UkrEximBank Reports UAH 88mn in Net Profi t for FY11

Government-owned UkrEximBank released its 4Q11 and FY 2011 UAS financials on Tuesday (Jan 24). The bank’s net interest income increased by 11.0% QoQ to UAH 977mn, while total income rose by 60.0% QoQ to UAH 1.46bn thanks to considerable growth of earnings from trading of currency and securities. Total income for FY11 amounted to UAH 4.4bn, a 9.4% YoY rise. The bank’s operating expenses increased by 24.7% QoQ in 4Q11 and by 26.9% YoY in FY11. A signifi cant change was seen in provisions for loan impairment, which increased by 72.6% QoQ in 4Q11, but by only 5.1% YoY for the whole year. Net profi t amounted to USD 29mn in 4Q11 and UAH 88mn in FY11. According to UkrEximBank’s balance sheet, corporate loans declined by 5.4% QoQ to UAH 42.1bn, while retail loans decreased by 4.8% QoQ to UAH 0.8bn. The loan/deposit ratio decreased to 166.5% (190.6% in 4Q10) on a 66% YoY increase in term deposits of legal entities and a 9.5% YoY increase in the term deposits of retail customers.

 COMMENTARY

 UkrEximBank’s results, which suggest a stable corporate loan portfolio and a gradually declining retail loan portfolio, are in line with our expectations. The bank’s loan/deposit ratio stabilized at 166% and stayed near this level for all of 2011. On the income statement we note a 4.8% YoY increase in the net interest income in 2011 to UAH 3.5bn and a 2.9% YoY increase in fees & commissions income. The net interest margin declined by 50 bps over the year to 5.2%, refl ecting a larger percentage of low-yielding government bonds in the bank’s interest-earning asset portfolio. Overall, we believe that the yield of 15% for UkrEximBank’s Eurobonds maturing in 2016 is an attractive yield level for a stable, well-managed, state-owned bank.