This is a “rare exception”, as Vedomosti commented on a change in capital adequacy standards for Vostochny on the Central Bank’s website, Fitch analyst Anton Lopatin. The following happened: on the website of the Central Bank monthly reports of banks are published. In the reports of Vostochny, as of September 1, it was necessary to amend the mandatory capital adequacy ratios. Initially, the standard of base capital (H1.1) was 5.15%, equity (H1) - 8.8% and fixed capital (H1.2) - 7.6%. Later they changed downward: to 4.9, 8.6 and 7.3%, respectively.
How this happened, representatives of the "East" and the Central Bank do not comment. The regulator does not comment on existing banks, its representative recalls. Either the bank post-factum adjusted its profit for August, which is not yet visible in the statements, or not all the profit was recognized by the Central Bank itself for calculating capital ratios, Lopatin notes.
East Accounting
In July, Vostochny had a base capital ratio of H1.1 for six days below 5.125%. This meant that the bank had to restore it on its own for 45 days, or write off eternal subordinated debt. The bank has such a debt - 7.9 billion rubles, but the bank did not use the right to write it off, the Vostochny representative said earlier: he restored the capital stock on his own.
According to Fitch, the bank earned 1.4 billion rubles in August. profit - this allowed him to straighten the H1.1 standard to the first version of the figure of 5.15%, analysts pointed out, although in the corrected version it turned out to be 4.9%. The minimum level set by the Central Bank is 4.5%.
As of October 1, the H1.1 standard was 5.51%, a spokesman for Vostochny said. When asked if there is a risk that this time the standard can be changed downward, he said that these reports "will not be adjusted."
After updating the reporting, the question arises - how then in September the bank corrected the H1.1 standard to avoid writing off the subordinated debt, because it is below the threshold 5.125% for the fourth month in a row, says Yury Belikov, Managing Director for Validation of Expert RA. On the website of the Central Bank, in the reporting on standards, it is indicated that the bank was below the norm of 5.125% H1.1 for 11 days in August, after which the bank corrected the standard. Probably, Vostochny lowered H1.1 on September 1, and on some intra-month date the Central Bank calculated another figure for it, that is, the plan was formally executed and the counter was reset to zero within 45 days, Belikov suggested.
The overestimation of capital adequacy standards may be due to the use of overestimated capital, says the head of the bank ratings department of the NKR agency Mikhail Doronkin: this is indicated by the fact that in the updated reporting form only the values of the standards and risk concentration for the borrower have changed - all other indicators completely coincide with the first version.To calculate capital adequacy ratios, in particular, equity values from the 123rd reporting form are used. However, when using the data of this reporting, normative values are obtained from the first version, and not the corrected one, Doronkin points out. This is confirmed by Belikov.
Questions for profit
August bank earnings for analysts also look strange: Fitch in his report calls it "uncertain profits." In January - July, the bank showed a loss of 2.4 billion rubles., Recognized about 9 billion negative adjustments to the balance sheet capital, plus in August it added up another 900 million rubles in reserves. - Given all this, in August Vostochny earned 1.4 billion rubles. profit against 300 million rubles. loss in July, counted Lopatin.
As a result, Vostochny turned out to be one of the most profitable banks in August - its annual return on capital reached 70%, while the average return on the sector was around 15–20%, Lopatin pointed out. Banks usually need to audit it in order to include profits in the basic (standard H1.1) capital, which takes time, while Vostochny's fixed capital in August grew by a value of about 1.5 billion rubles, comparable to profit, he reminds .
The bank sold a significant portion of its securities portfolio, mainly OFZ, for a total of more than 16 billion rubles, analysts say. The question, for which there is no answer yet, is to whom and on what conditions they were selling, if this provided such a profit, Belikov notes: it is not yet possible to say with 100% certainty that this is profit from the sale of securities, but other possible sources of profit for the analyst in the published statements did not see.
The representative of Vostochny, when asked why the bank made such a profit, said that “the bank consistently earns organic profit in the amount of 800 million to 1.3 billion rubles. per month".
The bank’s result cannot be considered sustainable, Belikov said, firstly, if the August profit is really from the sale of securities, then a significant part of the portfolio has already been realized. Secondly, as can be seen from the statements, the bank continues to accrue reserves, i.e., the occurrence of uncovered losses is still likely.
