Ukreximbank reports improved profit on halved provisioning in 1H17

Ukraine’s State Export-Import Bank (Ukreximbank,
EXIMUK) reported a UAH 736 mln bottom line in 1H17 (after UAH 1,325 mln in losses
a year ago), according to its interim report. The improvement was the result of
a 56% yoy drop in loan loss provisions to UAH 1,068 mln. At the same time, the
company’s key revenue indicators decreased in 1H17: net interest income fell 9%
yoy to UAH 1,501 mln as a result of interest income dropping 13% yoy and
interest costs sliding 14% yoy. Its net commission income fell 16% yoy to UAH
291 mln.

Ukreximbank’s net loan portfolio climbed 1% UTD to UAH
56.8 bln and remained at about 55% of its gross loan portfolio. Its securities
portfolio increased 2% YTD to UAH 73.7 bln – mostly due to a larger state bonds
portfolio, which also rose 2% YTD to UAH 72.1 bln. Gross loans to state
companies amounted to 19.9 bln, or 19% of the total. The bank’s total assets
rose 5% YTD (to UAH 168.4 bln), mostly due to an increased cash balance, which
improved 57% YTD to UAH 25.2 bln.

The bank’s deposit base improved 5% YTD to UAH 89.9
bln, while its biggest depositor (probably the State Grain Corporation) held
UAH 27.6 bln at the bank’s accounts, or 31% of the bank’s total deposits. The
bank’s total equity surged 2.6x YTD to UAH 14.1 bln (on a positive bottom line
and the state’s contribution into equity) and its CAR (Basel) improved to 23.6%
as of end-1H17, up from the risky level of 9.5% at the year’s start.

Alexander Paraschiy: The good
news is that the bank remains cash-rich, but its reduced net interest income
looks worrying. Theoretically, the bank might decrease its interest costs by
partially repaying its Eurobonds ahead of schedule. Currently, its Eurobonds
are the most expensive source of funding bearing 9.5% interest in 1H17,
compared to about 7.3% for deposits (except the Grain Corporation) and 5% for
borrowings from other banks.