Privatbank reports 2011 IFRS financials

Privatbank (PRBANK) released its 2011 IFRS statements this week, reporting net income of USD 197 mln (+8% yoy), for a ROE of 9.4%. Net interest revenues surged an impressive 62% last year on a 20% yoy expansion in net loan book and strong improvement in net interest margin (+2.2 pp yoy to 9.6%). Operating revenues notably outpaced expenses (+27% yoy vs. +12% yoy, respectively), pushing Cost/Income ratio down 6.4 pp to 46.9%. However, the lender’s cost of risk increased 110 bps to 4.9%, even though the share of NPLs declined 2.5 pp to 4.9% last year. Privatbank boosted its balance sheet 16% yoy in 2011, mainly on the continued strong inflow of customer deposits (+20% yoy). The bank continued to moderately rely on NBU funding, which made up 4.8% of end-2011 liabilities. The lender remains well capitalized with total Basel 1 CAR amounting to 16.1% (+1.2 pp yoy). The share of related parties in its total loan book stood at 7.9% as of end-2011.

Privatbank 2011 financials, IFRS, USD mln              

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                                    2011    yoy

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Net interest income        1,261    62%

Total revenue                 1,688    27%

Operating expense         -791      12%

Profit before provisions   897       45%

Net provision expense    -704       64%

Net income                    197        8%

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Assets                           17,688    16%

Net loans                       13,483    20%

Customer accounts         13,079    20%

Equity                            2,408    35%

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Source: Company data                       

Vitaliy Vavryshchuk: Privatbank’s 2011 results are neutral, as the substantial increase in net interest income was to a great extend offset by the increase in the cost of risk. We think the bank is well positioned to outperform the sector in terms of balance sheet growth this year – 1Q12 UAS-based results show the bank expanded its assets 5.1% in 1Q12 alone (on 8.7% growth in customer accounts). Yet, its profitability will remain constrained in 2012 on high loan provisioning. Another concern is under-disclosure of related party transactions – we believe the reported share of related party lending at just 8% of gross loans is severely understated.