Ukreximbank nearly doubles profit, decreases bond portfolio in 3Q13

State-controlled lender Ukreximbank (EXIMUK) increased its 3Q13 profit 90% yoy to UAH 52 mln, according to UAS financial statements on the bank’s website. The key profit growth drivers were a UAH 93 mln yoy increase in net interest income (+11%) and UAH 203 mln yoy decline in loan loss provisions (-25%). For the same reasons, the bank increased its profit 95% yoy to UAH 139 mln in 9M13.

Ukreximbank continued demonstrating a decline in client deposits, which fell 1.3% qoq (to UAH 43.1 bln) in 3Q13, after a 3.6% decline YTD in the first half of the year. At the same time, the bank was able to increase its gross loan portfolio 2.7% qoq (to UAH 39.6 bln) in 3Q13, thus narrowing the YTD decline to 2.0%. It also decreased its securities portfolio 3.3% qoq (to UAH 35.5 bln) over the quarter, but still posting a 77.9% YTD growth in the portfolio (which, we understand, are mostly government bonds). Share of securities portfolio in the bank’s total assets declined from 40% as of end-1H to 39% as of end-3Q.

The bank’s capital adequacy ratio stood at 29.55% as of end-3Q, which is a slight improvement compared to the end-1H result (29.49%).

Alexander Paraschiy: Ukeximbank’s 3Q results brought no negative surprises in terms of exposure to state bonds, which we treat as its most encouraging development. While we are slightly worrying that its deposit base is still declining, we understand that this is mainly due to below-market offered deposit rates. A lack of an aggressive deposit acquisition policy allowed the bank to show a slowing growth rate in interest costs (to 27% yoy in 3Q13 vs. 34% yoy in 2Q13) and allowed it to maintain stable 11% yoy growth in net interest income for the third consecutive quarter. All in all, we remain positive on the bank’s solvency, profitability and financial stability.