Russia’s VTB Plays Down Impact of Aborted Mutiny on Financial Stability

Reuters

16:44 JST, June 27, 2023

June 27 (Reuters) – Russia’s No. 2 lender on Tuesday said it was on track to post record profits this year and played down the impact of the weekend’s aborted mutiny by heavily armed mercenaries on its activities and the wider economy.

Mercenaries led by Yevgeny Prigozhin withdrew from the southern Russian city of Rostov-on-Don overnight on Saturday under a deal that halted their rapid advance on Moscow but left questions about President Vladimir Putin’s grip on power and sent the rouble tumbling to a 15-month low on Monday.

“From the point of view of last weekend’s events, we in principle, due to the fact that it was relatively short-lived,do not see any significant impacts of this event either on macroeconomics, or on the bank’s activities,” CFO Dmitry Pyanov told reporters in comments cleared for publication on Tuesday.

“Yes we saw slightly higher demand on cash withdrawals,” Pyanov said, saying that activity had been similar to a weekday,but that it had not turned out to be as serious as it might have been.

First Deputy Prime Minister Andrei Belousov on Monday said demand for foreign currency had increased by as much as 70-80% in some southern regions over the weekend.

VTB expects to bounce back to profit this year after a sanctions-induced net loss in 2022 and make at least 400 billion roubles ($4.74 billion), the upper end of its forecast range.

In May, the bank’s net profit amounted to 32 billion roubles, taking profits for January-May to 240.5 billion roubles, Pyanov said.

“The achieved results allow us to fully confirm the optimistic forecasts for record profit and return on capital this year,” Pyanov said, adding the positive results were built on operational efficiency, business growth and a conservative balance sheet.

Hawkish signals from the central bank could impact VTB’s numbers.

“We believe that a short-term increase in the Bank of Russia’s key rate is likely in the second half of this year,” Pyanov said, which could negatively affect VTB’s net interest income in some segments.

($1 = 84.4000 roubles)