VTB Says Deposits Rose 83%

VTB Group, the country's second-biggest bank, reported Wednesday that rising deposits boosted its core business in the first quarter, encouraging investors despite a $453 million securities trading loss.

VTB's net profit dropped 48 percent to $121 million, while loans grew 14 percent to $67.7 billion and deposits were up 86 percent to $43.6 billion. The net interest margin rose to 5.1 percent in the first quarter from 4.4 percent in the first quarter of 2007.

Analysts said that state-owned VTB, like Sberbank, benefited from increased market volatility and liquidity shortage as corporate clients shifted their accounts from smaller private banks.

"Big bank, big balance sheet mentality works well in this market," said David Nangle, from Renaissance Capital. The Central Bank pumped billions into the sector to keep banks afloat in the first quarter amid strong capital outflows.

VTB closed up 2 percent on MICEX in high volume, outperforming Sberbank, which was up 0.55 percent. The MICEX Index rose 0.71 percent.

"We are impressed with revenues and particularly with the net interest margin, but we are concerned about how sustainable growth in corporate deposits is. We are unclear on operational expenditure growth," said Alex Kantarovich, from JPMorgan.

VTB has not disclosed the contents of its security portfolio, making it difficult to pinpoint the cause of the loss.