve such a result, the profit of VTB enough to reconsider its policy of reservation. In 2015, the Bank has created reserves at 167 billion rubles., this year we are expecting 130 billion,” says banking sector analyst “Aton” Michael Ganelin. He notes that in pre-crisis years VTB has supported the reserves at 100 billion rubles (in 2013). But given the fact that the situation with problem assets in the banking sector remains difficult, the decision of VTB on the dissolution of the reserves would have looked strange, said Ganelin. He does not exclude that the reduction of the reserves of the Bank will be able in 2017 as the economy recovers.

“The potential for more rapid recovery of the Bank’s profit is. First half results were above our expectations,” says the analyst. In the first half of the year, the Bank posted net IFRS profit of 15.4 billion rubles (over the same period in 2015, the Bank’s loss was 17.1 billion rubles ). Ganelin recalls that this result was due to the sale of shares of the Mari oil refinery – operation has enabled VTB to offset his profit of RUB 11.9 bn. It does not exclude that future financial results may also be influenced by such “trades”.

At the same time, the Bank reported the increase in the percentage (88%) and Commission income (12%). Part of the income of the Bank was eaten by reserves, which in January—June 2016 has increased by almost a third, from 80 billion rubles in the first half of 2015 to 102.9 billion rubles, the Growth of reserves for possible losses still fit into the framework of our scenario,” says Rybalkin.

VTB is not explained through any of the indicators, the Bank plans to achieve this financial result. “Presently, VTB is preparing a new strategy, which we will soon demonstrate, and explain about the key factors for its implementation”,- said the press service of the credit institution.

“Interest rates on deposits decreased, and given the excess liquidity in the system, this trend will continue. At the same time, the cost of credit in the economy remains high, therefore VTB has all the prerequisites for the growth of the interest margin” – says Michael Ganelin. In addition, it is not excluded that the Bank will continue to cut their costs. In January-June 2016 VTB group showed an increase in administrative expenses by 22% up to 136,5 billion.

“The group’s revenues grow and thanks to the other businesses. For example, the profit of the group brings to the insurance business, premiums on which are growing,” says Rybalkin.

In VTB expect oil prices of $20-30 per barrel, the market will not see. “We do not expect further sharp decline in prices to 20 or 30, that’s such a terrible script. We are also seeing a recovery in the coal market, especially coking coal, other important Russian exports and Russian production. Therefore, we believe that we could expect some bright future for commodity prices,” said Andrey Kostin.

It was supported by the President-Chairman of VTB24 (enters into group VTB), Mikhail Zadornov, who believes that “a strong demand for commodities”. “We do not expect further declines in demand for raw materials and the fall in oil prices”.- he said in an interview with TV channel “Rossiya24”. Zadornov also announced that it expects GDP growth next year of 1.5-2%, higher than forecasts of the Central Bank – 1%.

The head of VTB also noted a recovery in the market of consumer crediting: from the beginning of year the portfolio of credits to individuals and small business at VTB24 increased by 8%

“The results of VTB group in any case will depend on the macroeconomic situation in the country.”,- says Rybalkin.

Michael Ganelin from “Aton” notes that in addition to the retail substantial income VTB group brings investment banking business. “I do not exclude that growth of income can be associated with this direction, given the recovery in the market of Eurobonds and rouble bonds,” he said. In the first half of 2016, the profit of VTB from retail amounted to 13.1 billion rubles (against a loss of RUB 9.2 billion for the same period in 2015), investment banking operation brought for the group to 31.6 billion rubles as against 29.7 billion.

VTB’s shares responded with a slight growth on the statements of top management of the group. The value of Depositary receipts on the London stock exchange in the first half grew by 2.84% in the high paper of the Bank was trading at $2,32. VTB shares on the Moscow stock exchange the dollar grew in price by 0.28% to 7.47 COP.