Ukraine, EBRD preparing Oschadbank privatization plan, media reports

The Ukrainian government, the EBRD and Oschadbank (OSCHAD) are preparing a memorandum of reform of Ukraine’s biggest state bank, the finclub.net news site reported on Nov. 21. The draft foresees that a stake of at least 20% in Oschadbank will be offered for sale to an international investor in mid-2018. The EBRD may consider purchasing such a stake only in case there will be “clear commitments of the government to fully privatize the bank.” Such a privatization may happen in 2022, according to draft memorandum.

In addition, Ukraine’s Cabinet has committed to hiring independent members of the bank’s supervisory board in 1H17, while the EBRD will help to optimize the bank’s internal processes and improve the quality of risk management and compliance. On top of that, the EBRD will assist in the development of the bank’s program of financing of small- and medium- enterprises and energy efficiency projects.

A similar program may be implemented later with Ukraine’s other large state bank, Ukreximbank (EXIMUK), finclub.net reported. The Finance Ministry presented a strategy of reform of both state banks in February 2016, which also assumed a sale of no less than 20% of the banks to IFIs.

Alexander Paraschiy: Reforms, transformations and privatization are being heavily delayed in Ukraine so we don’t believe the outlined plan, even if signed soon, will be implemented on time. Also, we do not believe in the government’s intention to fully privatize Oschadbank. In any case, tight cooperation of Oschadbank with the EBRD, as well as internal reforms, adds some chances that the bank will become more transparent and efficient in the mid-term.

We continue to consider Oschadbank’s and Ukreximbank’s Eurobonds quasi-sovereign notes that have similar default risk to government paper.