PUMB reports 1.9x surge in net interest income, positive profit in 1Q17

First Ukrainian International Bank (PUMB, PUMBUZ) posted UAH 480 mln in net income in 1Q17 (up from UAH 265 mln in losses a year ago), according to its quarterly report published on May 5. The improvement was the result of a surge in net interest income of 88% yoy to UAH 718 mln and no loan loss provisioning (vs. UAH 599 mln in provisions in 1Q16).

Its interest income rose 13% yoy to UAH 1,306 mln, driven by a 25% yoy increase in interest from individuals to UAH 332 mln (on a 14% yoy rise in loans to individuals) and a 68% yoy advance in interest from securities held to UAH 329 mln (on an almost quadrupled amount of securities held). Its interest costs fell 24% yoy to UAH 588 mln, mostly driven by a 35% decrease in interest on individual deposits to UAH 238 mln (even though the amount of the deposits remained unchanged). The bank received in cash only 81% in interest income accrued in 1Q17 (vs. 98% received in 1Q16).

The bank boosted its OpEx 2.2x yoy to UAH 876 mln, which was driven mostly by losses from impairment of property (UAH 336 mln, vs. zero a year ago) and a 43% yoy jump in workforce expenses (to UAH 267 mln).

The bank’s net loan portfolio decreased 6% qoq (and 12% yoy) to UAH 23.37 bln as its securities portfolio increased 2% qoq (and 4.3x yoy) to UAH 9.56 bln as of end-1Q17. At the same time, its net loans to related parties jumped 2.2x yoy to UAH 3.77 bln as of end-1Q17. Its deposit base remained flat qoq (14% yoy growth) at UAH 33.19 bln.

The bank also noted that it repaid on time USD 19.76 mln in amortization of Eurobonds (payable in the last day of each quarter, till end-2018).

Alexander Paraschiy: The bank’s P&L looks too good to be true, but the impressive result is also supported by its cash flow statement: its cash received from operations (before assets and liabilities changes) remained solid at UAH 633 mln in 1Q17, or 39% yoy growth.

That supports our view that it won’t be a problem for PUMB to make further quarterly amortization payments on its Eurobond. We continue to treat its Eurobonds as an attractive instrument to hold by its ultimate maturity. The bond offers 10.9% YTM currently.