Leaked 2016 Privatbank report shows over USD 6 bln provisioning
22 June 2017
Ukraine’s biggest lender Privatbank (PRBANK) posted UAH 176.6 bln (about USD 6.9 bln) in net losses in 2016, according to its annual report, which was leaked by someone and published by the dubinsky.pro website. The biggest factor was UAH 154.5 bln in loan loss provisioning made in late December as a part of the bank’s nationalization.
With such provisioning, the bank’s net loan portfolio dropped 78% yoy to UAH 43.6 bln as of end-2016. Most of the provisions (UAH 148 bln) were made on the bank’s corporate loan portfolio, which was the most significant part of the bank’s assets at the year’s start (net value of UAH 168 bln, or 61% of the bank’s total assets). As of end-2016, the net value of the bank’s corporate loan portfolio was UAH 9.3 bln, or 5% of the bank’s total assets.
The bank also provided list of related party loans as of December 19, the date of start of its nationalization. Based on the report, the bank provided only UAH 8.8 bln in net loans to related parties as of that date.
The report also mentioned the bank’s bail-in, during which it converted UAH 10.72 bln in senior Eurobonds, UAH 7.78 bln in subordinated debt and UAH 10.93 in related party deposits into the bank’s equity. The bank also received UAH 107.0 bln in capital contribution from the state in late December. However, the bank’s total equity was UAH -0.7 bln as of end-2016.
In the leaked report, the bank’s new auditor, Ernst & Young, wrote that it won’t express an opinion on the bank’s reported P&L cash flow statement, nor on its related party operations report. The auditor also listed seven bases for qualified opinion on the bank’s balance sheet. According to Interfax-Ukraine’s sources, the leaked report is “one of the drafts.”
In other news, the finclub.net news site reported that Ukraine’s central bank is preparing a resolution to forbid Privatbank’s former auditor, PwC, to make audits of Ukrainian banks, as a result of its poor performance with Privatbank.
Alexander Paraschiy: The leaked annual report document, signed in May 2017, indeed looks like a draft. But it gives an understanding on how the final report will look like. Firstly, the report does not provide any proof that all the bank’s corporate loans were provided to related parties.
Secondly, the report shows that new Privatbank management does not recognize Eurobond holders as related parties. This is one more strong argument for the noteholders seeking cancellation of the bail-in. Recall, during the bail-in in late December, Ukraine’s Deposit Guarantee Fund ruled to exchange Eurobonds and some of the bank’s other liabilities into its new shares (which were later sold to Ukraine’s MinFin for one hryvnia). But Ukrainian legislation allowed the Fund to sign a purchase agreement for the bank’s new shares only on behalf of related parties.
