Ukraine banks are marginally profitable in 5M12

Ukrainian banks posted an aggregate net income of USD 236 mln in 5M12 (vs. a loss of USD 125 mln in 5M11), implying a ROE of 2.9%. Banks’ net interest income was down 5.5% yoy to USD 2.6 bln on extremely weak growth in loan portfolios and cost of funds pressure. Banks’ profit before provisions was down 7.6% yoy to USD 1.4 bln but loan loss provisions were slashed 1/3 yoy to USD 1.2 bln.

Olena Zuikova: We expect banks’ core earnings will decline slightly this year as chances for a lending recovery and subsequent growth in interest revenue are close to zero. In addition, recent NBU initiatives to tighten monetary policy will push costs of funds up further. Banks are still expected to report a positive bottom line of about USD 0.5 bln this year (vs. a loss of USD 1.0 bln last year) but the improvement will come solely on lower loan loss provisions.