Ukraine Markets Daily (February 22, 2018)

Market news

  • Ukrainian banking system received USD 919 mn of net loss in 2017

Market comment

The UX index increased by 0.9% yesterday and the PFTS index was up by 0.2% (in UAH terms). The WIG-Ukraine index decreased by 0.7%. On the interbank exchange market, the UAH/USD was down by 0.2% to UAH 26.99 (mid price), according to Thomson Reuters. The official exchange rate reported by the NBU was UAH 27.07


Ukrainian banking system received USD 919 mn of net loss in 2017

According to preliminary results of banking system for 2017, reported by the National Bank of Ukraine (NBU), Ukraine’s banking system received USD 919 mn (-85.3% y/y) of net loss for twelve months ending December 31, 2017, as a result of total income decrease to USD 6,727 mn (-10.0% y/y) and a drop of the total expenses to USD 7,647 mn (-44.3% y/y). In December 2017, system’s total revenue increased by 4.9% m/m to USD 604 mn, compared with the USD 576 mn of total income in November 2017. Particularly, banks gained USD 438 mn of interest income (+14.8% compared with November 2017), USD 48 mn (x8.0 m/m) of income from trading operations and USD 58 mn (+52.3% m/m) of other operating income, while the commission income decreased by USD 94 mn (-66.6% m/m) to USD 47 mn. Total expenses of the banking system in December were significantly up by USD 966 mn (x2.6 m/m) to USD 1,555 mn, compared with USD 588 mn in November. Interest and other operating expenses increased by USD 2 mn (+1.2% m/m) and USD 84 mn (x4.0 m/m) to USD 210 mn and USD 112 mn respectively, while the commission expenses decreased to USD 34 mn (-13.4% m/m). Deductions for the creation of the reserve grew up by USD 444 mn (x4.0 m/m) to USD 590 mn and other expenses – by USD 439 mn (x70.0 m/m) to USD 445 mn.

Our view:

In 2017 Ukraine’s banking system improved its financial performance mostly due to a low comparison base in 2016, which is a result of PrivatBank nationalization and recapitalization in December 2016. But still, a net loss of USD 919 mn is quite large and was gained mostly during December 2017 as a result of the significant amount of deductions for the reserve creation (USD 590 mn) and of other expenses (USD 445 mn). Among main loss generators were PrivatBank and banks with Russian capital.