Oschadbank needs UAH 3.5 bln in capital, Ukreximbank might need more
3 October 2016
Ukraine’s State Savings Bank (Oschadbank, OSCHAD) has UAH 8.42 bln in total capital needs as foreseen in its program following stress tests, the dt.ua news site reported on Oct. 2, citing a letter from the bank. Out of this amount, the bank received UAH 4.96 bln in 2016 and the rest has yet to be received.
Another state-owned lender, Ukreximbank (EXIMUK), did not provide information on its total capital needs on a request of dt.ua. The government increased the bank’s share capital by UAH 9.32 bln in January 2016. The bank has since requested another state contribution of about UAH 12 bln for the year 2017, according to unofficial sources cited by dt.ua.
The total capital contribution of the state into its two biggest banks was UAH 32.4 bln in 2014-2016.
Alexander Paraschiy: Thus far, the 2017 state budget does not contain any capital increase plans for Oschadbank or Ukreximbank. But the government could still invest in these banks next year, considering the 2016 budget – approved in the last days of 2015 – also did not contain bank recapitalization items but already in January, UAH 14.28 bln in state bonds were contributed to the banks’ equity.
The state banks’ capital gap is a result of their poor governance, but it’s a headache only for the government, not the banks’ creditors. However poor-performing the banks remain, the state has no other choice but to cover their inefficiencies with additional capital and/or additional liquidity loans. We continue to treat the two state banks as government agents that bear the same default risk as the Ukrainian government. Therefore, we believe the 160 bp – 210 bp spread to sovereign curve at which OSCHAD and EXIMUK bonds are trading should disappear.
