UkrSotsbank Reports UAH 15mn in Net Profi t in FY11

UkrSotsbank released its 4Q11 and FY11 UAS fi nancials yesterday (Jan 26). The bank said its net interest income remained almost unchanged from the previous quarter, increasing by 1.3% QoQ to UAH 729mn. Net interest income for FY11 was UAH 2.9bn, or 2% YoY lower compared to what was reported in 2010. Total income for 4Q11 rose by 7.5% QoQ to UAH 923mn and increased by 1.6% YoY to UAH 3.6bn in FY11. The bank’s cost/income ratio continued to creep up, closing 2011 at 40%, up from 35.2% at the end of the previous year. UkrSots reported a very small profi t of UAH 15mn for 2011, implying an ROE of just 0.2%. On the balance sheet we note continuous and successful efforts by UkrSotsbank directed at deleveraging. In particular, the loan/deposit ratio stood at 205% on 31 December 2011, down from 244% at the end of the previous year. The portfolio of gross corporate loans was slightly up, closing the year at UAH 18.7bn, a 4.6% YoY increase. Retail loans declined by 5.4% YoY.

COMMENTARY

This is a “typical” reporting package for UkrSotsbank of recent times. It features stagnancy in both revenue and volume of interest-earning assets. Operating profi ts which the company makes are used to make loan loss provisions up to the limit which would allow leaving a small, essentially negligible profi t for the company. The bank’s provisions/gross loans ratio was 30% on the reporting date, which indicates that this policy may be relaxed in 2012 and that the bank will fi nally start reporting signifi cant profi ts.