Ukrainian banks not only ended the year with a profit, but some players even managed to significantly increase it, writes the Kommersant-Ukraine newspaper in the article Reserve plans worked. Due to the dissolution of reserves and a decrease in operating costs, the largest institutions gained in the IV quarter almost 40% of all annual profit – UAH 2.5 billion. Experts note that banks can still continue to increase profits by dissolving reserves, but only if the difficult economic situation does not worsen the finances of their borrowers.
The Ukrainian banking system is recovering even in the face of falling real GDP, which has been going on for two quarters contract. According to the reports of the 16 largest credit institutions, in the last three months of 2012 they received more than in any of the first three quarters – UAH 2.5 billion. This allowed them to increase their annual profit to UAH 6.5 billion. PrivatBank earned the most – UAH 1.53 billion, in second place was Ukrgasbank, which managed to make a profit of UAH 1.1 billion, and VTB Bank took third place with a profit of UAH 951 million. None of the largest banks became unprofitable, although some were balancing around zero (see chart on page 6).
However, while many institutions showed high profits on a quarterly basis, some players achieved extraordinary results only in IV quarter. The most successful at the end of the year was Ukrgasbank. Its profit amounted to UAH 809 million – a record figure for the entire banking system. As Kommersant reported, such a result of the nationalized institution was caused due to the return of overdue loans, and most of the profits were received in November (see Kommersant on December 13, 2012). PrivatBank’s profit in the IV quarter amounted to UAH 541 million.
The most unprofitable in the IV quarter was Raiffeisen Bank Aval – its losses amounted to UAH 34.7 million. The agency says the loss under Ukrainian accounting standards is not the result of deterioration in operating performance. “The published report is, in fact, statistical reporting for calculating NBU standards, while the audited annual report of Raiffeisen Bank Aval on IFRS will be published in April. But even based on the data of the published report, the bank’s annual profit amounted to UAH 33.8 million,” they stressed in the press service.
Brokbusinessbank was also not lucky – its loss in the last quarter amounted to UAH 2.2 million. “In order to preserve resources, level the risks of dependence on an unstable interbank market, in order to avoid outflow of deposits and loss of customers, the institution had to respond by raising rates on client deposits,” says Alexander Morozov, Chairman of the Board of Brokbusinessbank. “At the same time, the bank did not pursue an aggressive policy towards borrowers to increase interest rates on already issued loans. Moreover, the majority of the loan portfolio are national producers, whose activities significantly depend on the size of the loan rate. A sharp increase in the cost of loans could negatively affect their financial results. ” The search for a compromise cost the bank a profit, which amounted to only UAH 518 thousand at the end of the year.
OTP Bank has an unusual situation. During the year, he regularly showed small profit or loss, but over the past three months he managed to earn UAH 257 million. “The increase in profit was due to the growth of the loan portfolio, in the IV quarter alone, the increase amounted to about UAH 350 million, which led to an increase in net interest income – more than UAH 80 million,” says Tamas Hak-Kovacs, Chairman of the Board of OTP Bank. However, in the first three quarters, the average net interest income was much higher – UAH 147 million. “In addition, changes have been made to internal procedures to optimize administrative costs,” says Hak-Kovacs. In the IV quarter, they amounted to UAH 389 million, also being above the average. However, the institution did not incur expenses for the formation of reserves for the loan portfolio and even disbanded them for UAH 41 million.
A similar situation developed in Prominvestbank, which unexpectedly received a large profit of UAH 235 million in Q4. “It so happened that in the IV quarter we had repayment of large corporate loans. These are old loans that we inherited before Vnesheconombank bought Prominvestbank. Borrowers came and said they could repay the loans, so we dissolved the reserves,” says Vladislav Kravets, member of the board of Prominvestbank. – Perhaps this was due to the fact that in the fourth quarter the budget was executed, payments were made, and money appeared. ” The bank’s report is not so unambiguous: in it expenses on reserves in the 4th quarter amounted to UAH 414 million.
The banks still have the opportunity to further improve their financial performance by dissolving reserves. However, over time, especially given the deteriorating economic situation, the chances of repaying long-term nonperforming loans are decreasing. “Loans can be lost