Oschadbank raises profit 33% yoy, doubles bond portfolio in 1H13

State Oschadbank (OSCHAD) reported 33% growth in profit to UAH 298 mln in 1H13, according to a non-audited report released on June 17. The bank increased client accounts 8%  yoy (+1.6% YTD) to UAH 40.0 bln and interest expenses grew 19% yoy to UAH 2.7 bln in 1H13. With interest income growth lagging (+16% yoy), the company’s net interest income improved just 13% yoy to UAH 2.7 bln.

The bank’s total assets increased UAH 9.5 bln YTD to UAH 95.6 bln, funded mostly by an increase in “other financial liabilities” and “other attracted funds.” Total liabilities increased UAH 9.7 bln YTD (to UAH 77.6 bln), mainly due to UAH 7.3 bln YTD growth in foreign currency liabilities. Despite the spectacular growth in attracted funds, Oschadbank’s loan portfolio decreased by almost UAH 0.5 bln and deposits with other banks declined UAH 5.0 bln YTD. The key asset item that grew was its securities portfolio (government bonds, we assume), which improved by a remarkable UAH 11.5 bln (1.9x) YTD and UAH 13.1 bln (2.1x) yoy to UAH 24.7 bln as of end-1H13.

Alexander Paraschiy: It looks like Oschadbank is continuing its practice to finance the Ukrainian government by buying state securities. Recall as of end-2012, 42% of the bank’s assets were allocated in operations with “related” state structures. Most likely, this “exposure to related parties” increased by about 10pp in 1H13 to exceed 50% of total assets.

We also believe the bank played an important role in purchasing the state’s foreign currency-denominated securities in 1H13. That doesn’t throw into question the bank’s solvency and financial stability, but clearly reveals the central role that Oschad will likely have to play further in 2013 in order to support the national currency’s stability.