PUMB doubles profit, improves ROE to 10.2% in 2013

Обзоры по компаниям и отраслям 03.04.2014 SCM-related First Ukrainian International Bank (PUMB, PUMBUZ) reported its consolidated financials for 2013 on April 2. The bank’s financials now fully account for the acquisition of Renaissance Capital bank which the company completed in late 2013. Based on consolidated figures, PUMB increased its interest income 24% yoy to UAH 3.57 bln, mainly thanks to an increase of its gross loan portfolio by 15% yoy to UAH 24.6 bln. The bank increased its customer accounts 19% yoy to UAH 21.1 bln, mostly due to a 31% yoy increase in current accounts. An increase in cheaper current accounts has allowed the bank report only a 15% yoy increase in interest costs, to UAH 1.85 bln in 2013. This has resulted in a 35% yoy increase in the net interest income of the bank, to UAH 1.73 bln. Net fees and commissions of the bank improved 41% yoy to UAH 0.78 bln. The bank’s consolidated operating costs increased just 10% yoy to UAH 1.39 bln, which resulted in an improvement of the Cost/Income ratio by 10pp to 53%. The bank’s bottom line doubled to UAH 554 mln and its average ROE nearly doubled yoy to 10.2% in 2013. The bank’s CAR (by NBU methodology) amounted to 12.3% as of end-2013 - a significant drop compared to the end-2012 ratio (18.4%). The bank’s cash position as of end-2013 was UAH 1.34 bln (+86% yoy). Alexander Paraschiy: The core question is if the bank will be able to repay smoothly its USD 250 mln Eurobond at the end of 2014. According to the bank’s report, the total carrying value of its financial assets recoverable in 2014 is UAH 8.0 bln, while the total value of financial liabilities due in 2014 (including Eurobond) is UAH 6.8 bln, which suggest the bank should be able to repay its notes. The core risks are the worsening macro and political situations than may undermine the bank’s ability to recover its short-term financial assets. From this standpoint we believe that PUMB is one of the least risky banks in Ukraine. We believe that PUMB Eurobonds, yielding currently more than 20% to maturity, are one of the most attractive opportunities in the Ukrainian universe. At the same time, we are concerned about a significant decline of the company’s CAR (as a result of the fast increase in its assets in 2013), which indicates the bank may require an additional capital increase in the near term. Though, given that this year will not be the best for asset growth in Ukrainian banks (including PUMB), the bank may still be able to avoid the need for a capital increase in 2014.