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04.03.2010
Credit-Rating: Ukrainian Banking System - Reverse Moving
Credit-Rating has today published review of Ukraine’s banking system for 2009. The review features assessment of the banking sector, quality of assets and resources, and risks inherent for Ukrainian banks.
Credit-Rating thinks that the aggressive lending policies and struggle for the market share during the past years, the quasi-hedging of own currency-related risks by transferring them to the borrowers had adverse impact on the banking system. Inadequate evaluation of risks in performing asset transactions became one of the principal troubles in 2009. The subsided business activities in a number of sectors, volatile currency policy and outflow of cash from the banking sector prompted erosion in solvency of a considerable number of banks (during the past year the NBU’s temporary administrations worked in 20 banks, with 10 of these banks remaining on the stage of liquidation). According to the NBU, the amount of overdue debts increased by 3.9 times to UAH70bn over 2009, with the level of reserves allocations for the loan portfolios increased by over 2 times to 13%.
According to Andrey Konoplyastyi, a Credit-Rating’s Head of Division for Financial Institutions, “the majority of banks have sufficient capacity for overcoming existing and potential problems associated with quality of portfolios. Under retained trends of economy development and currency policy, the level of trouble loans will not rise substantially”.
Credit-Rating notes that the increase in the regulatory capital (including the subordinated debt, which is allowed to be drawn in foreign currency starting from 2009) allowed to maintain financial independence (capital adequacy) at the sufficient level (18.08%) and to compensate for the losses incurred under significant expenses for reserves allocations. We note that the banks with foreign capital maintained their capitalization primarily by attracting funds in foreign currency as subordinated debts (their specific gravity in the liabilities rose to 4%). Such regulator’s concessions allowed to maintain interest of certain international banking groups in development their businesses in Ukraine, since they enabled the latter to hedge currency-related risks and to simultaneously maintain capitalization of their subsidiaries.
Even though, despite the financial aid from the regulator (the amount of refinancing for the year was recorded at UAH30bn) and shareholders (as augmentation of the capital for over UAH36bn and as subordinated debts), which allowed to compensate for outflow of deposits and maintain solvency, the risks for the banking system remain high.
Credit-Rating agency has operated in the Ukrainian market since 2001 being committed to assignment of the national scale ratings. The agency has assigned 1081 ratings since start of its activities. As at March 1, 2010 the Credit-Rating’s list of ratings is represented with 662 ongoing ratings: 508 in corporate, 105 in financial, and 49 in municipal sectors. In February 2010 Credit-Rating has assigned 8 credit ratings, revised 19 ratings, suspended 5 ratings and withdrawn 15 ratings.
Information on all credit ratings assigned in accordance with the National Rating Scale may be found in REUTERS and BLOOMBERG information systems.
For more information, please contact:
Information and
analytic department
Sergey Rozumyak +38044490 25 50
SRozumyak@credit-rating.com.ua
Denis
Rudenko
DRudenko@credit-rating.ua
