Russia's troubled Bank of Moscow saw its first half 2011 net profit plunge 94 percent year-on-year to 350 million rubles ($11.3 million) to IFRS, the bank said in a statement on Thursday.
In 2010, Bank of Moscow made a 68.2 billion ruble loss after it had to build up provisions for problematic loans extended to companies close to former Moscow mayor Yury Luzhkov.
Bank of Moscow, the capital's investment vehicle under Luzhkov, was taken over by Russia's second largest lender VTB, after President Dmitry Medvedev fired Luzhkov over a lack of trust last fall. A recent check of the bank revealed a significant hole in its assets.
Russia has placed an international arrest warrant for the bank's former CEO, Alexei Borodin on charges of improperly loaning $443 million to shell companies which then transferred the cash to Luzhkov's wife Elena Baturina, owner of construction empire Inteco.
The bank was given a record $14 billion bailout, in which VTB raised its stake in Bank of Moscow from 46.5 percent to 75 percent, allowing the central bank to disburse a low-interest loan of 295 billion rubles. That will help Bank of Moscow to book an accounting gain to cover the worst of its bad loan problem.
VTB has to pump a further 100 billion rubles into Bank of Moscow before the end of 2012.
Borodin, claimed the takeover was "political" and was done to transfer money from the state to the bank's new shareholders.