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Confirmation of the Credit rating of JSC “UkrSibbank”


19/11/2014

On November 19, 2014 the Rating Committee of Rating Agency «Expert-Rating» decided to affirm the uaAAA (the Ukrainian rating scale) credit rating of JSC “UkrSibbank” (EDRPOU code 09807750). A borrower or a separate bond instrument with uaAAА rating has the highest solvency as compared to other Ukrainian borrowers or bond instruments. Agency’s decision to affirm such a high credit rating was based on the analysis of the Bank’s performance in the first 9 months of 2014.

Table 1

Balance Sheet Dynamics of JSC “UkrSibbank” for the First 9 Month,  in kUAH, p.p., %   

Indicators

01.10.2014

01.01.2014

Change

Growth rate, %

Own equity

1,919,759

2,650,275

-730,516

-27.56%

Authorized capital

1,774,333

1,774,333

-

-

Equity to assets ratio, %

8.00%

10.99%

-2.99 p.p.

-

Liabilities, total

22,066,030

21,461,467

604,563

2.82%

Including liabilities in foreign currencies

11,430,786

10,706,632

724,154

6.76%

Banks’ funds

140,098

199,318

-59,220

-29.71%

Individuals’ funds

8,556,646

9,162,533

-605,887

-6.61%

Legal entities’ funds

7,886,806

7,469,697

417,109

5.58%

Assets, total

23,985,789

24,111,742

-125,953

-0.52%

Liquid assets (Cash and cash equivalents + Funds of mandatory provisions of the bank in the NBU +  Trade securities + Funds in other banks)

4,978,560

4,534,215

444,345

9.80%

Customer loans and debt with account for provisions

13,685,950

14,601,718

-915,768

-6.27%

Loan provisions

1,765,255

858,572

906,683

105.60%

Loan provisions to customer loans and debt ratio, %

12.90%

5.88%

7.02 p.p.

-

Securities for sale

2,371,158

911,123

1,460,035

160.25%

Provisions for securities for sale

32,649

5,328

27,321

512.78%

Liquid assets to liabilities ratio, %

22.56%

21.13%

1.43 p.p.

-

Source: data of JSC «UkrSibbank», calculations by RA «Expert-Rating»

            1. Key balance sheet indicators of JSC “UkrSibbank” according to the results of the first 9 months of 2014 have demonstrated the following changes:

  • Own equity decreased by 27.56% to UAH 1.92 bln (in the first half of 2014 own equity decreased by 16.35%);
  • The liabilities increased by 2.82% or by UAH 604.56 mln to UAH 22.07 bln (according to the results of the first half of 2014 the liabilities increased by 1.60% or by UAH 342.53 mln);
  • The assets decreased by 0.52% or by UAH 125.95 mln to UAH 23.99 bln (according to the results of the first half of 2014 the assets decreased by 0.38% or by UAH 90.74 mln);
  • The loans and debt of the Bank’s clients decreased by 6.27%, including provisions, and amounted to UAH 13.69 bln, the provisions increased more than twice (by UAH 906.68 mln or by 105.60%);
  • The portfolio of securities for sale increased by 2.6 times (by UAH 1.46 bln or by 160.25%), and amounted to UAH 2.37 bln (according to the results of the first half of 2014 the portfolio of securities for sale increased by 111.76% or by UAH 1.02 bln);
  • Liquid assets grew by 9.80% or by UAH 444.35 mln and amounted to UAH 4.98 bln (according to the results of the first half of 2014 the liquid assets increased by 7.02% or by UAH 318.38 mln). 

Key components of the resource base of JSC “UkrSibbank” over the period from 01.01.2014 to 01.10.2014 showed the following dynamics:

  • The funds of legal entities increased by 5.58% or by UAH 417.11 mln to UAH 7.89 bln (while over the period from 01.01.2014 to 01.07.2014 the funds of legal entities decreased by 1.00% to UAH 7.4 bln, which means that in the third quarter the Bank managed to renew the inflow of this type of resources);
  • The funds of individuals decreased by 6.61% or by UAH 605.89 mln and amounted to UAH 8.56 bln (according to the results of the first half of 2014 the funds of individuals showed a decrease by 1.94% or by UAH 177.52 mln);
  • The funds of the Banks decreased by 29.71% or by UAH 59.22 mln to UAH 140.09 mln (according to the results of the first half of 2014 the decrease spiked to 63.84% or UAH 127.24 mln). 

