Economics

A difficult road to recovery

Aleksandra Nekrashchuk reports from Kyiv for UBI on economic prospects for investors in Ukraine in the wake of last year’s economic slump, with further bank rationalisation expected but agriculture and state privatisation offering tempting prospects

Within Europe Ukraine has suffered from the economic crisis more than most – seeing falls in GDP, actual per capita income, declines in the banking sector and a halt to construction projects, with perhaps Moldova one of the few unlucky contenders able to claim to have had a harder time. But, to the surprise of many, the early signs post-election are that this year will see the situation revive, with GDP, domestic consumption and investments in the country all set to increase. This positive trend is expected to be reflected in the country’s agriculture and banking sectors, where a resumption of lending is forecast.

BANKS TO RESUME LENDING

Last year was the nadir for Ukrainian banks who faced the most difficult conditions in more than ten years. According to official statements by the NBU (National Bank of Ukraine), during 2009 the entire loan portfolio of the Ukrainian banking system decreased by 2% – some 718,717 m hr (US$89.8 m). In 2009 the NBU recalled the licences of eight financial institutions and started liquidation proceedings

to close them down. Among organisations affected are ‘Ukrprombank’, ‘Eastern European Bank’, ‘The Bank of regional development’, ‘Odessa-Bank’, ‘Ukrainian financial Group’, ‘European Bank’, ‘National Standard’ and ‘Prichernomorye’. In addition the operations of six financial institutions needed to be stabilised. Three of them were nationalised by the Cabinet of Ministers of Ukraine (‘Rodovid Bank’, ‘Kyiv’ and ‘Ukrgasbank’), which plans to sell them this year. Another three banks that found themselves in financial difficulties were subsequently bought by private investors (‘Prominvestbank’, ‘National Credit’ and ‘Westerncombank’). This year the situation is viewed by

commentators as being much better and the panic observed at the end of 2008 and at the beginning of 2009 has now evaporated. Talking to UBI, analysts at Concorde Capital (a market research organisation) said that the population’s trust in banks has continued to increase. From March 2009 until February 2010 retail deposits gained 12.9%, with the last four months seeing Ukrainians especially

Basic indicators of Ukrainian banks* in million gr (million US$)

The name of the bank Gross assets

Privatbank

Lending

Oschadnybank Ukreximbank

Raiffeisen Bank Aval UkrSibbank Ukrsotsbank

Prominvestbank OTP Bank VTB Bank Alfa-Bank Nadra

Finance&Credit Forum

First Ukrainian International Bank

Rodovid

Brokbusinessbank Swedbank

Kreditprombank

86,066 (10,758) 59,927 (7,49) 57,197 (7,149) 54,048 (6,756) 46,348 (5,793) 43,657 (5,457) 30,437 (3,804) 29,395 (3,674) 28,780 (3,597) 28,694 (3,586) 24,846 (3,105) 19,457 (2,432) 19,453 (2,431)

17,4 (2,175)

16,952 (2,119) 16,163 (2,02) 13,853 (1,731) 13,578 (1,697)

74,992 (9,374) 44,601 (5,575) 48,309 (6,038) 48,725 (6,09) 45,276 (5,659) 40,557 (5,069) 24,462 (3,057) 29,056 (3,632) 26,219 (3,277) 25,314 (3,164) 24,793 (3,099) 16,659 (2,082) 17 (2,125)

13,56 (1,695) 5,355 (0,669) 11,39 (1,423) 18,127 (2,265) 11,782 (1,472)

Commitment

75,795 (9,474) 43,54 (5,442) 46,327 (5,79) 48,735 (6,091) 41,446 (5,18) 37,629 (4,703) 24828 (3,103) 26,555 (3,319) 25,532 (3,191) 25,816 (3,227) 24,371 (3,046) 17,43 (2,178) 17,587 (2,198)

14,772 (1,846) 12,616 (1,577) 13,85 (1,731) 15,68 (1,96)

12,356 (1,544)

active: inflow was 5.5%. “In December to January, UAH deposits grew faster than foreign currency deposits (4.4% vs. 0.2%), signaling an improvement in confidence in the national currency”, a spokesperson for Concorde Capital told UBI. In addition, the banking sector’s capitalisation (CAR) rose from 15.6% at the end of September 2009 to 19.3% at the end of January 2010. This is still insufficient, and so, just as in 2009, the shareholders will have to provide additional support to their banks. Usually this can be provided in one of two ways: either grant the financial institution a subordinated debt which should be repaid in five-ten years, or issue shares. The most important question today is

whether the financial institutions will start lending before the end of the year. “There are isolated cases of mortgages being issued, but these are more the exception than the norm,” the president of the Association of Ukrainian Banks Aleksandr Sugonyako told UBI. Even loans provided in this way are seeing financial institutions make significant demands on their borrowers who are required to provide deposits

Authorised capital stock

7,811 (0,976) 13,892 (1,736) 10,004 (1,25) 2,42 (0,302) 5,28 (0,66) 1,27 (0,158) 5,299 (0,662) 2,868 (0,358) 2,929 (0,366) 2,977 (0,372) 390 (0,048) 2 (0,25)

226 (0,282)

2,523 (0,315) 8,409 (1,051) 1,966 (0,245) 2,159 (0,269) 1,35 (0,168)

Own capital

10,271 (1,283) 16,386 (2,048) 10,869 (1,358) 5,313 (0,664) 4,902 (0,612) 6,028 (0,753) 5,61 (0,701) 2,84 (0,35)

3,248 (0,406) 2,878 (0,359) 475 (0,059) 2,027 (0,253) 1,867 (0,233)

2,628 (0,328) 4,336 (0,542) 2313 (0,289) -1,827

1,222 (0,152)

Source: The National Bank Of Ukraine

Net profit/loss

1050,489 (0,131) 692,696 (0,087) 21,124 (2,64)

-2019.07 -1243.558

126,761 (15,8)

-2750.815 -435.343

0,456 (0,057)

-348.405 -1363.775 -449.978 -664.557

-800.856 -4215.998

17,86 (2,23)

-4342.24 -307.43

* 1st of January 2010

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