Privatbank criticizes nationalization rumors

Ukraine’s biggest lender Privatbank (PRBANK) called rumors on its possible nationalization as an “attempt to destabilize the political situation in Ukraine,” according to its Dec. 14 press release. The bank claimed “there is no legal way in Ukraine to nationalize any bank that is working stably.” It also claims it is fulfilling on schedule all the actions on its recapitalization program that it had agreed upon with the central bank.

In other news, Oleh Churiy, the deputy head of central bank, said on Dec. 14 that currently there are “short-term systemic risks to financial stability related to the possible failure to fulfill recapitalization programs by certain banks.” He called this risk as one of the reasons for the regulator to delay steps towards foreign currency market liberalization.

Alexander Paraschiy: Churiy didn’t name the banks that he suspects in possibly failing to meet the recapitalization program, and he did not necessarily mean Privatbank. However, his reference to “systemic risks” suggests that he did mean Privatbank, whose importance for the entire financial system is high. So far, we have no confirmation that the bank is or isn’t fulfilling its recapitalization program, but we continue to believe the Ukrainian government has enough reasons to nationalize it.

But in addition to reasons and justifications, the government must have a clear and risk-free plan to execute such a complicated project, as well as the intellectual capacity and talent to implement the plan and run the bank once it is nationalized. We continue to believe the government doesn’t have this ability.

Therefore, we continue to expect Privatbank won’t be nationalized anytime soon. Nevertheless, we cannot rule out the nationalization and we continue to treat the Eurobonds of Privatbank as a highly risky asset.