Ukrsotsbank cuts costs 1/3 qoq, keeps reporting low income in 3Q12

Ukrsotsbank (USCB) reported a 15% yoy decline in 3Q12 net interest income to UAH 610 mln (-6% qoq) as a result of a decrease in interest income and 20% yoy (and 6% qoq) growth in interest costs. Increased deposit rates allowed the bank to slightly increase total deposits (+2% qoq) due to the accumulation of an additional 5% qoq of corporate client funds. Total deposits were still down 3% YTD. Remarkably, the bank managed to decrease operating costs 33% qoq to UAH 357 mln, thus lowering its Cost/Income ratio from 64% in 2Q12 to 45% in 3Q. The 9M12 Cost/Income amounted to 51% – decent growth compared to 36% a year before. The bank continued building up its loan loss reserve to write off UAH 450 mln and report a minor UAH 1.7 mln profit in 3Q12 (some UAH 0.1 mln more qoq, UAH 0.6 more yoy).

Alexander Paraschiy: The decline of net interest income is a key concern this time, while we are delighted that a sharp increase in operating costs observed in 2Q12 turned to be one-off. We do not expect any radical changes in Ukrsotsbank`s interest income provisioning and net profit over the next 12 months.