Cabinet to increase Ukreximbank equity by UAH 6.8 bln

Ukraine’s cabinet voted on Sept. 23 to approve an
equity increase for state Ukreximbank (EXIMUK) by UAH 6.8 bln, Interfax-Ukraine
reported the same day, citing an announcement by the finance minister at
cabinet’s weekly Wednesday meeting. The government is going to contribute the
respective amount of state bonds to the bank’s equity, with maturity in 15
years and a coupon rate of 9.3%.

Recall, the bank’s CEO Yevhen Metzger said in August
that he was in talks with the government on a possible equity increase by up to UAH 10 bln.
He said the bailout is needed to cover additional bank provisions under old
non-performing loans. As of Aug. 1, the bank’s loans for a gross value of UAH
75.0 bln (57.3% of total) were classified as non-performing, while Metzger
hinted that the share of NPLs was underestimated.

Since 2014, Ukreximbank has received capital
contributions from the state for a total of UAH 22.0 bln. With this most recent
bailout, its equity will have been raised to a total of UAH 28.8 bln. Its peer
Oschadbank (OSCHAD), whose gross loan portfolio is 9% lower, drew capital
contributions of UAH 31.2 bln for the same period.

Alexander Paraschiy: As with the previous capital increases, we deem this event to be
positive for the bank since the government is confirming its commitment to
support Ukreximbank. Nevertheless, we continue to see the bank’s Eurobonds as
less attractive than the bonds of Oschadbank (OSCHAD), which offer higher
yields with the same risk profile. For the government, such a bailout will mean
the swelling of state debt. But the growth won’t be significant, at only about
0.17% of this year’s GDP.