Who pulls the banking system down.
The banking system is again running at a loss. For the 6 months of this year, 20 banks have earned of 10.07 billion net loss. This was more than enough to cover the aggregate profit remaining 70 financial institutions. The overall result for the first half – minus 1.85 billion UAH. In the first quarter of 2017, banks received 5,09 billion UAH of profit.
LIGA.net versed in the figures of the consolidated report of the NBU for all Ukrainian banks.
“The main reason for the deterioration in financial result was the increase in deductions in reserves banks to 12.5 bln in the second quarter of 2017. Most of them formed a two – PrivatBank and Prominvestbank” – noted in the message of the national Bank, devoted to the publication of presultrow.
Loss of privacy has really pulled down the overall results of the remaining state-owned banks. Six months they (first and foremost, profitable Oshchad, Ukreksim, Ukrgasbank) finished with a profit of UAH 1.1 bn. Privat has brought the group a net loss of 1.8 billion, The same applies to banks with foreign capital: excluding Prominvestbank they showed a cumulative profit of UAH 3.7 bn, with Pibom – loss of UAH 1.1 bn.
In addition to Private and PIBA, the loss of more than 1 billion UAH showed only VTB Bank. All other loss-making financial institutions finished the half with a loss of not more 375.9 million UAH (USB). Minimal loss showed Bank trust-Capital – minus 490 000 UAH in six months.
“Prominvestbank and VTB is the subsidiary of Russian state-owned banks, which owed including our elected officials. Both banks are actively fighting in the courts for their rights of the creditor, but it is not always possible,” says the member of the Executive Committee of the Ukrainian society of finanalytica Vitaly Shapran.
Both Bank show minus the portfolio, but operationally and PIB and VTB profitable. Chronic negative result due only to the new provisions, said Shapran. Market participants on the rights of anonymity note: some solvent borrowers of the Russian banks are now deliberately stop to service their obligations, knowing the Russians prano or later leave the Ukrainian market.
The second reason of the poor performance “Russians” – low estimate of uncollectible portion of the loan portfolio in previous years. Banks have to compensate by increasing reserves, which leads to permanent loss. “At the time, these banks made too few contributions to reserves. Now I have to catch up” – said the head of analytical Department of Concorde Capital Oleksandr Parashchiy.
Additional pressure on banks has and the innovation of the NBU about the rules of credit risk assessment (351 resolution of the national Bank), which operates since February of this year. His point is that banks create reserves not only for existing but also for new debt immediately, not on the fact a 90-day delay, as it was before. Plus, the NBU has tightened the interpretation NPL loan.
“We changed the definition of non-performing loan. Now this is a debt, which, first, is overdue by 90 days or more, and second, when the status of the borrower is such that to collect the debt without any withdrawal of collateral is impossible,” – said earlier the head of the Department of instability NBU Vitaly vavrischuk.
Market participants do not rush to draw conclusions about the impact of the 351 regulations on the work of banks, since the overall coverage of the loan portfolio reserves for six months has not changed – it is now 40%. “But given the relatively strict attitude of the NBU to the issue of bad loans, major banks, verotyano will have to generate reserves until they cover not only obvious, but also expected losses from NPL-debt”, – he told LIGA.net the Manager of one of the major banks.
The second method of working with bad debts for large banks the restructuring of corporate loans, said chief financial officer Ukrsotsbank Sergey Ermakov. But, as a rule, this solves only a small part of the problem. The same Ukrsots still suffers due to the poor quality of the loan portfolio and other exit, except how to go to restrukturizatsiyu and get rid of non-core assets, the Bank does not see.
Problems small
For six months the new rules have led not only to an increase in reserves major players, but also to the capital at smaller banks, says analyst at Alpari Maxim Parkhomenko. “Revaluation of assets in the part 351 of the decision itself distorts the statistics, – says Parkhomenko. – The amount of capital which comes from the value of their assets, was previously sufficient, it covers all the risks of banks. Now it is not enough.”
On the background of the NBU requirements on the minimum regulatory capital of the banks for the first time in several quarters began to show losses.
