VTB Posts Record 432.2 Billion Roubles of IFRS Net Profit for 2023 as Fourth-Quarter Result Falls 35%

MOSCOW, February 20, 2024 — VTB, one of Russia's largest banks, closed 2023 with a record IFRS net profit of 432.2 billion roubles, a result in line with management guidance, while fourth-quarter profit fell 35% quarter-on-quarter to 56 billion roubles, according to the report published by the bank and cited by Interfax on February 20, 2024.

Record full-year profit, weaker fourth quarter

The published IFRS statements show that VTB earned 432.2 billion roubles of net profit in 2023 — a record for the bank and in line with the guidance given by its management. In the fourth quarter alone, net profit amounted to 56 billion roubles, down 35% compared with the third quarter of 2023.

The results came in slightly below the Interfax consensus, which had expected fourth-quarter profit of 58.5 billion roubles and 434.4 billion roubles for the full year.

Net profit, full-year 2023: 432.2 billion roubles — a record, in line with management guidance.
Net profit, Q4 2023: 56 billion roubles, down 35% quarter-on-quarter.
Interfax consensus: 58.5 billion roubles for Q4 and 434.4 billion roubles for 2023.
Net interest income, 2023: 761.4 billion roubles versus 321 billion roubles in 2022 and 646.3 billion roubles in the pre-sanctions year of 2021.
Net fee and commission income, 2023: 217 billion roubles versus 146.8 billion roubles in 2022 and 158.5 billion roubles in 2021.
Cost of risk, 2023: 0.9%, down 1.5 percentage points year-on-year.
Non-performing loan (NPL) share: 3.2% of the total loan portfolio, down 90 basis points since the beginning of the year.

Why the fourth quarter was weaker

The quarterly decline in profit was driven mainly by a sharp increase in provisioning. In the fourth quarter VTB's provisioning expenses grew 1.6 times quarter-on-quarter to 57 billion roubles. A significant part of that amount — 34 billion roubles — was set aside against loans to the bank's foreign subsidiaries, a step linked to the presidential decree adopted in early January that prohibits judicial recovery on so-called type C accounts.

Blocked assets of the former foreign subsidiaries

Commenting on the provisions, Pyanov explained the deterioration of expectations for blocked assets: "We were litigating over our blocked assets with our former subsidiaries VTB Europe and VTB Capital plc. So in essence, with the appearance of this decree, we were forced to worsen our expectations for these types of blocked assets," he said, as cited by Interfax.

Administrative expenses also weighed on the quarter: in Q4 they rose 30% quarter-on-quarter, which the bank linked to the acceleration of import substitution and technology transformation projects as well as higher staff costs. Other operating income turned negative in the quarter, with a loss of 11.3 billion roubles against 127.3 billion roubles of net other operating income for the full year.

Income lines: interest, fees and margin

The structure of the 2023 result shows how strongly the interest income line recovered after the sanctions shock of 2022.

Net interest income: 761.4 billion roubles in 2023 (321 billion roubles in 2022; 646.3 billion roubles in 2021); in Q4 it decreased 4% quarter-on-quarter to 190.6 billion roubles.
Net interest margin: 3.1% for 2023; in Q4 it narrowed to 2.9% from 3.1% in Q3.
Net fee and commission income: 217 billion roubles in 2023; in Q4 the bank earned 58.8 billion roubles of fees, 3% less than in Q3.

Risk, costs and efficiency

Cost of risk for 2023 stood at 0.9%, 1.5 percentage points lower than in 2022.
The NPL share of the total loan portfolio fell 90 basis points over the year to 3.2%.
Staff and administrative expenses totalled 400.3 billion roubles for 2023.
The cost-to-income ratio before provisioning was 36.2% for the year.

Taken together, these indicators describe a bank that combined a record annual result with a visibly more expensive fourth quarter — the price of provisioning for blocked foreign assets and of the technology and import substitution programmes.

Market reaction

Interfax noted in a follow-up item published shortly after the report that VTB shares declined after the release of the IFRS results for the fourth quarter and for 2023 as a whole.

Company and contacts

VTB is one of Russia's largest universal banks. The figures above come from the bank's IFRS report for the fourth quarter and full year 2023, published on February 20, 2024 and reported by Interfax the same day.

Contacts: VTB IFRS report of February 20, 2024 and the comments of Pyanov as cited in the Interfax report of February 20, 2024 (Moscow, INTERFAX.RU).

Website: https://www.vtb.ru/