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Report: Regulator orders Orient Express Bank to boost loan loss provisions

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Report: Regulator orders Orient Express Bank to boost loan loss provisions

The Central Bank of the Russian Federation asked PSC Orient Express Bank to set aside about 20 billion Russian rubles in additional loan loss provisions following a recent inspection at the lender, Kommersant reported Jan. 16.

Orient Express Bank already set aside 6.8 billion rubles in provisions in 2018, and the remaining sum, mainly for provisions on corporate loans on securities investments, will be covered from future profits and a planned 5 billion ruble capital hike, according to sources cited by the newspaper.

The lender told Kommersant that it developed an 18-month plan for covering the additional provision requirements from upcoming earnings. The plan, approved by the central bank in December 2018, is based on an assumption that the lender's profit will amount to around 10 billion rubles in 2018 and will reach around 15 billion rubles during the next 18 months.

The newspaper's sources also noted that Orient Express Bank's two main shareholders, businessman Artem Avetisyan and private equity firm Baring Vostok Capital Partners Ltd., agreed during a meeting with Russian central bank head Elvira Nabiullina that the 5 billion ruble capital increase will be completed in April 2019. However, if Avetisyan is not able to participate in the capital hike, Baring Vostok funds will purchase all additional shares issued by Orient Express as part of the increase, Kommersant said.

As of Jan. 16, US$1 was equivalent to 66.37 Russian rubles.