Russian banks will not be separated by dividends. Freezing of Coupons on Subordinated Bonds

Russian Finance Minister Anton Siluanov will suggest to state-linked banks not to split dividends in 2022 on last year’s earnings. “Institutions need stable capital strength,” the minister added, according to reports from Interfax. The main government-linked groups, Sberbank and VTB, were planning to pay half of their net profits as a coupon before they were hit by Western sanctions.

VTB is waiting for the Kremlin’s decision on the dividend. “The government is looking at the situation at the moment not only in relation to our situation, but is considering whether to pay coupons in the event of a need to recapitalize the banking sector. It is likely that this will be a decision that will be made at the level of systemic, ”explained the managing director of VTB Andrei Costin.

Kostin and Sberbank CEO Herman Gref wrote to Prime Minister Mikhail Mishustin in mid-March, saying that banks had assessed their potential losses from participating in state support measures for the economy that were adopted or about to be adopted in response to Western sanctions.

The total losses of the country’s largest banks, which are tightly restricted, could reach nearly 600 billion rubles ($7.5 billion). The letter shows that, according to the Central Bank of Russia, the expected volume of system-wide liabilities in 2022 will range from 3,500 to 5,800 billion rubles, excluding negative revaluation of securities in the amount of almost 2,000 billion rubles.

The US and UK imposed sanctions on VTB in late February. The United States on April 6 added a complete ban on activities towards Sberbank, thereby freezing all assets that touch the American financial system and preventing American citizens from establishing relations with the bank. The UK has also imposed strict restrictions on Sberbank.

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Meanwhile, Sovcombank, which is itself subject to US sanctions, suspended the ex-dividend coupon on two perpetual Eurobond issues. The bank said bonds maturing in 2025 and 2030 will accrue interest, but payments are temporarily suspended. Also because, at the beginning of the week, the United States prevented Russia from paying over 600 million dollar bond holders by asking US banks not to authorize payments to creditors. Today, the dollar resumed its rally against the ruble, rising 2.8% to 78.88, still above levels before February 24, when Russia invaded Ukraine. The impact of the sanctions should become clear over the next few months. (All rights reserved)


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