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PRIVATBANK: TOO BIG TO BE PRIVATE

 

  • The takeover of Privatbank, the largest private bank of Ukraine, announced on December 19, 2016, and executed by the Government on December 21, 2016 came as a surprise for the market, despite long-standing rumors about such a development.
  • Overall, we see the measures of the National Bank and the government towards its nationalization to be highly qualified, allowing avoiding a crisis spillover throughout the banking system, stabilizing the bank over a very short time period, while abstaining from increasing government exposure to the financial risks of the bank.
  • On a longer term, however, we see the bank to face huge challenges due to the legacy of its business model, which is highly dependent upon related parties and regional economy.
  • We consider three highly speculative post-nationalization scenarios for the banks along a full write-off of the bank’s unsecured debt, a debt-to-equity swap, or a Eurobond restructuring deal.