VTB's core capital adequacy ratio dropped to 5.31% in September 2024
VTB basic capital adequacy ratio (MOEX: VTBR) at the end of August 2024 fell to a multi-month low, it turned out to be lower than that of other banks. The reason is the transfer of assets from the merging bank FC Otkritie. A decrease in the indicator negatively affects VTB's ability to expand its lending business. However, the bank successfully enjoys the support of its subsidiaries, which pay a significant amount of dividends.
VTB's basic capital adequacy ratio (N1.1) dropped to 5.31% by the beginning of September, with the regulatory minimum of 4.5% excluding allowances (they were reset to zero and should be fully restored by 2028), its reporting shows. At the beginning of September 2024, VTB’s indicator is also the lowest among all banks, with the exception of those undergoing resolution.
The indicator has been declining for six months in a row, during which time the decrease was 1.3 percentage points. Currently, it is close to the threshold value (5.125%), if exceeded, the write-off of subordinated loans may follow. According to previously disclosed reports, the bank has not seen such a low indicator since 2014, when this standard began to be calculated. However, from March 2022 to April 2023, reporting was not disclosed, and according to the first deputy chairman of the board of VTB, Dmitry Pyanov, the bank then had “every chance of writing off subordinated loans due to the write-off triggers being broken.”
A decrease in the capital adequacy ratio negatively affects the bank’s ability to expand its business and increase assets, including lending. However, last week VTB explained to journalists that this figure is decreasing due to the integration of the Otkritie FC bank, within which the transfer of clients and the loan portfolio is taking place. “Accordingly, moments arise when assets arrive, and capital within the group comes after these assets,” pointed out Dmitry Pyanov. But, according to his assessment, there is no threat to write-off of sub-bords, and in the future the standard indicator will not deteriorate.
Experts do not rule out that the bank may require additional capitalization. In particular, with an increase in reserve volumes due to a potential deterioration in the financial situation of borrowers due to high rates and the lack of significant amounts of one-time income, explains Artem Outlev, an analyst at Ingosstrakh-Investments Management Company. At the same time, he notes that according to the multipliers, VTB is “valued below its main competitors,” therefore, with a fair valuation of the bank’s shares at 100–115 rubles, depending on the potential volume of the additional issue, the placement price should be less than 100 rubles. Another interlocutor of Kommersant in the financial market notes that in a growing market the discount for accelerated placement of shares (ABB) is 5-7%, in the current market - 5-10%. “It was with this discount that the Astra and Positive groups were placed. In the case of VTB, the discount should be at the level of 20% (current price less than 90 rubles— “Kommersant”), then the shares will be of interest to large players,” he estimates.
According to the head of the internal audit and risk management department of FBK, Roman Koenigsberg, it is possible to achieve an increase in the standard by working with the quality of assets (a decrease in the risk coefficient will lead to an increase in the standard). In addition, according to him, dividends received by the bank from subsidiaries can also affect its improvement, but through the growth of profits, which can be transferred to the base part of the capital after an audit of the statements. To include profits received in capital, including in the form of dividends, an audit report will be required. And, as Denis Taradov, partner of the Unicon group, notes, audit companies often receive such requests from clients. The process itself takes two to three weeks, plus several days to transfer the conclusion to the Bank of Russia, after which the bank has the right to include profits in sources of capital, the expert notes.
At the same time, the bank did not answer Kommersant about how they plan to increase the standard. At the beginning of March, Dmitry Pyanov stated that the bank does not rely on replenishing capital through hybrid instruments, such as subordinated bonds. At the same time, VTB receives significant funds in the form of dividends from subsidiaries. Thus, RNKB, in addition to paying dividends for 2023 to the parent bank in the amount of 12.1 billion rubles, will pay another 25 billion rubles. for the first half of 2024. Otkritie FC has already paid 114.2 billion rubles at the end of 2023, 14.1 billion rubles for the first quarter of 2024, and another 18.3 billion rubles for the first half of 2024.