In the category of small banks multiple – Motor Bank, BTA Bank, Skye Bank, Alpari Bank and First investment Bank(PINBank). Misto Bank, Agropromservis Bank, BM Bank (owned by Russian VTB) and PRAVEX-Bank show losses of at least mid-2015.
For many, this year has been a busy one: of the top four only PIN and BTA Bank long before the deadline, the NBU fulfilled the required minimum capital of 200 million Others had more complicated: Motor Bank received state registration of the new capital after 12 July (the deadline for recapitalization). Alpari Bank has not done this so far – in the registry of legal entities at the time of publishing the Bank’s capital is fixed at 122 million. Except it did not fulfill minimum Credit Optima Bank, Bank center (owned by the NBU), the Bank Portal, Policombank, Ayboks Bank and Bank Center.
On the one hand, loss-making small banks talks about the need to reserve risks. Small financial institutions are more difficult to find a good borrower. Because of this, all existing and especially new loans to cover reserves without reservation. On the other hand, a sharp loss indicate problems with operations. Market participants behind the scenes note: this financial institution is now difficult to be profitable. To attract large borrowers, they lack capital. To work only on transactional business, or to go toward retail, like cash credit, it is also not easy – you need a serious investment. Now owners of small banks are more concerned with the question of where to get another 100 million UAH for the next step to mandatory capitalization.
The provisions for credit risks could cause losses except in the case of BTA Bank, on the Motor and Alpari Bank contributions to reserves were not, says para. “Rather, there are other reasons for falling interest income and rising operating costs,” he explains.
“Interest income” includes not only loans but also the interest on securities, including government bonds and NBU desertificaton. Among the four loss-making “kids” the biggest portfolios goscinnych securities were at the Motor and BTA Bank, says Vitaly Shapran. The yield on government bonds and desertification over the last six months gradually decreased along with the discount rate of the NBU (from 14 to 12.5%). According to the national Bank, if in winter one-two-year government bonds could attract on the secondary market at an average yield of 16-18% per annum in June (the last month of the second quarter), the average coupon on them dropped to 13-15%.
To calculate the share of securities in the structure of “interest” portfolios of reporting, which publishes the national Bank impossible, said Parashchiy. If before the crisis the interest on the loans the banks have brought about 90% of their income, now that figure has dropped to 73%, was noted in the June “financial stability Report” of the NBU. The state-owned banks the situation has changed deeper: the securities give them about 40% of the passive income.
Questionable accounting
With the main source of interest income from banks problems: over half of the total net portfolio of loans in the system fell from 538,7 billion UAH at the beginning of the year up to 512 billion at the end of June. Negative entities even more 33.5 billion the Logic of these changes is the same – the new rules of rezervirovaniya plus factor PrivatBank, according to respondents LIGA.net analysts.
“Net portfolio value, which after changing the rules of calculation of the reserves shows little, – said Vitaly Shapran. – It is important how many percent in the quarter, the Bank can throw you out of your credit portfolio”.
Net loan portfolio provided only a running debt. The aggregate amount of the loans on the Bank’s balance sheet must be evaluated in relation to “reserves under depreciation of customers ‘obligations”. In reality, banks have reduced their portfolios (that is, not reserved credits, and closed them, for example, through the assignment of the financial companies, as did OTP Bank, PRAVEX or through write-offs after NPL-debt was 100% covered by reserves) at 20.1 billion. most of the balances are cleaned 4 of the Bank: Prominvestbank, VTB, Sberbank and ING – they accounted for 26,6 billion UAH, says Parashchiy, Concorde Capital from.
“Separately, around 9 billion drop in the system (and 3 billion on four banks) can be explained by the strengthening of the hryvnia against the dollar, says para. – Directly increasing reserves of 12.9 billion, mainly because of PrivatBank, which is reserved 28.6 billion”. On the market the amount of foreign currency loans in the system estimated at about 40% of the total portfolio.
To assess the quality of credit portfolios of Ukrainian banks is still difficult because of problems of accounting. In their performance, banks often indicate you have not paid a cent. “It is desirable that the Bank has shown its interest income on a cash basis. We don’t know, does the Bank that he actually received from the borrower. Perhaps it was only accrued but not paid interest,” says Shapran.
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