Ukraine does not intend to finance state banks, Naftogaz in 2016

The Ukrainian government is not planning for equity injections into state natural gas holding Naftogaz and state banks in 2016, Deputy Finance Minister Ihor Umanskiy told journalists on Dec. 15, as reported by UNIAN news agency. “We did not foresee a single hryvnia from the next year’s state budget for the Naftogaz capital increase,” he said. “Regarding the state banks, all will depend on the annual audit. But as of today, estimates show that they won’t need additional capital”. 

Recall last Friday, the S&P ratings agency stated that it could consider an upgrade of its ratings for Ukraine if state banks and Naftogaz “cease their reliance on budgetary and quasi-fiscal support”.

Alexander Paraschiy: As we’ve written, the draft of the 2016 state budget does not assume any implicit number for a capital increase for Naftogaz or state banks. At the same time, it does give the Cabinet the authority to increase their capital “in case there is a need to do so,” via contribution of state bonds into their equity. Thus far, it indeed looks like Naftogaz, Oschadbank (OSCHAD) and Ukreximbank (EXIMUK) will be able to survive the next year without any capital injection. But much will depend on the bank’s ability to improve their P&L in the upcoming quarters. This year so far, the trend has been pretty negative for state banks as the capital adequacy ratios of Oschadbank and Ukreximbank decreased to 13.0% and 12.7% as of end-3Q15, respectively, from 31.4% and 22.6% at the beginning of the year.