Banking

The end of spring and the summer have brought some respite for the Ukrainian banking system. A number of positive factors, including currency exchange rate stabilization, drying up of the deposits outflow and recovery of the banking system’s liquidity decreased our worries about the sector’s future.

The end of spring and the summer have brought some respite for the Ukrainian banking system. A number of positive factors, including currency exchange rate stabilization, drying up of the deposits outflow and recovery of the banking system’s liquidity decreased our worries about the sector’s future.

On 23, June Ukrainian Parliament has passed a bill #3585 which main official aim is to “overcome the consequences of financial crisis” how it is written in the name of draft. This document regulates some issues of debt restructuring procedure, restricts foreign currency lending and preliminary external debt repayments. The law was passed by the overwhelming majority of parliament and main disputable issues were solved in compromise way, therefore we anticipate that President will sign this law soon. The final version of bill that was passed still hasn’t been officially published, therefore in our analysis we rely on information available from open sources such as news postings, newspapers, authorities’ interviews and latest available versions of draft.

The instability regarding currency exchange has become the main theme in Ukrainian life these days. Severe UAH devaluation has cast doubt on the ability of some Ukrainian companies to meet their FX obligations, as well as the ability of retail loan borrowers to repay their FX debts. Ukraine’s President Viktor Yuschenko, NBU Chairman of the Board Volodymyr Stelmakh and Ukraine’s Finance Minister Viktor Pynzenyk have made a series of important declarations about their intentions and further actions regarding the stabilization of the situation in the banking sector and the FX market. As well, Prime Minister Yulia Tymoshenko has said that she wants the President to resign the NBU’s Chairman of the Board, the respective draft legislation for which has already been registered in the Parliament. We would like to provide our view about the latest declarations made by authorities.

Megabank [MEGA] is a mid-size, Kharkiv-based bank, and is moving towards becoming one of Ukraine’s top 20 banks. Notably, it combines considerable growth with a high quality loan portfolio and a low cost-to-income ratio. MEGA is also a very transparent, and works with World bank, EBRD, and the IFC on a number of corporate governance and lending programs. Megabank should significantly benefit from the growing Ukrainian middle class: 40% of its retail business is represented by car loans, which, in turn, have one of the highest levels middle class penetration levels – 23%. When combined with mortgage-secured consumer loans, car lending should enable MEGA to achieve a true breakthrough in retail.

Rodovid Bank [RODB] is ranked 18th among Ukrainian banks with total assets reaching USD 944 mln in May 2007. With a special focus on retail, mortgage, and credit card loans, Rodovid Bank is likely to move further up the banking sector ladder, striving to reach a top 10 position. Significant market expansion on the national level and product development are among the bank’s top priorities.