Oschadbank improves profitability in 2011
20 April 2012
Oschadbank (OSCHAD) released its 2011 IFRS financials this week, posting net income of USD 137 mln for a ROE of 6.6%. Net interest income was up 11% yoy on an 18% increase in its net loan book. However, its pre-impairment profit remained broadly flat yoy on a 28% surge in operating expenses, which management related to extensive investments in IT. The bank considerably reduced its exposure to related parties: the share of its loan portfolio to state companies shrank 14 pp in 2H11 to 51% (the share of loans to Naftogaz was down 10 pp to 35%), although this partly came due to strong balance sheet growth. Loan quality seems to be well in check, with the share of NPLs (loans overdue by 90 days or more) declining 2.6 pp yoy to 10.9% of gross loans (excl. lending to Naftogaz). The bank slashed its cost of risk to 3.4% in 2011 from 4.9% a year earlier. The bank continued to rely heavily on NBU funding (used mainly for lending to Naftogaz), which accounted for 27% of liabilities as of end-2011 (all maturing in 2015).
Oschadbank key financials and ratios
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2010 2011
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Assets, USD mln 7,229 9,244
Assets, yoy 1% 28%
Net loans, USD mln 5,347 6,316
Net loans, yoy -7% 18%
Net income, USD mln 58 137
ROE 2.9% 6.6%
Cost/Income 38% 44%
Cost of risk 4.9% 3.4%
BIS CAR 36% 30%
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Source: Company data, Concorde Capital
Vitaliy Vavryshchuk: We view Oschadbank’s 2011 results as broadly positive, especially progress in reducing exposure to related parties was impressive. The extremely strong lending growth at 18% yoy is our only concern – sustaining a high quality fast growing loan portfolio against a weak macro environment may be a challenge. Oschadbank’s USD 700 mln Eurobond currently trades at about a 300 bp premium to the sovereign curve, which we think is attractive.
