Finance & Credit reports positive bottom line, critically low CAR in 2012

Finance & Credit Bank (FICBUA) reported its 2012 results on Jan 28, which demonstrated increased lending activity (gross loans +5% yoy) and built up deposits (+14% yoy). This allowed it to report 2% higher assets yoy at UAH 22.5 bln. The bank earned a minor UAH 3.2 mln profit for 2012 (vs. a loss of UAH 79.2 mln in the prior year), mainly on a decline in loan loss provisions by UAH 187 mln yoy.

Increased deposits led to higher interest costs (+4% yoy in 2012), while the need to preserve its customer base led to a decline in interest income (-3% yoy) and resulted in a 34% drop in net interest income to UAH 251 mln. The bank’s net commission income improved by a remarkable 15% to UAH 412 mln, but the growth was not enough to cover the decline in interest income. The bank’s operating efficiency, therefore, worsened with its Cost/Income ratio increasing to 98% in 2012 (vs. 86% in 2011).

The bank remains barely capitalized with its CAR worsening towards the 10% NBU benchmark, to 10.22% from 10.62% in 2011.

Alexander Paraschiy: We attribute the bank’s positive bottom line to its low capital adequacy (i.e. no room to incur more losses) rather than any improvements in its loan portfolio. We believe the bank’s securities remain a risky asset, unless its shareholders inject additional capital. Recall that last year, the bank failed to finalize a preannounced increase of capital by about USD 25 mln (9% of regulatory capital as of end-2012).