Ukreximbank reported UAH 0.77 bln profit, audited 2017 accounts say

Ukraine’s State Export-Import Bank (Ukreximbank,
EXIMK) posted a UAH 765 mln profit in 2017, according to audited consolidated accounts
released last week. A year before, the bank reported UAH 977 mln in net losses.
The bank’s net interest income before provisions decreased 12% yoy to UAH 2.83
bln in 2017, mostly due to a fall in interest income by 10% yoy (to UAH 12.34
bln), which outpaced a drop in interest costs (by 9% yoy to UAH 9.51 bln). The
key factor of the bank’s bottom line improvement was reduced loan loss
provisioning (by 88% yoy to UAH 0.67 bln). Another factor was a decrease in
OpEx by 3% yoy to UAH 1.78 bln. Ukreximbank’s operating cash flow before
changes in assets and liabilities surged 3.1x yoy to UAH 1.12 bln.

The bank’s gross loan portfolio increased 11% yoy to
UAH 115.9 bln in 2017, fueled mostly by increased lending to state enterprises
(by 40% yoy to UAH 28.11 bln). In particular, the bank increased lending to a
state-controlled extraction company (most likely, Naftogaz) by 59% yoy to UAH
16.86 bln. Ukreximbank’s net loan portfolio increased 16% yoy to UAH 67.61 bln.
Its securities portfolio climbed 6% yoy to UAH 76.4 bln, while its portion in
total assets remained 45%.

Ukreximbank’s deposit base increased 5% yoy to UAH
90.5 bln in 2017. Deposits of the biggest single entity (most likely the State
Grain and Food Corporation) stood at UAH 26.9 bln (down 2% yoy), or 30% of the
total deposits (vs. 32% in 2016).

The bank also reported on June 27 that it has paid UAH
588 mln, or 75% of its 2017 net income (UAH 784 mln on a standalone basis) in
dividends to the government.

Alexander Paraschiy: The good news is that the bank enhanced its operating cash flow and
implemented some cost optimization efforts to reduce its OpEx. Worrying items
are decreasing net interest income and a significant increase of exposure to
the state sector. With the expansion of its loan portfolio to state companies,
the share of the state sector in the bank’s gross loans increased to 24% in
2017 from 19% a year ago. But that merely confirms the bank remains a state
lending agent, which also means Ukreximbank can always rely on state support
any time it needs a capital increase. All in all, we remain bullish about the
bank’s Eurobonds.