Ukraine Markets Daily (November 01, 2017)

Market news

  • FUIB increased net profit to USD 29 mn for the first nine months of 2017
  • PrivatBank’s net loss for the three quarters of 2017 amounted to USD 61 mn
  • Fitch upgraded PrivatBank’s to ‘B-‘ with the stable outlook

Market comment

The UX index increased by 1.2% yesterday and the PFTS index increased by 0.2% (in UAH terms). The WIG-Ukraine index decreased by 1.4%. On the interbank exchange market, the USD/UAH was up by 0.2% to UAH 26.88 (mid price), according to Thomson Reuters. The official exchange rate reported by the NBU was UAH 26.83.


FUIB increased net profit to USD 29 mn for the first nine months of 2017

First Ukrainian International Bank (FUIB) in the interim financial statements for three quarters of 2017 reported a net profit growth by USD 18 mn (x1.7 y/y) to USD 29 mn, from USD 11 mn in 2016 as a result of USD 26 mn (43.9% y/y) increase of net interest income to USD 85 mn and the net commission income growth to USD 33 mn, which is USD 6 mn (+23.2% y/y) more than for the same period of 2016. FUIB’s total assets increased by USD 14 mn (+0.9%) to USD 1,664 mn since the year beginning, while the loan portfolio grew up more significantly – to USD 935 mn, showing a USD 19 mn (+2.0%) expansion during 2017. At this time, the Bank’s total liabilities dropped down by USD 21 mn (-1.4%) to USD 1,479 mn, despite a USD 87 mn (+7.0%) growth of clients deposits to USD 1,316 mn. Total equity rose by USD 35 mn (+23.2%) to USD 185 mn. In comparison with the net cash outflow from operating activities for three quarters of 2016, in 2017 FUIB got a USD 101 mn of cash inflow, showing an USD 150 mn change year over year. The Bank’s cash outflows from investment and financial activities amounted to USD 60 mn and to USD 73 mn respectively.

Our view:

FUIB’s positive changes in financial results for the three quarters of 2017 are explained by reduced interest expenses (-29.8% y/y) and increased commission income (+24.0% y/y). These improvements caused the total equity growth through the increase in retained earnings. Meanwhile, Eurobonds buyouts held by the Bank during the year resulted in total liabilities decrease. We think that with such financial performance, FUIB will not meet any difficulties with its external debt servicing and amortization till the Eurobond’s maturity.

PrivatBank’s net loss for the three quarters of 2017 amounted to USD 61 mn

As was reported by the PrivatBank, for the three quarters of 2017 its net interest income increased by USD 52 mn (+38.1% y/y) to USD 187 mn and its net commission income rose by USD 41 mn (+18.5% y/y) to USD 265 mn, compared with the results of 2016. Despite this, the Bank gained a USD 61 mn of net loss. As of September 30, 2017, PrivatBank’s total assets amounted to USD 9,526 mn, which is USD 1,926 mn (+25.4%) more than at the year’s beginning. Bank’s loan portfolio increased by USD 176 mn (+10.9%) to USD 1,790 mn. Total liabilities of the Bank rose by USD 583 mn (+7.6%) to USD 8,215 mn, while the total amount of deposits expanded by USD 911 mn (+13.6%) to USD 7,619 mn. PrivatBank’s total equity showed the most significant changes, skyrocketing to USD 1,311 mn from a negative value of USD 33 mn as of January 1, 2017.For the nine months of 2017, PrivatBank’s net cash inflow from operating activities grew up by USD 225 mn (x1.9 y/y) to USD 344 mn. At this time net cash outflow from investment activities increased to USD 116 mn, which is USD 87 mn (x3.0 y/y) more than for the same period of 2016. The Bank’s net cash outflow from financing activities reduced by USD 37 mn (-13.8% y/y) to USD 230 mn.

Our view:

Significant changes in PrivatBank’s assets and equity were caused by the nationalization process held in the end of 2016 and the beginning of 2017 and the further recapitalization of the Bank through the injections into the share capital. Some part of these funds was used for reserves formation, which had the most significant impact on the Bank’s profitability, resulting in the net loss for the period, despite the increased net interest income. We think that it will be very hard for PrivatBank to finish this year with positive financial result, but in 2018 its overall performance should be much better, especially considering the performance in 2017, which will be used as a comparison base.

Fitch upgraded PrivatBank’s to ‘B-‘ with the stable outlook

Fitch Ratings upgraded the PrivatBank’s Long-Term Foreign Currency Default Rating (IDR) to ‘B-‘ from ‘RD’ with the Stable Outlook on the Long-Term IDR. In addition, Fitch also upgraded the Bank’s Viability Rating (VR) to ‘b-‘ from ‘f’. Other ratings, like Long-Term Currency IDR, Short-Term Currency IDR, Support Rating Floor and National Long-Term Rating were also upgraded by the agency.

Our view:

Ratings upgrade is influenced by the strengthening and the stabilization of the Bank, after some major concerns, which stared in the end of 2016 and were caused by the PrivatBank’s nationalization. This stability was brought by the significant support of the Ukraine’s government, as it was impossible to admit the collapse of the largest bank in the country.


Although the information in this report has been obtained from sources which Empire State Capital Partners believes to be reliable and was collected in good faith, we do not represent or warrant its accuracy, except with respect to information concerning Empire State Capital Partners, its subsidiaries and affiliates, either expressly or implied, and such information may be incomplete or condensed. Nor has the information and/or data been independently verified, and so is provided without further caveat regarding its reliability, suitability for commerce or specific purpose. This report does not constitute a prospectus and is not intended to provide the sole basis for an evaluation of the securities discussed herein. All estimates and opinions included in this report constitute our judgment as of the date of the report and may be subject to change without notice. Empire State Capital Partners or its affiliates may, from time to time, have a position or make a market in the securities mentioned in this report, or in derivative instruments based thereon, may solicit, perform or have performed investment banking, or other services (including acting as advisor, manager) for any company referred to in this report and may, to the extent permitted by law, have used the information herein contained, or the research or analysis upon which it is based, before its publication. Empire State Capital Partners will not be responsible for the consequences of reliance upon any opinion or statement contained herein or for any omission. This report is confidential and is being submitted to select recipients only. It may not be reproduced (in whole or in part) without the prior written permission of Empire State Capital Partners. Any recommendations, opinions, forecasts, estimates or views herein constitute a judgment as at the date of this report. This document has been produced independently of Empire State Capital Partners and the recommendations, forecasts, opinions, estimates, expectations, and views contained herein are entirely those of the research analyst(s). While all reasonable care has been taken to ensure that the facts presented herein are accurate and that the respective recommendations, forecasts, opinions, estimates, expectations, and views are fair and well considered, none of the research analyst(s), Empire State Capital Partners or any of its directors, managers or employees has verified the contents of this document and, accordingly, no research analyst, Empire State Capital Partners or any of its respective directors, managers or employees shall be in any way responsible for its contents.

Kind regards

Research Team