             2. Dynamics of the balance sheet indicators of JSC “UkrSibbank” impacted the dynamics of the Bank’s ratios. Deterioration of macroeconomic environment resulted in additional provisions for non-performing loans and funds at other banks and had a great impact on the financial result (since it resulted in a significant loss), as well as on own equity and regulatory capital of the Bank. Thus, over the period from 01.01.2014 to 01.10.2014 the regulatory capital of JSC “UkrSibbank” decreased by UAH 1.33 bln or by 28.37% to UAH 3.35 bln, capital adequacy ratio of the Bank (N2) decreased by 5.65 p.p. to 17.36% (in line with the NBU requirement “not lower than 10%”, the average N2 ratio of the banking system of Ukraine makes up 15.96%), and the regulatory capital to total assets normative ratio (N3) decreased by 5.71 p.p. to 12,99% (in line with the mandatory requirements “not lower than 9%”, the average ratio of the Ukrainian banking system makes up 12.30%).

Table 2

Dynamics of key ratios at JSC “UkrSibbank” for First 9 Months 2014, in kUAH, p.p., %  

Indicator

NBU requirement

01.10.2014

01.01.2014

Change, kUAH, p.p.

Bank value

Average system value

Bank value

Average system value

Regulatory capital (N1), kUAH

not less than kUAH 120,000

3,351,058

-

4,678,442

-

-1,327,384

Regulatory capital adequacy normative (N2), %

not less than 10%

17.36%

15.96%

23.01%

18.26%

-5.65 p.p.

Regulatory capital/total assets normative ratio (N3), %

not less than 9%

12.99%

12.30%

18.70%

13.98%

-5.71 p.p.

Instant liquidity ratio (N4), %

not less than 20%

46.03%

43.94%

38.79%

56.99%

7.24 p.p.

Current liquidity ratio (N5), %

not less than 40%

84.36%

79.53%

70.71%

80.86%

13.65 p.p.

Short-term liquidity ratio (N6), %

not less than 60%

83.71%

86.75%

76.10%

89.11%

7.61 p.p.

Significant credit risk indicator (N8), %

not more than 800%

50.93%

246.46%

8.37%

172.05%

42.56 p.p.

Maximum aggregate loans, guarantees and warranties issued to insiders indicator (N10), %

not more than 30%

5.42%

1.45%

5.58%

1.63%

-0.16 p.p.

Source: data of JSC «UkrSibbank», NBU, calculations by RA «Expert-Rating»

               Therefore, according to the results of the first 9 months of 2014 the equity of JSC “UkrSibbank” decreased in line with overall tendencies in the banking system of Ukraine. In spite of the decrease, the capital ratios of JSC “UkrSibbank” exceeded by far not only the limits, set by NBU, but also average ratios of the Ukrainian banking system. Thus, the capital adequacy ratio of the Bank (N2) exceeded the average market ratio by 1,40 p.p., and the regulatory capital to total assets ratio (N3) by 0.69 p.p.

Over the first 9 months of 2014 liquidity ratios of JSC “UkrSibbank” increased (while the average liquidity ratios of the banking system have demonstrated a downward trend), in particular:

  • Instant liquidity ratio of the Bank (N4) increased by 7.24 p.p. to 46.03% (the NBU requires the ratio to be “not lower than 20%” and the average of the Ukrainian banking system amounts to 43,94%);
  • Current liquidity ratio of JSC “UkrSibbank” (N5) increased by 13.65 p.p. to 84.36% (the NBU requires the ratio to be “not lower than 40%” and the average of the Ukrainian banking system amounts to 79.53%);
  • Short-term liquidity ratio of the Bank (N6) grew by 7.61 p.p. to 83.71% (required ratio “not lower than 60%” and the average market ratio 86.75%). 

Therefore, JSC “UkrSibbank” began the fourth quarter of 2014 with significant liquidity reserve. As of 01.10.2014 the liquidity ratios of the Bank noticeably exceeded by far NBU requirements. The instant (N4) and current (N5) liquidity ratios of JSC “UkrSibbank” exceeded the average ratio of the banking system of Ukraine by 2.09 p.p. and 4.83 p.p., correspondingly.

Table 3

Key Income and Expenses Items of JSC “UkrSibbank” for First 9 Months of 2013-2014, in kUAH, p.p., %           

Indicator

9 months of  2014

9 months of  2013

Change

Growth rate, %

Net interest income

1,308,087

983,640

324,447

32.98%

Net commission income

506,293

464,643

41,650

8.96%

Net commission income to net interest income ratio

38.70%

47.24%

-8.53 p.p.

