Ukreximbank in talks to increase equity by UAH 10 bln, CEO says

Ukraine’s State Export-Import Bank (Ukreximbank,
EXIMUK) is in talks with the central bank and Finance Ministry on a possible capital
increase of about UAH 10 bln, the bank’s CEO Yevhen Metzger told
Interfax-Ukraine in an interview published on Aug. 27. He explained that
additional equity is needed to cover loss provisions on the bank’s old loans,
as well as for the bank’s expansion. Talking about the bank’s NPLs, Metzger
said that the actual number of non-performing loans in the bank is higher than
the bank has reported (57% of all loans, or UAH 75.0 bln as of Aug. 1). In
particular, he said that there is a risk that some of earlier restructured
loans will turn to non-performing. Metzger also confirmed a commitment by the
bank to decrease the share of NPLs to 32% in three years.

Recall, the bank’s CEO announced a possible need to increase its equityin April. In 2014-2017, the government contributed UAH 22 bln into
Ukreximbank’s equity.

Alexander Paraschiy: From
Metzger’s words, it looks like a decision to increase the bank’s equity by up
to UAH 10 bln has been already agreed upon on the highest level. If so, the
bank will likely report more losses in 2H20 due extra loan loss provisioning,
in addition to UAH 1.9 bln of net losses reported in 1H20.

Such a capital increase will allow the bank to more
accurately reflect the true condition of its loan portfolio, while the
management is yet to tackle the hard job of improving the portfolio’s quality.
Our view on the bank’s Eurobonds remain unchanged: we prefer the bonds of its
peer Oschadbank (OSCHAD) which offer a higher return against a similar risk
profie.