VAB Bank approves 27% share capital increase

VAB Bank (VABANK) shareholders, at an EGM yesterday, approved completion of a 27% (UAH 500 mln or USD 63 mln) share capital increase. The capital injection boosts the bank’s equity by 55% from end-1Q12. Earlier this year, the bank completed a UAH 600 mln (USD 75 mln) increase and the institution plans one more issue of UAH 500-600 mln by end-2012. VAB shareholder Sergei Maksimov (ex-head of VAB’s supervisory board) announced yesterday he would appeal the recent capital increase in court as he was deprived the pre-emptive right to subscribe for new shares while in detention. In related news, VAB Bank’s CEO voiced plans to expand assets by 70-80% and loans by 70% in 2012, with lending remaining focused on the agricultural sector. The bank should turn a profit this year according to management, after a loss of USD 62 mln in 2011.

Olena Zuikova: The capital increase is necessary for the bank as its CAR stood at 10.3% as of end-1Q12, marginally above the NBU’s minimum requirement of 10%. VAB’s lending plans imply the need for additional capital as well. The conflict between Maksimov and VAB’s current majority shareholder, Oleg Bakhmatiuk, is likely to linger for the next couple of months but we think the status quo will be preserved. Also we believe the dispute should have a negligible effect on the bank’s operations.