Raiffeisen Bank Aval, Ukrsotsbank report weak 1Q12 UAS results

Raiffeisen Bank Aval (BAVL UK) and Ukrsotsbank (USCB UK) both reported unimpressive 1Q12 results, posting net incomes of less than USD 2 mln, according to UAS financials released yesterday. Pre-impairment profit declined 2% yoy at Aval and 9% at Ukrsotsbank and both banks set aside operating profits in provisions almost in full. Balance sheet-wise, Aval saw its net loans contracting 4% qoq (-6% yoy) while Ukrsotsbank’s book was up 1% qoq (-3% yoy) in 1Q12.

Raiffeisen Bank Aval 1Q12 financials, UAS, USD mln                                  

 ——————————————————
                                                       1Q12   yoy     
——————————————————
Net interest income                           135    3%     
Net fees and commissions                  39   15%     
Operating expenses                          -96    9%     
Pre-impairment profit                         82   -2%     
Impairment charge for credit losses    -79   -4%     
Net income                                        1     591%     
——————————————————
                                                    1Q12   qoq   yoy
——————————————————
Assets                                           6,350   -1%   -7%
     Gross corporate loans                2,085  -10%  -24%
     Gross retail loans                      2,821   -7%    3%
     Loan loss reserve                     -1,258  -18%  -20%
Liabilities                                       5,548   -1%   -8%
     Corporate deposits                    1,608    2%   10%
     Retail deposits                          1,928    3%   -6%
Equity                                             803   -1%   -1%
——————————————————
Source: Company data   

Ukrsotsbank 1Q12 financials, UAS, USD mln 

——————————————————
                                                            1Q12   yoy     
——————————————————
Net interest income                                82   -8%     
Net fees and commissions                      17    17%     
Operating expenses                               -43    7%     
Pre-impairment profit                             63    -9%     
Impairment charge for credit losses        -61   -12%     
Net income                                            0.4    47%     
——————————————————
                                                 1Q12   qoq   yoy
——————————————————
Assets                                      5,049    0%   -3%
     Gross corporate loans           2,411    3%    7%
     Gross retail loans                 2,282   -1%   -5%
     Loan loss reserve                -1,041    2%   19%
Liabilities                                  4,226    1%   -4%
     Corporate deposits                793    -10%   30%
     Retail deposits                     1,387    4%   11%
Equity                                       823      0%    0%
——————————————————
Source: Company data

Olena Zuikova: We give little credit to the banks’ UAS-based financials as they differ substantially from IFRS numbers due to discrepancies in accounting of interest revenues and loan provisioning. We expect a much stronger bottom line under IFRS for both banks on lower (than under UAS) loan impairment charges. As previously, we do not expect any material price triggers for banking stocks this year as the banking sector recovery is progressing slowly. Both stocks are currently trading at 2012E P/B of 0.4x.