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Concorde Capital Research: Ukraine to invest UAH 15 bln in capital increase of Oschad, Ukreximbank

January 28, 2016 | Cbonds

Ukraine’s Cabinet of Ministers approved on Jan. 27 a UAH 5 bln increase in the equity of Oschadbank (OSCHAD) and a nearly UAH 10 bln increase in the equity of Ukreximbank (EXIMUK), Interfax-Ukraine reported the same day, citing PM Arseniy Yatsenuyk. He expects that the equity contribution will support the banks’ stability and improve their lending activity.

In 2014, the government invested UAH 12.7 bln into the equity of Oschadbank and UAH 5.0 bln into the equity of Ukreximbank. A month ago, Deputy Finance Minister Ihor Umanskiy (now resigned) said that the government was not intending to recapitalize the state banks in 2016. The 2016 state budget did not contain any line item for investing into state banks, while granting such an option to the Cabinet.

Alexander Paraschiy: We expect the increase of the banks’ capital will be made with the traditional contribution of government bonds into their equity. These increases will have a neutral effect for the banks’ Eurobonds since they don’t improve the banks’ dollar liquidity. The increases also looks neutral for the banks’ fundamentals. On the one hand, additional capital would indeed improve their liquidity and ability to provide new loans. On the other hand, their need for additional capital suggests the banks did not perform well in 2015, despite the Cabinet’s earlier understanding that they are in fine condition. That’s also negative for MinFin, which revealed its poor understanding on what’s going on in the state banks. Meanwhile, the state debt will increase by another UAH 15 bln (or 1%) just from this transaction.

Company: Oschadbank

Full company nameJoint Stock Company "State Savings Bank of Ukraine"
Country of riskUkraine
Country of registrationUkraine
IndustryBanks

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