Ukrainian subsidiary debacle made VTB review approaches to banks in CIS countries, no more lending plans

VTB (MOEX: VTBR) has decided to hedge against extra financial losses that may arise due to financial instability in post-Soviet countries: a new policy of the group states that potential write-offs cannot exceed the amount of capital of local subsidiaries.

The Ukrainian subsidiary bank debacle that lead to significant losses for VTB, made the group review its approach to its subsidiaries in CIS countries, said Andrei Kostin, CEO and Chairman of VTB. "We, of course, had a major issue with Ukraine. We closed our bank there in the long run. We lost a lot of money there, we are not going to lose such amounts again. We have introduced several principles. First, we no longer lend to these banks, we think the banks have to operate with the resources they can raise within a country, this is why, unlike Ukraine, whatever happens, we are not losing anything over our capital this time", - said Kostin in his interview to RBC TV channel.

He noted, that the parent bank allocated significant resources to its Ukrainian subsidiary to increase retail and corporate lending. "This is why we took big losses, and we learned a lesson. We still think a new scenario like this to be unlikely, when very hostile forces came in and essentially started fighting the Russian banking sector, and this fight is continuing to this day. I think all Russian bank will sooner or later leave the country one way or another ", - said VTB head.

VTB’s presence in CIS countries: Armenia, Belorussia, Kazakhstan, Azerbaijan.

"We do not have a bank in Kirgizia, we have customers we supported there, gold producers. I think the Russian state can protect interests of Russian investors there. We are strong enough for this, not to let any hard measures be taken against our investors ", - said Kostin.

He added that the Russian subsidiary of VTB is operating as usual. " Despite all the processes, we did not change our operations in any way, did not restrict anything, we did not ramp up anything ", - he said.

The National Bank of Ukraine (NBU) on December 18, 2018 made a decision to revoke the banking license and liquidate VTB Bank. The Group estimated the license revocation losses of its Ukrainian subsidiary at RUB 17,3 bn.