VAB Bank initiates UAH 1 bln capital increase

VAB Bank (VABANK) reported on October 4 that it has scheduled an EGM for November 5 to increase its share capital by UAH 1.0 bln, or 32.7%. Last month, the bank completed a capital increase of UAH 0.7 bln to UAH 3.05 bln (refer to our news from September 19).

Alexander Paraschiy: This will be the third capital increase for VAB Bank in the last two years, and it is another sign of the strong commitment that the bank’s key owner, Oleg Bakhmatyuk, is taking to keep the bank safe. If the capital increase is completed, with everything else being equal, the bank’s regulatory capital will increase 1.6x and its capital adequacy ratio will improve to a safe level of 19.6%, vs. 12.4% as of end-June 2013. Given the logic of the previous capital increase, when Bakhmatyuk bought almost all the additional shares, this latest issue will likely increase Bakhmatyuk’s stake in the bank to 90.00% from 86.78%. All in all, we are keeping our view that the Eurobonds of VAB Bank, which currently yield 36% to its maturity in June 2014, are underpriced by the market.