VTB May Cut Dividends Amid New Capital Requirements: Kostin

Russia’s second-largest banking group, VTB, may be forced to cut dividends in response to new capital requirements that come into force next year, Andrey Kostin, the head of Russia’s state-controlled lender, said in an interview with Bloomberg.

Kostin said he had failed in his efforts this week to persuade the central bank to adjust the introduction of higher capital requirements for Russia’s systemically important lenders in line with Basel III regulations. He has estimated the new rules will cost his bank about 150 billion rubles ($2.3 billion) in 2019.

“I don’t think we can afford 50 percent of profit,” Kostin said, referring to the proportion of this year’s earnings that will be paid as dividends. “That would be enough for us to be in line with Basel III regulations, but I don’t think in this case we will be ready to pay 50 percent dividends.”

The Russian Finance Ministry has pushed for state-controlled companies to pay out at least half of their net profit in dividends to attract investors and help keep the federal budget in the black. VTB paid 61 percent of its 2017 profit in dividends.

VTB shares were up 0.7 percent at 1:53 p.m. in Moscow. They have fallen 20 percent this year.

Kostin also said that an “interesting process” is now observed among securities buyers. “Some large investors no longer live up to the expectations of quotations, they are not aiming at that. They are looking for fairly cheap stocks with high dividend payments. And so they leave the stock as if it is fixed income,” the financier said. According to him, such investors find a yield of 8% per annum on dollars and hold on to these securities for a long time.