Privatbank reports UAH 2.9 bln in losses on high provisioning in 1H17

Ukraine’s recently nationalized biggest lender
Privatbank (PRBANK) reported UAH 2.6 bln in net losses in 1H17 as it had to
provision UAH 6.5 bln of its loan portfolio, according to its first-half report
published on July 31. The bank managed to reduce interest costs 34% yoy and
faced a decrease in interest income by 24% yoy, which allowed it to report a
85% yoy advance in net interest income to UAH 2.7 bln. Its cash-based net
interest income increased to positive UAH 0.3 bln in 1H17 from negative UAH 4.2
bln a year before. Its operating cash flow before assets/liabilities change
improved to UAH 1.7 bln in 1H17 from negative UAH 3.6 bln  a year ago.

The bank’s net loan portfolio increased 1% YTD to UAH
44.1 bln, remaining at 19% of its gross portfolio as of end-June. Its portfolio
of securities and derivatives increased 18% YTD to UAH 107.5 bln, accounting
for 54% of total assets. The bank’s deposit base improved 10% YTD to UAH 199.0
bln.

Privatbank’s equity improved to UAH 10.7 bln as of
end-June, from negative UAH 0.9 bln at the year’s start. Privatbank did not
report on its capital adequacy ratio. The report also mentioned that in July
2017, the state contributed an additional UAH 22.5 bln into the bank’s equity.

Alexander Paraschiy: It is
particularly good that the bank was able to generate positive cash flow from
operations, which was a result of smaller spending on interest and a 28% yoy
increase in net inflow from commission business. It looks like most of its
interest income was generated from possession of state debt instruments
(received during its nationalization), meaning the bank is not earning much on
its loan portfolio. Nevertheless, it looks like the bank has all chances to
survive and improve its profitability in the future, which raises the chance
for Eurobond holders to claim their investments back if they win the upcoming
international litigation against a bail-in made in December 2016.