Oschadbank boosts UAH deposits, cuts bond portfolio in 2Q14

Обзор облигаций 28.07.2014 The State Savings Bank of Ukraine (Oschadbank, OSCHAD) reported its 2H14 results under local accounting standards on July 25. Its profit increased 16% yoy for the period to UAH 340 mln, as a 12% yoy increase in its net interest income was only partially offset by a 156% yoy surge in loan loss provisioning and 16% yoy growth in operating costs. Its annualized ROE for 1H14 amounted to 3.5%, or 0.1pp better than in 1Q14. The bank increased its gross loan portfolio in local currency 11% YTD to UAH 38.8 bln, while its foreign currency loans balance increased 48% YTD to UAH 24.6 bln, solely due to hryvnia depreciation (the loans balance was unchanged in USD terms, we estimate). At the same time, the bank reported its securities portfolio (mostly state and quasi-state papers) at UAH 33.3 bln as of end-June, which is 10% decline qoq and 6% decline YTD. Oschadbank was able to increase its UAH deposit base by 5% qoq in 2Q14, after the 18% qoq decline in 1Q14. However, a decline in foreign currency deposits sped up in 2Q14 to 10% qoq (in USD terms) after -5% qoq in 1Q. The bank’s total foreign currency assets declined 12% YTD as of end-1H14, in USD terms. Alexander Paraschiy: The bank’s results are slightly disappointing in the area of a ForEx deposit decrease. However, we do not see a risk for the bank’s ability to repay its USD-denominated debt due to this development. Foreign currency deposits account for just 25% of its deposit base (vs. 67% for its peer Ukreximbank) and keeping dollar accounts is not the bank’s core business. We believe the bank, which traditionally provides the lowest interest rates on most of its deposits, will have a chance to replenish its USD deposits at any time in the future, should it need to.