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Commerzbank EM Credit Notes - VTB: Positive H1 2011 results but cautious outlook

September 05, 2011 | Commerzbank

VTB Bank reported its Q2 2011 and H1 2011 IFRS results, reflecting strong net income, healthy loan growth, and a stabilising margin. The increase in net profit (+113.5% to RUB53.6bn) was largely driven by a RUB9.9bn one-off gain of recovery losses on initial recognition and progress on loan restructuring. The reported net profit seems to be in line with management’s full year profit target of RUB100bn. Fee and commission income rose strongly (+51.7%) but the overall margin remained relatively stable at 4.3% (based on our calculations). Management guided for full year 2011 NIM to stabilise at below 5%. VTB remains on track to increase its stake on BoM to 75% by end-Q3 2011 and fully consolidate it starting from Q4 2011. Moreover VTB has raised its share on TCB to almost 75%. The integration of TCB had a negative impact on costs. In response, VTB is planning a major cost efficiency exercise following the completion of the two mergers. Overall, we remain neutral on VTB eurobonds. VTB’s spreads have recovered from the sharp spike in early August following the sell-off and VTB 2015 is currently offering a c.113bp premium to Sberbank 2015. We believe this spread differential is justified by the upcoming consolidation of BoM and anticipated privatisation plans of VTB. We do not rule out some further widening of the spread following the consolidation of BoM in case the financials are negatively affected. We believe as consolidation plans are confirmed Bank of Moscow bonds are a cheap entry into VTB risk.

For more details go to our Comments section.

Company: VTB

Full company nameBank VTB (PJSC)
Country of riskRussia
Country of registrationRussia


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