* VTB expects 2021 net profit at over 300 bln rbls
* Next year's profit could come under pressure amid rising
c.bank's key rate - CEO
* VTB holds 1.75 trln rbls in OFZ bonds, plans to invest 100
* Potential new U.S. sanctions on OFZ market 'not a serious
* Full Kostin quotes in Russian
MOSCOW, Nov 29 (Reuters) - Russia's second biggest bank VTB
won't necessarily see 2022 net profit match this
year's expected record high as sharp rises in interest rates
reduce margins, Chief Executive Andrey Kostin told Reuters.
In October, state-owned VTB lifted its net profit forecast
for this year to more than 300 billion roubles ,
from a previous forecast of 295 billion roubles.
Kostin told Reuters in an interview conducted for
publication on Monday that one-off factors including the sale of
VTB's 17.3% stake in food retailer Magnit would help
drive profit growth this year.
However, rising interest rates are hurting margins and that
would be felt more clearly next year.
Rising inflation has prompted the Russian central bank to
lift its key interest rate by 325 basis points so far this year
and it has signaled more increases to come.
VTB expects another 50 bps rate rise at the central bank's
next meeting on Dec. 17 and Kostin said higher interest rates
would depress overall retail lending growth in Russia's banking
sector to 14.5% next year, from 22% in 2021, and corporate loans
growth would be below 10%, down from 10-12% expected this year.
"That said, it is possible that VTB's net profit for 2022
may not be as high as the record (we expect in) 2021 - growth in
business would be offset by loss in margins," he said.
Net profit this year is set to rise from 75.3 billion
roubles last year, when the impact of COVID-19 hit business, and
201.2 billion roubles in 2019.
The bank will recommend paying 50% of its net profit in
dividends on ordinary shares on this year's results but plans to
talk to the government on paying less on the preferred shares,
The Russian government controls 92.2% of VTB via ordinary
and preferred shares. The remaining 7.8% of VTB is represented
by ordinary shares and is in a free float.
GEOPOLITICS AND OFZ MARKET
As political tensions between Russia and the United States
increase on everything from the Nord Stream 2 gas pipeline to
relations with Ukraine, some U.S. lawmakers recently suggested
extending sanctions on Russia's secondary OFZ treasury bond
Existing U.S. restrictions already ban U.S. investors from
buying into new OFZ bonds but Kostin believes any new sanctions
on OFZs, if adopted, would not represent a 'serious threat' for
the country's financial stability.
"The Russian market, with such players as Sberbank
and VTB, major OFZ holders, is incomparable with the OFZ
portfolio held by U.S. investors," he said.
Foreign investors hold 21% of total OFZ bonds outstanding,
or 3.3 trillion roubles ($44 billion), of which U.S. investors
account for around a third - less than VTB alone which has 1.75
trillion roubles of OFZs in its portfolio.
According to Kostin, VTB plans to increase its OFZ portfolio
by another 100 billion roubles in the coming months, and to keep
that level stable further on.
"I do not think that this (potential new sanctions) is a
serious threat for the country's financial stability or for the
bank," he said, adding that any new sanctions would hurt U.S.
investors first while increased yields, as a result, would allow
Russian bond buyers to earn even more.
But overall, Kostin, a former diplomat himself, said he was
worried about increasing tensions between Russia and Western
nations, calling the current political backdrop "even more
alarming than a couple of months ago."
"It is best for all of us to focus on social-economic
issues," he said, urging Russian and Western leaders to focus on
business and economic issues such as inflation rather than
(Reporting by Katya Golubkova; Editing by Susan Fenton)