Privatbank repossesses UAH 43 bln in collateral in 8M16

Ukraine’s leading financial institution Privatbank (PRBANK) reported UAH 0.19 bln in IFRS-based profit in 1H16 (2x more yoy). The result was driven by an increase of the bank’s net commission income by 69% yoy to UAH 3.71 bln and negative loan loss provisioning of UAH 0.28 bln in 1H16.

Its net interest income decreased 27% yoy to UAH 1.34 bln as growth in interest income (+13% yoy to UAH 16.39 bln) was outpaced by a 19% yoy increase in interest expenses (to UAH 15.05 bln) in 1H16. Interestingly, its cash interest received in 1H16 fell 7% yoy to UAH 10.96 bln, and net cash interest received was negative at UAH 4.00 bln.

The bank’s net loan portfolio fell 9% YTD to UAH 178.6 bln as of end-1H16, while its deposit base increased 4% YTD to UAH 200.4 bln.

As a part of its restructuring plan, the bank repaid UAH 2.6 bln in debt to the central bank, with the amount due remaining at UAH 24.4 bln as of end-1H16. As part of the plan, the bank also repossessed collateral from its borrowers at a total estimated value of UAH 31.8 bln in 1H16, and for an additional value of UAH 10.9 bln in July-August 2016.

Alexander Paraschiy: The bank’s restructuring plan indicated it has committed to (1) further increasing share capital, (2) attracting additional subordinated debt, (3) repossessing part of its collateral by April 1, 2016, (4) gradually decreasing a share of loan issues to related parties and insiders, (5) obtaining additional collateral for a significant part of loans by Sept. 1, 2016 and (6) gradually repaying overdue principal and interest on NBU refinance loans by August 2017. It looks like the bank is moving forward with items (1), (3) with delays and (6). At the same time, we did not find in the bank’s semi-annual report a progress with (4) and (5), which seem to be critical for the bank to comply with NBU requirements. That said, we treat the increased amount of collateral repossessed as a positive development, while are looking forward to seeing decreased exposure to related parties and seeing more data on secured hard collateral on its loans.