MOSCOW: Russia risks having to bail out more banks owned by large industrial groups unless there is rapid consolidation, VTB (VTBR.MM) First Deputy Chief Executive Yuri Solovyov said. Two of Russia’s biggest banks, Otkritie and B&N, have had to be taken over by the central bank in the past two months after a liquidity squeeze. Such “pocket banks”, a post-Soviet phenomenon which involved industrial groups needing their own banking wings to finance business, are still common in Russia, but some are struggling. “There should be less banks (than now) – we said this many times. Banks should be well-capitalized,” Solovyov told Reuters.
State controlled VTB is the second biggest bank by assets in Russia, which now has some 500 lenders, down from almost 900 in 2013 when central bank chief Elvira Nabiullina took the helm. “We are now moving towards (a situation) when some of the ‘pocket banks’ will be sold off or risk repeating the fate of those bailed out,” Solovyov said. Asked if VTB would buy bailed out lenders Otkritie or B&N after the central bank finishes cleaning them up, Solovyov said the state bank is growing quite fast organically. “There should be a logic behind any purchase. There is no task to buy (something) just because of the loan book… It’s hard to see how Otkritie will look after the bailout.” VTB holds a minority stake in the Otkritie group which controlled the bank which will be written down and cost VTB around 7 billion rubles ($121 million). A VTB loan to Otkritie to buy Lukoil’s (LKOH.MM) diamond business has been serviced, Solovyev said.
