The Central Bank will jam Artem Avetisyan for Vostochny Bank

To rectify the situation, the bank needs about 5 billion rubles in capital, analysts say.
05.02.2020
Vedomosti
Origin source
Vostochny Bank has not complied with the requirements of the Central Bank, it follows from its reporting on the regulator’s website: it complied with all the required capital adequacy standards - but without taking into account the allowances that should be at the end of the quarter. By the end of the fourth quarter, the value of the standard of capital adequacy ratio (N1.1), fixed assets (N1.2) and equity (N1.0) for non-systemically important banks should be 6.75, 8.25 and 10.25%, Vostochny turned out to be 5.4, 7.7 and 8.9%. Most of all, the bank slipped the norm H1.1 (the ratio of base capital to risk-weighted assets, its minimum value without premiums is 4.5%), with the premium “Vostochny” observed it only one day in December, according to its statements.

The Central Bank introduced these allowances since 2016. They are gradually increasing to 2.5% since 2020, however, banks must comply with the regulations with allowances at the end of each quarter. At the end of the first quarter, the lows will be 7, 8.5 and 10.5%, respectively, and will not grow more.

Banks that do not comply with capital adequacy ratios, taking into account surcharges, cannot distribute profits among shareholders, direct them to pay dividends, the bank law says.

“Vostochny” complies with all mandatory standards with a reserve, the bank representative said: as of February 1, the standard N1.0 is 9.5%, N1.1 - 5.5% and N1.2 - 8.0% (reserve 5.9 billion in rubles). The bank has an approved business plan under which it plans to reach the level of premiums recommended by the Central Bank, his representative added.

The retained, historically earned profit of Vostochny recorded in equity at the end of 2019 amounted to 13.5 billion rubles, Yuri Belikov, managing director for validation of Expert RA, calculated. Theoretically, a meeting of shareholders could decide to pay such dividends, but that would mean a critical decrease in capitalization, even with allowances, he suggests. In general, non-fulfillment of premiums is not critical, the analyst notes: in the current phase of the economic cycle, few banks pay dividends, but otherwise it only requires the provision of plans to restore capital adequacy in the Central Bank.

2.2 billion rubles. for such an amount Artem Avetisyan promised to buy the non-core assets of Finvision Bank if the bank could not sell them independently

The bank has not paid dividends since at least 2010, Belikov recalls. In addition, if the values ​​of the standards with allowances are not fulfilled, the bank is obliged to provide the Central Bank with a plan aimed at fulfilling the allowances, he notes: promise to increase capital or reduce risky assets.

None of Vostochny’s standards for allowances are met, although lows are observed without allowances, Belikov says. To comply with the H1.1 standard with a premium at the end of 2019, the bank needed about 4 billion rubles, says Fitch analyst Anton Lopatin. And in order to achieve compliance with all standards, taking into account the new premiums, from January 2020, Vostochny would need to increase its base capital by 5 billion rubles, Belikov calculated.

It was precisely at this amount that Vostochny planned to carry out an additional issue back in 2018, but due to a conflict of shareholders (Artem Avetisyan and partners against Baring Vostok), this was not possible, and in January the Central Bank declared it failed. The Central Bank did not respond to the request.

The problem of the bank is not only in the performance of premiums, according to Mikhail Doronkin, head of the bank ratings department of the NKR agency: his N1.1 is close to 5.125%. If the standard is kept below this value for six days, the bank must, within 45 days, either restore it on its own or write off perpetual subordinated debt. The bank has such a debt - 7.9 billion rubles. In July 2019, the standard fell six days below the threshold 5.125%, but Vostochny did not write off the subord, straightening the situation on its own. True, the bank canceled the payment of the coupon on this loan.

In December, the bank's capital fell by 3 billion rubles. due to the growth of accumulated loss - this could be due to the prescription of the Central Bank, says Lopatin. At the end of the year, the Central Bank ordered Vostochny to charge 5.8 billion rubles. reserves, wrote RBC. The bank has already resorted to selling OFZs to maintain standards, it is possible that the portfolio will continue to decline in January (at the beginning of the year the bank had securities at 9 billion rubles), Doronkin argues, another option is to sell the most problematic loans, which will restore him reserves. Avetisyan promised to help the bank: his Finvision pledged to buy 2.2 billion rubles in troubled assets of the bank.

To fulfill the allowances, risk-weighted assets could be reduced by 23%, or 54 billion rubles, Belikov says: obviously, this is too dramatic, capitalization is preferable.

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