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30.07.2008
Banking institutions` efficiency falls
Credit-Rating notes the falling efficiency of the banking institutions: during 1Q2008 the business efficiency ratio has decreased by 17 percentage points compared to the same period of 2007.
The key reason is the outrunning growth of interest expenditures over the revenues due to the increase in resource cost. With the purpose to minimize the influence of this factor and to improve the performance, some banks were obliged to reduce the expenditures no related to the their principal activities, to adjust their plans for territorial expansion of the network and to postpone the extensive development.
According to Credit-Rating`s leading financial analyst Viktor Shulik: Further development of the banking institutions in the course of the year depends on general economic situation in the country and regulator`s actions. As before Credit-Rating expects the decrease in the efficiency of principal activities under further reduction of the loan portfolios` growth rates, increase in the resource cost and growth of the troubled assets.
70 banking institutions with ratings assigned have been analyzed. More detailed analysis of the banking institutions` activities over 1Q2008 you can find in Credit-Rating`s web-site: credit-rating.ua, section Publications.
For reference: business efficiency ratio indicates the coverage level of general administrative expenditures by operating revenues; it is used to determine both the recoupment level of administrative expenditures at the expense of conditional and fixed incomes from principal activities and banks` opportunity to increase expenditures connected with the development.
As of July 24, 2008 Credit-Rating maintains monitoring 65 ratings assigned to the banking institutions and 48 ratings assigned to debt instrument. 86% of the total amount of ratings have investment grade. During 1Q2008 Credit-Rating has upgraded 2 ratings, downgraded 2 ratings and revised outlooks of 10 ratings.
Detailed analysis of the banking institutions' activities for 1Q2008
For more information, please contact:
Information and Communication Department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua
