Oschadbank increases profit, exposure to related parties in 2013

Обзоры по компаниям и отраслям 02.05.2014 State Savings Bank of Ukraine (Oschadbank, OSCHAD) reported its IFRS financials for 2013 on April 30. Its interest income advanced 11% yoy to UAH 11.2 bln in 2013, baked by a 37% yoy increase in a gross portfolio of loans and fixed income securities, to UAH 97.5 bln. As its interest-bearing liabilities increased 25% yoy, the bank’s interest costs advanced 19% yoy to UAH 5.7 bln. This resulted in a 4% yoy growth of net interest income to UAH 5.5 bln. Its loan loss provisioning declined 9% yoy to UAH 5.5 bln, and net commission income advanced 18% to UAH 1.2 bln, giving the bank a 26% yoy advance in profit before tax, to UAH 926 mln. The bank’s bottom line advanced 7% yoy to UAH 711 mln in 2013, implying a year-average ROE of 15.4%. Oschadbank posted a remarkable 19% yoy (UAH 7.5 bln yoy) growth in client deposits to UAH 46.4 bln in 2013. It also attracted UAH 4.5 bln from other banks and raised UAH 4.0 bln from the placement of Eurobonds in 2013. All the attracted funds were directed to lend to related parties, the state and state companies. Oschadbank’s gross loans to related parties and investment in papers of related parties increased by 17.9 bln yoy, to UAH 55.2 bln. In particular, Oschadbank increased its portfolio of state and municipal bonds by UAH 22.7 bln (to UAH 31.3 bln), as well as purchased UAH 4.4 bln in state-guaranteed bonds of Naftogaz in 2013. At the same time, gross loans to Naftogaz decreased by UAH 5.1 bln yoy to UAH 15.3 bln as of end-2013. The total net exposure of the bank to related parties (net of NBU) increased 1.6x yoy to UAH 51.5 bln. The Share of assets exposed to related parties (net of NBU) increased to 51% of total assets as of end-2013, from 39% a year before. Notably, borrowings from NBU remained nearly flat yoy at UAH 14.7 bln. Alexander Paraschiy: Oschadbank apparently turned in 2013 from a lender to Naftogaz to a lending vehicle for Ukraine’s budget. While a year ago, the banks’ net exposure to related party lending was nearly equal to government contribution into the bank (via its equity and NBU refinancing), as of end-2013 this exposure exceeded government contribution by 1.5x.