Bank Forum losses shrank 50% q-o-q in 3Q10, quite predictably

Bank Forum (94.5% is owned by Commerzbank AG) posted yesterday UAH 600 mln (USD 75 mln) of net loss for 3Q10, 50% below the loss for 2Q10, but still much larger than UAH 141 mln loss in 3Q09. In line with our expectations, the bank continues to accumulate provisions against troubled assets which now reached 22% of total loans portfolio. Mykyta Mykhaylychenko: We see the bank is close to completing provisions formation and, hence, the bottom line is to improve going forward. Forum continues shrinking its balance sheet with total assets squeezed 5% (UAH 1 bln) during 3Q10 which may explain further deterioration of interest rate margin to 2.8% (4q rolling), from 3.1% a quarter ago. The bank’s retail loans portfolio increased 20% during 3Q10 (+7.1% system average), while corporate deposits shrank by 18.1%. Loans/Deposits stayed unchanged at 188%. As we wrote earlier, last week Bank Forum’s shareholders voted to increase the bank’s charter capital by 34% or UAH 1.5 bln (USD 189 mln). This will be the second capital infusion this year after Forum approved a twofold increase in March. Forum’s CEO stated that the major reason for the capital injection is to aggressively expand the loan portfolio in 2011 with a targeted increase of 25% next year. The management also hopes to begin reducing provisions next year. It was also confirmed that the bank has nearly completed a structural reorganization aimed at reducing operating costs going forward.