OschadBank Corporate Loan Portfolio up 36.8% YoY in 2011

January 30, 2012

Government-owned Oschadny Bank published its 4Q11 and FY11 UAS financials on Jan 26. According to the bank’s balance sheet, the volume of loans rose 31.4% YoY to UAH 58.8bn in FY11. Loans to corporate clients increased by 36.8% YoY to UAH 54.4bn, while loans to individuals fell by 11.1% YoY to UAH 4.5bn. The bank’s loan impairment provisions increased by 50% YoY in 2011.

COMMENTARY

OschadBank’s IFRS finacials for 1H11 indicated that loans issued to parties related to state-owned “Naftogaz of Ukraine” and “UkrTransNafta” amounted to UAH 24bn, or 45% of the bank’s total volume of loans as of 30 June 2011, which obviously represents a very significant concentration. This volume of Naftogas indebtedness remained largely unchanged from what was reported at the end of 2010. The format of Ukrainian accounting standards does not call for the disclosure of the loan concentration, but we presume that Naftogaz and related companies still accounted for a significant percentage of the total loan portfolio of Oschadny Bank at the end of 2011. The bank’s Eurobond maturing in 2016 trade with the yield of 12.5% which is 110 bps cheaper compared to the yield on similar bonds of Ukreximbank, another Ukrainian government owned bank. We believe that, with this pricing situation, Ukreximbank16s are a better buying opportunity.

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