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. Last Updated: 07/27/2016

VTB Group Plans to Raise Dividends, Get More Deposits

VTB Group, the country's second-biggest bank, plans to keep provisions high, increase dividends and attract more deposits while reducing borrowing over the next three years, financial director Herbert Moos said Thursday.

The state-controlled bank has just approved a new three-year strategy targeting a doubling of its stock price by 2013. It hopes to return to profit this year after Russia's first recession in a decade left it with a $2 billion loss in 2009.

"The target for this year is a higher [operational] margin than in 2009," Moos told reporters at a presentation of VTB's strategy.

"We will develop a new dividend policy, which will assume [a payout of] over 10 percent," he said.

Current policy sets dividends at no less than 10 percent of profit according to Russian accounting standards. For 2009 — when VTB eked out a RAS profit despite posting a loss to international financial reporting standards — the pay out was 25.54 percent, or 6 billion rubles ($190 million).

The lender aims to increase net income to 120 billion rubles ($3.9 billion) in 2013 from an expected 50 billion rubles this year as part of the strategy, Moos said. Bank assets should rise between 50 percent and 80 percent over the same period.

VTB's strategy also includes increasing the share of deposits and client accounts to 60 percent to 70 percent of its assets by 2013, from more than 50 percent at end-2009, and diversifying its income base, Moos said.

"We will continue to increase client funds — this is cheap money. We will not be such frequent issuers on the eurobond market. We will look at Asian markets, at other products, at repo," he said.

Corporate lending should account for 50 percent to 55 percent of revenue by 2013, Moos said, declining to give the current breakdown of revenue by division.

On provisions — which Russian banks piled up during the crisis — VTB remains cautious.

"For 2010 there were no plans to reduce provisions. The post-crisis development features a minimal reduction in provisions, so our result at end-2013 includes a minimal, insignificant reduction of 120 billion rubles," Moos said.

VTB shares rose 5.2 on the MICEX, outperforming the exchange's financial index, which gained 2.5 percent.

(Reuters, Bloomberg)