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PUMB commits to UAH 1.3 bln capital increase by end-August

PUMB commits to UAH 1.3 bln capital increase by end-August

25 April 2016

Ukraine’s tenth-biggest bank, First Ukrainian International Bank (PUMB, PUMBUZ), agreed to commitments to the central bank to increase its capital by UAH 1.28 bln by Sept. 1, the bank’s CEO Sergey Chernenko told the liga.net news agency last week. He said the capital increase could be made in the form of an equity injection and/or recovery of the bank’s bad loans. The commitment to increase the bank’s capital by the agreed upon deadline was signed by its key shareholder, Chernenko said. Rinat Akhmetov holds a 99.9% stake in the bank.

 

PUMB currently holds UAH 2.5-3.5 bln in central bank certificates of deposits and local government bonds, Chernenko said. It also owes a UAH 0.5 bln refinancing loan to the central bank, which it will consider repaying in case all the risks for Ukraine’s financial stability are eliminated, namely when IMF cooperation is renewed. The bank sees its dollar deposits will continue to decline this year, while its local currency deposits will increase. As of end-September 2015, PUMB’s dollar deposits declined 31% YTD (in USD terms) and hryvnia deposits increased 1% YTD.

 

PUMB also released its annual report under IFRS last week, posting a UAH 1.75 bln loss in 2015 (up 12x yoy). The loss was mainly generated due to loan-loss provisioning, which increased 68% yoy to UAH 4.82 bln. Provisions were in excess of the bank’s net interest income which fell 8% yoy to UAH 2.15 bln in 2015. Its net commission income grew 9% yoy to UAH 0.91 bln. 

 

The bank may reduce its loan loss provisions by about 4x yoy in 2016, Chernenko said, which should allow it to post a positive bottom line this year. PUMB’s operating income remained flat yoy in 2015 at UAH 2.7 bln, the bank reported, and so was its cost/Income ratio, staying at 38%. Its liquidity ratios as of end-2015 exceed the NBU minimum requirements by about 2x.

 

The bank decreased its net loan portfolio 7% yoy to UAH 26.3 bln in 2015, mostly due to loan-loss provisioning (its gross loan portfolio grew 10% yoy). Its deposit base increased 5% yoy to UAH 27.6 bln, solely due to increased local currency deposits (+10% yoy, according to the CEO). Interestingly, deposits of related parties decreased 31% yoy to UAH 4.9 bln as of end-2015, down to 18% of total deposits (from 27% a year ago).

 

Alexander Paraschiy: An equity contribution ahead of the next amortization payment of the bank’s Eurobond (USD 19.7 mln in end-September) should add confidence that the repayment, as well as the next quarterly payments of the same size, will go smoothly.

 

The key risk remains that the bank won’t have enough foreign currency liquidity to service its Eurobonds, while we believe that this won’t be a problem. Dollars are easily available currently on the market, and we expect the situation on the ForEx market won’t deteriorate significantly in the mid-term. All in all, we continue to believe that PUMB’s Eurobond, currently yielding over 22% to its maturity, is worth investing in.

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