Ukraine plans IPO of Oschadbank and sale of Privatbank, strategy shows

The Ukrainian government is planning to float a 25%
stake in Oschadbank (OSCHAD) and sell 100% of Privatbank (PRBANK) in 2022,
according to the Finance Ministry’s state bank development strategy presented
on Feb. 21. Also the government is considering selling to an IFI a 20% stake in
Oschadbank in 2020 and 20% in Ukreximbank (EXIMUK) in 2021. Regarding a smaller
state-owned bank, Ukrgazbank, MinFin is going to sell a 20% stake to an IFI
this year and the remaining 75% stake to a strategic investor in 2020. In this
way, the government plans to reduce its share in Ukraine’s banking system to
24% in 2022 from 55% currently.

MinFin also plans to introduce independent supervisory
boards in Oschadbank and Ukreximbank this year. By 2020 or 2021, MinFin also
plans to resolve all the court claims related to Privatbank. The strategy also
assumes decrease of state banks’ loan exposure to state enterprises starting
2018.

Also, this year the government is going to develop a
mechanism of bad loan management for state-owned banks. Recall, Ukraine’s state
banks have among the biggest shares of NPLs in their
loan portfolio in the banking sector, ranging betwen 60% and 87% for the three
biggest state-owned banks.

Alexander Paraschiy: MinFin’s
strategy presentation lacks details, but it is good to see it. We doubt MinFin
will be able to meet its envisaged deadline for the Privatbank’s sale to
strategic investors, but the sale of minority stakes to IFIs looks possible
within the presented timeframe. The key issue for state banks at the moment is
NPLs, and a lot has yet to be done to enable them to resolve this issue. So
far, we remain bullish on the Eurobonds of Oschadbank and Ukreximbank.

Meanwhile, it is encouraging for the bailed-in
bondholders of Privatbank to see that the government is not going to drag out
the recovery of their bonds should a U.K. court rule in their favor.