Russia's second-largest bank VTB made a loss of 18.3 billion roubles ($373 million) in the first quarter. As Ivor Bennett reports it reflects the damage done by tight central bank interest rates, sanctions and a gathering economic slowdown.
The ice may have thawed, but the sanctions have not. VTB one of several of Russia's state banks still frozen out from international markets. The effects of this harsh winter are increasingly coming to light. Russia's second largest bank posting a loss of 373 million dollars in the first quarter. Richard Hunter from Hargreaves Lansdown. (SOUNDBITE) (English) RICHARD HUNTER, HEAD OF EQUITIES AT HARGREAVES LANSDOWN STOCKBROKERS, SAYING: "Russia is in a difficult situation at the moment. Already the sanctions are starting to wash through to an almost recessionary feeling. Clearly the oil price hasn't helped either and in the meantime there has been something of a run on the rouble." In a bid to stop that run, Russia's central bank hiked the main interest rate to 17.5 percent at the end of last year. It's since dropped back to 12.5 percent, but for Russia's state banks, the damage was done. VTB's net interest income slumped almost 50 percent in the first three months of this year. While its gross loan book also shrank - a far cry from the double-digit lending growth of previous years. The one mitigating factor for VTB was in fact the rouble. It's one of the best performing currencies of the year so far. Helping the bank make gains on forex and securities to the tune of over half a billion dollars. (SOUNDBITE) (English) RICHARD HUNTER, HEAD OF EQUITIES AT HARGREAVES LANSDOWN STOCKBROKERS, SAYING: "There's also a tendency for markets to overshoot in either direction on such news as the sanctions and it may well be that the rouble is at a rather more realistic level than perhaps it was three to six months ago." VTB narrowly avoided a loss last year. But the rot seems to be setting in now. This is its second consecutive negative quarter.