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. Last Updated: 07/27/2016

Alfa Expects Bad Loans To Eat Profit

Alfa Bank expects no profit this year as provisions for bad loans soar, CEO Rushan Khvesyuk said Thursday.

Russia's banks were hit badly by the stock market collapse in the second half of 2008 and are weighed down with deteriorating assets as the economy feels its first contraction in a decade.

"We will channel a maximum of our profits to create provisions. ... We are urging everyone to work based on the most pessimistic, most conservative scenario. ... The most conservative scenario is a zero net profit for this year," Khvesyuk told reporters.

The bank reported a 10 percent fall in 2008 net profit to $230 million as provisions consumed up to $900 million.

"It's no use hiding your head in the sand -- everybody will suffer losses, and so will we," Khvesyuk said.

The bank's overdue loan ratio has ballooned to 9.83 percent at April 1, 2009, from 1.14 percent in October 2008.

"The share of loans with signs of impairment is two times bigger then that of overdue ones," deputy CEO Vladimir Tatarchuk said.

Government officials have said Russian banks could see their profits fully erased this year should bad loans triple to 10 percent of the total portfolio, triggering provisions of about $45 billion.

Alfa Bank president Pyotr Aven has said the level of bad loans in the banking sector is likely to hit 15 percent to 20 percent by the end of this year.