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21.03.2008
Credit-Rating: Struggle against inflation will raise hryvnya`s price and lead to slowdown in lending
Credit-Rating believes that limitation on money stock imposed by the government and the National Bank of Ukraine aiming at restraining the inflation growth may lead to rise in value of resources in hryvnya and banks` restrained lending activity.
The government`s and regulator`s efforts aimed at removing of excess in money stock (which gained 52 percent in 2007) entailed sharp rise in refinancing rate, which constrained banks` capacity for attracting of cheap resources from the interbank market. Considering the fact that such steps are taken in combination with shrank capacity for external capital inflows, we may note that not only small and middle banks, but also the large ones may encounter difficulties with funds` attraction. This policy will lead to slowdown in lending (primarily in retail segment), raised requirements for obligors` solvency and decreased terms for lending.
The situation with attraction of hryvnya and FX resources for Ukraine`s banking sector on better terms may improve in case of stabilization in a number of factors, the main of which are inflation expectations and global financial crisis. Credit-Rating anticipates a certain slowdown in development of Ukraine`s banking system. At the same time, the agency does not expect significant stresses because of low integration with the global financial system. There might be revisions in strategies of some banks, which have had ambitious expansion plans in 2008. The banks with modest liquidity, which tend to develop at the expense of external inflows may also be exerted a pressure under these circumstances.
Overall, Credit-Rating subscribes to the opinion that there are no reasons for revision of ratings carried by national banking institutions, yet it monitors attentively the situation on this market.
Credit-Rating`s note:
The agency has rated 66 national commercial banks, and 47 banks` bond issuances. The majority of the ratings assigned to the banks are of investment grade bearing stable outlooks.
For more information, please contact:
Information and Communication Department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua
