Russia’s Bank of Moscow, which ranks among the country’s top five lenders, saw its overdue payments surge to 169.9 billion rubles in 2011 from 28.3 billion rubles a year earlier, as calculated under Russian Accounting Standards (RAS), the bank said in a report Monday.
Bank of Moscow, an investment vehicle of the Moscow government during former Moscow mayor Yury Luzhkov’s period in office, was taken over by VTB after President Dmitry Medvedev dismissed Luzhkov over a lack of trust in 2010.
A check following the change in ownership revealed a significant gap in its assets and it has received a bailout of 400 billion rubles, a record sum for the Russian banking system.
Bank of Moscow’s problem assets amounted to 367 billion rubles in June and fell to 311.1 billion rubles by the end of 2011. The bank acquired 3.2 billion rubles worth of property within its clients’ loan repayment in 2011.
VTB agreed to raise its stake in Bank of Moscow to 75.0 percent from 46.5 percent it originally bought to allow the Central Bank of Russia to disburse a 295 billion ruble low-interest loan to help Bank of Moscow deal with its loan problem. VTB also injected 100 billion rubles in Bank of Moscow and then raised its stake in the lender to 94.8% in December 2011.
In 2012, Bank of Moscow will create 22.9 billion rubles worth of additional reserves as part of a financial recovery plan. It does not rule out attracting debt collecting agencies to handle the most difficult arrears.