06/04/2018 |

Dividends in exchange for investments

VTB

VTB will send 61% of the profits to the owners.
VTB Bank planned to allocate more than 50% of the net profit requested by the government for dividends for 2017, RBC sources say. The state will receive the same amount as in 2016, while minority shareholders – 2.7 times more.

According to the results of 2017, VTB Bank intends to allocate 73.5 billion rubles for the payment of dividends, two sources familiar with the agenda of the meeting of the bank’s supervisory board scheduled for April 16 told RBC. This is 61% of VTB’s net profit for the past year, amounting to 120.1 billion rubles.

According to the current proposals, the state in total for all types of shares should receive 56 billion rubles., Minority – 17.5 billion rubles., Sources say. For the same amount, VTB paid the state dividends on the results of 2016, minority shareholders then received less – 6.3 billion rubles. The press service of VTB declined to comment, the Ministry of Finance and Federal Property Management Agency did not respond to the request of RBC.

State companies should send at least 50% of their profits to pay dividends on the results of the last year, follows from the letter of the Federal Property Management Agency (available to RBC), sent to joint-stock companies with state participation in March this year.

Dividends on preferred shares are fully transferred to the state. According to the source of RBC, the state will receive as much dividends as it expected, but mostly not on preferred shares, but on ordinary shares. For both types of shares, it is planned to set an equal dividend yield at 5.51%, calculating the share price based on the average price of the shares for 2017. When implementing such a scheme, dividend payments will be redistributed in favor of ordinary shares, RBC’s interlocutor said. As a result, the winners will be minorities, which will receive 2.7 times more than last year.

During a telephone conversation with investors at the end of February, VTB already announced its intention to change the structure of dividend payments related to the desire to ensure an equal dividend yield on all classes of shares, while maintaining the volume of payments to the state, Roman Prabkin, an analyst at S & P, recalled. Earlier, the government agreed with the proposal of the bank’s management to equalize the dividend yield of its two types of shares. The state as the owner of both ordinary and preferred shares is not particularly important, through what type of shares it will receive dividends, argues the analyst of the investment company “Aton” Mikhail Ganelin. But unlike ordinary shares, preferred shares do not circulate on the market, and their nominal value is likely to be taken to their nominal value, he explains.

The junior director of “Expert RA” Lyudmila Kozhekina connects the increase in VTB dividends with the profit growth in 2017 by about 1.5 times compared to 2016. “The merger with VTB24 led to an increase in the capital adequacy of VTB Bank by approximately 100-120 bp. The increase in the stock based on capital adequacy ratios made it easier for VTB to increase the amount of dividend payments, “Roman Rybalkin calls the factor to increase the dividend payments of the bank. As of January 1, 2018, the capital adequacy ratio (N1.0) for VTB is 11.3% with an allowable minimum of 8%, according to the RAS financial statements for 2017. The effect of dividend payments on capital adequacy ratios will be insignificant, within 1 ppt, calculated in “Expert RA”.

The decision to pay higher dividends will be well received by investors, Mikhail Ganelin believes. After a long fall in VTB shares, management is looking for ways to return interest to them, and improving dividend policy is the right step, the expert says. According to Ganelin’s forecasts, VTB’s share price over the next 12 months could grow to 0.07 kopecks, or 30%.

As Roman Rybalkin notes, the task of any management is to make the shareholder’s asset worth more. “As a rule, in public joint stock companies, part of compensation for management is tied not only to the financial result of the year, but also to the value of shares,” the analyst said. VTB is the second largest bank in Russia after Sberbank. But the return on its capital (ROE) is significantly lower than that of Sberbank: by the end of 2017, it was 24% for Sberbank, and for VTB – 8.3%, but in the next few years the profitability of VTB’s capital will grow, Ganelin concludes. But VTB’s return on capital (ROE) is in the growth stage, while Sberbank, according to management, this indicator is at peak values ​​and is likely to decline this year, says senior portfolio manager of the capital Kapital Vadim Bit-Avragim: In the coming years, VTB’s net profit will also increase faster than Sberbank, which means that VTB’s dividends may become more attractive in future, Ganelin predicts. As RBC previously wrote, in 2018 VTB sets a target for net profit – at least 150 billion rubles.

Authors: Anastasia Krivorotova, Anna Mikheeva.

Original in Russian: RBC Daily

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