Ukreximbank generates UAH 2 bln losses in 1H20

Net interest income at Ukraine’s State Export-Import
Bank (Ukreximbank, EXIMUK) plunged 40% yoy to UAH 0.51 bln in 1H20. This was a
result of a 21% yoy drop in interest income to UAH 4.82 bln amid a 18% yoy
decrease in interest costs. Its loan loss provisions of UAH 1.34 bln and
foreign currency losses of UAH 3.13 bln contributed UAH 1.92 bln in net losses
in 1H20. Its operating cash flow before assets and liabilities change was
negative at UAH 0.65 bln (5.3x deeper yoy).

Meanwhile, the bank’s cash position improved 6% YTD to
UAH 35.4 bln and total assets improved 14% YTD to UAH 159.6 bln in 1H20. The
key growth drivers on its liability side were client accounts (up UAH 15.9 bln,
or 21% YTD, to UAH 93.0 bln) and loans from IFIs (up UAH 5.0 bln, or 24% YTD,
to UAH 25.9 bln). On the asset side, most of the increase was in securities,
which rose UAH 17.3 bln YTD, including growth of UAH 6.6 bln in its portfolio
of local state bonds. The share of state bonds in the bank’s total assets
remained unchanged YTD at 34%. At the same time, total exposure of the bank to
state entities’ lending increased to 52% of the bank’s assets as of end-1H20,
up from 46% as of end-2019.

The bank’s total CAR decreased to 14.5% as of
end-June, from 19.5% as of end-December.

Alexander Paraschiy: The bank’s weak P&L and operating cash flow was compensated by
rising deposits, enabling it to remain a contributor to the state budget over
the first half of 2020. The bank remains liquid and well-capitalized, and
therefore is likely to avoid a need to ask for capital contributions from the
government this year. While we maintain the position that the bank’s bond risks
are the same as for the government, taking into account Ukreximbank’s weak
fundamentals and possible risks related to corporate governance, we see the bank’s bonds as inferior to the bonds
of its peer Oschadbank.