Fitch confirms B- ratings of Oschadbank, Ukreximbank

Fitch Ratings confirmed the B- credit ratings of
Ukraine’s State Savings Bank (Oschadbank, OSCHAD) and State Export-Import Bank
(Ukreximbank, EXIMUK) and stable outlooks for the ratings, according the
agency’s July 23 press release. The rating action “reflects limited changes to
the banks’ standalone credit profiles and Fitch’s view of potential support to
these institutions, if required, from the government,” the agency commented.
Therefore, the state banks’ ratings are kept at the sovereign level.

Fitch also commented that full repayment of the banks’
Eurobonds, which start amortizing next year, “will depend on the banks’ ability
to receive timely and full repayment due on their respective USD 3.3 billion
and USD 2.6 billion sovereign bond portfolios”.

Out of USD 1,200 mln of Oschadbank Eurobonds
outstanding, USD 455 mln are amortizing in 2019.  Out of USD 1,475 mln of
Ukreximbank Eurobonds, USD 437 mln are amortizing in 2019.

Alexander Paraschiy: We support Fitch’s view that the credit profiles of Oschadbank and
Ukreximbank are linked to the ability of the Ukrainian government to service its
debt. So far, the banks remain government financing agents with their
management remaining fully accountable to the government, whose representatives
control the banks’ supervisory boards. Earlier in July, the Ukrainian parliament approved a law that stipulates new principles for creating the
supervisory boards of state banks, with the majority of seats on the boards
being offered to independent members. However, the passed bill has yet to be
signed by the president. Meanwhile, our position remains that the banks have
pretty the same risk profile as the Ukrainian government does, meaning that the
banks’ Eurobond yields should be the same as for sovereign bonds.