Bank Forum cuts net interest income 4.6x yoy in 3Q12

Bank Forum (FORM UK), still a subsidiary of Commerzbank that is currently in the process of being sold to Smart Holding, reported a significant decline in revenues in 3Q12 (according to local accounting standards). Interest income declined 1.8x yoy in 3Q12 on a 2.2x yoy decrease in loan portfolio, which led to 4.6x cut in net interest income to just UAH 27 mln for the quarter (UAH 189 mln in 9M12, down 2.2x yoy). The decrease in income was not compensated by a cut in operating costs (down 1.7x yoy in 3Q12), which made the bank’s Cost/Income ratio rise from 1.5x for 9M11 to 2.9x for 9M12. Despite poor operations, Forum managed to report a marginally positive UAH 1 mln profit for the quarter (UAH 3.6 mln for 9M12), mainly on a UAH 150 mln (positive) reversal of loan loss provisioning. The bank’s net loan portfolio declined 16% YTD (-2% qoq), while client accounts shrank 26% YTD (-8% qoq) as of October 1, 2012. Forum’s equity declined 1% YTD to UAH 1.48 bln.   

Alexander Paraschiy: It is clear that the bank requires a complete strategic review to turn itself around. Though Forum trades at an attractive 0.24x P/Book, its shrinking business, high cost base and unclear prospects related to entry of a new strategic investor suggest the risks of investing into this asset are much higher than any potential benefits.