-

Result from operations with securities in the bank’s portfolio

0

(26,335)

-

-

Result from operations with foreign currency

256,238

79,024

177,214

224.25%

Administrative and other operating expenses

(1,472,749)

(1,440,405)

(32,344)

2.25%

Net profit / (loss)

(732,150)

(14,700)

(717,450)

-

Source: data of JSC «UkrSibbank», calculations by RA «Expert-Rating»

3. In spite of the difficult economic environment of Ukraine, the key income-related items of JSC “UkrSibbank” saw an increase according to the results of the first 9 months of 2014 compared to the same period of 2013. Thus, net interest income of the Bank increased by 32.98% or by UAH 324.45 mln to UAH 1,31 bln, net commission income grew by 8.96% or by UAH 41.65 mln to UAH 506.29 mln, and income from foreign exchange operations increased by 224.25% or UAH 177.21 mln.

Nevertheless, according to the results of the first 9 months of 2014 JSC “UkrSibbank” posted UAH 732,15 mln in losses exceeding by 49,8 times the losses incurred in the first 9 months of 2013. As stated above, one of the key factors of pressure on the financial result of JSC “UkrSibbank” were substantial deductions to loan provisions and funds at other banks, the volume of which increased by 5.8 times (by UAH 1.17 bln or by 480.57%) and according to the results of the first 9 months of 2014 amounted to UAH 1.41 bln. Another key factor of pressure on the financial result of the Bank was a substantial negative reassessment of foreign currency (UAH 210.05 mln). Taking into account the capital adequacy and liquidity ratios of the Bank as of 01.10.2014, the Agency believes that the losses incurred by the Bank in the first 9 months of 2014 will not have a significant impact on the credit risk of the Bank and its stability.

            4. The Agency would like to remind that JSC “UkrSibbank” has a very high level of external support on the part of its shareholders BNP Paribas Group (France), a large financial group, and the European bank for reconstruction and development (EBRD). 84,99% of shares of JSC “UkrSibbank” belong to BNP Paribas Group, 15% of shares of JSC “UkrSibbank” are owned by the EBRD. 

            According to the results of the 9 months of 2014, BNP Paribas Group showed positive overall results due to its diversified business model and the significant geographical footprint. Total income of BNP Paribas amounted to EUR 9,537 mln. That is by 3.9% higher than in the third quarter of 2013. Net income attributable to shareholders made up to EUR 1,502 mln (EUR 1,358 mln in the third quarter of 2013).

            The Agency would also like to remind that on October 26, 2014 the European Central Bank (ECB) published the results of the comprehensive assets quality assessment of the 130 largest banks of Euro zone. The assessment included detailed Asset Quality Rating (AQR), and stress test together with the European Banking Authority (EBA).

            Overall impact of AQR on the CET1 ratio (shareholders’ equity adequacy ratio of Tier 1) of BNP Paribas is insignificant: 15 basis points, 8 out of which were already included into the CET1 ratio posted on June 30, 2014.

            The results of the stress test showed that BNP Paribas Group is capable to withstand considerable stress in unfavorable economic and market environment in line with the stress test scenario. The comprehensive assessment carried out by the ECB and the EBA confirms the solidity of the balance sheet, quality of assets and stringent risk management of the BNP Paribas Group. 

              Overall, the key balance sheet items of JSC “UkrSibbank” according to the results of the first 9 months of 2014 showed multidirectional tendencies following those of the first half of 2014. The Bank continued to increase the liquid assets on the back of shrinking loans and debt of the clients. In the third quarter of 2014 JSC “UkrSibbank” saw an increase in the inflow of legal entities’ funds. Deterioration of macroeconomic environment forced the Bank to made additional provisions for loan impairment and funds at other banks which impacted the financial result (resulted in significant losses), as well as own equity and regulatory capital of the Bank.

            The equity ratios of JSC “UkrSibbank” according to the results of the first 9 months of 2014 decreased in line with the global tendencies of the banking system of Ukraine. However, in spite of the decrease, capital ratios of JSC “UkrSibbank” continued to exceed by far not only the NBU requirements but also the average ratios of the banking system of Ukraine.

            Liquidity ratios of the Bank increased while average liquidity ratios of the market showed downward tendencies. As of the beginning of the fourth quarter of 2014 liquidity ratios of JSC “UkrSibbank” exceeded by far the NBU requirements (instant liquidity (N4) and current liquidity (N5) ratios of JSC “UkrSibbank” exceeded those of the banking system of Ukraine).

The Agency would like to remind that JSC “UkrSibbank” enjoys high level of external support on part of its shareholders BNP Paribas Group (France), a large financial group, and the European Bank for Reconstruction and Development. In the first 9 months of 2014 BNP Paribas Group increased its own equity and net income and successfully passed the stress test by ECB.

Confirmation of the Credit rating of JSC “UkrSibbank” - 19.11.2014 (english version)

 

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