The legislation provides for liability for non-submission or untimely submission of reports to the Bank of Russia, reminds Forward Legal lawyer Fedor Zakabunya: liability is provided for both credit organizations and their officials. If the bank has provided the Central Bank with incorrect data, then the regulator may order it to eliminate the identified violations, he says.
How this happened, representatives of the "East" and the Central Bank do not comment. The regulator does not comment on existing banks, its representative recalls. Either the bank post-factum adjusted its profit for August, which is not yet visible in the statements, or not all the profit was recognized by the Central Bank itself for calculating capital ratios, Lopatin notes.
East Accounting
In July, Vostochny had a base capital ratio of H1.1 for six days below 5.125%. This meant that the bank had to restore it on its own for 45 days, or write off eternal subordinated debt. The bank has such a debt - 7.9 billion rubles, but the bank did not use the right to write it off, the Vostochny representative said earlier: he restored the capital stock on his own.
According to Fitch, the bank earned 1.4 billion rubles in August. profit - this allowed him to straighten the H1.1 standard to the first version of the figure of 5.15%, analysts pointed out, although in the corrected version it turned out to be 4.9%. The minimum level set by the Central Bank is 4.5%.
As of October 1, the H1.1 standard was 5.51%, a spokesman for Vostochny said. When asked if there is a risk that this time the standard can be changed downward, he said that these reports "will not be adjusted."
After updating the reporting, the question arises - how then in September the bank corrected the H1.1 standard to avoid writing off the subordinated debt, because it is below the threshold 5.125% for the fourth month in a row, says Yury Belikov, Managing Director for Validation of Expert RA. On the website of the Central Bank, in the reporting on standards, it is indicated that the bank was below the norm of 5.125% H1.1 for 11 days in August, after which the bank corrected the standard. Probably, Vostochny lowered H1.1 on September 1, and on some intra-month date the Central Bank calculated another figure for it, that is, the plan was formally executed and the counter was reset to zero within 45 days, Belikov suggested.
The overestimation of capital adequacy standards may be due to the use of overestimated capital, says the head of the bank ratings department of the NKR agency Mikhail Doronkin: this is indicated by the fact that in the updated reporting form only the values of the standards and risk concentration for the borrower have changed - all other indicators completely coincide with the first version.To calculate capital adequacy ratios, in particular, equity values from the 123rd reporting form are used. However, when using the data of this reporting, normative values are obtained from the first version, and not the corrected one, Doronkin points out. This is confirmed by Belikov.
Questions for profit
August bank earnings for analysts also look strange: Fitch in his report calls it "uncertain profits." In January - July, the bank showed a loss of 2.4 billion rubles., Recognized about 9 billion negative adjustments to the balance sheet capital, plus in August it added up another 900 million rubles in reserves. - Given all this, in August Vostochny earned 1.4 billion rubles. profit against 300 million rubles. loss in July, counted Lopatin.
As a result, Vostochny turned out to be one of the most profitable banks in August - its annual return on capital reached 70%, while the average return on the sector was around 15–20%, Lopatin pointed out. Banks usually need to audit it in order to include profits in the basic (standard H1.1) capital, which takes time, while Vostochny's fixed capital in August grew by a value of about 1.5 billion rubles, comparable to profit, he reminds .
The bank sold a significant portion of its securities portfolio, mainly OFZ, for a total of more than 16 billion rubles, analysts say. The question, for which there is no answer yet, is to whom and on what conditions they were selling, if this provided such a profit, Belikov notes: it is not yet possible to say with 100% certainty that this is profit from the sale of securities, but other possible sources of profit for the analyst in the published statements did not see.
The representative of Vostochny, when asked why the bank made such a profit, said that “the bank consistently earns organic profit in the amount of 800 million to 1.3 billion rubles. per month".
The bank’s result cannot be considered sustainable, Belikov said, firstly, if the August profit is really from the sale of securities, then a significant part of the portfolio has already been realized. Secondly, as can be seen from the statements, the bank continues to accrue reserves, i.e., the occurrence of uncovered losses is still likely.
The legislation provides for liability for non-submission or untimely submission of reports to the Bank of Russia, reminds Forward Legal lawyer Fedor Zakabunya: liability is provided for both credit organizations and their officials. If the bank has provided the Central Bank with incorrect data, then the regulator may order it to eliminate the identified violations, he says.
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