The most profitable and most unprofitable banks: results of three quarters of 2015

Author : Yulia Petrychenko

Source : 112 Ukraine

Little less than 1/3 of 27 banks were profitable, drawing up 89.6% of assets out of the assets of all solvent banks in Ukraine
19:09, 30 November 2015

112 International

The positive financial result in three quarters of 2015 showed 10 banks - the biggest and large - in terms of assets (I and II group of National Bank of Ukraine classifier). At the same time, six of them comparing to the same period of last year, demonstrated a decrease in profits and only two have increased profits; two more banks managed to get in the black after a negative financial result.

The loss in January-September 2015 triggered nearly two-thirds of the biggest and large banks. At the same time, eight banks have gone into the red instead of profitable indexes over the same period of 2014; seven banks showed an increase in losses and only two banks were able to reduce them.

Unlucky at profits

According to financial reports of banks as of 1 October 2015, published on the website of the NBU, the leader among the outsiders was the bank with Russian capital VTB - minus ₴16.3 billion. ₴8.7 billion loss showed the Italian UniCredit Bank, 8,3 billion – state Ukreximbank, 6.3 billion - the Russian Prominvestbank. Rounds out the TOP-5 of anti-leaders the state Oschadbank - ₴5.4 billion loss. The following four banks received from ₴1 to ₴2 billion loss, and all the rest - less than a billion.

Let’s note that eight banks from Group I and II of the NBU Classifier for the first three quarters of 2015 showed a negative financial result, whereas in the same period last year, these financial institutions were among profitable.

Seven major and large banks in terms of assets in January-September 2015 comparing to the same period last year increased their losses. The Top-5 banks are UniCredit Bank, Ukreximbank, Raiffeisen Bank Aval, Bank Credit Dnipro, Platinum Bank.

According to experts:  the consequences of the losses of assets in connection with the occupation of the Crimea and the Donbas, the devaluation of the hryvnia at the beginning of 2015, the turmoil in the economy of Ukraine last year and a half still have affects. All these factors have influenced the deterioration of the quality of credit portfolios of Ukrainian financial institutions, and the formation of reserves for them, and are a major cause of losses of banks.

"To cover the losses, banks are obliged to create reserves for problem loan. The amount of these reserves is deducted from the income of the bank and so the banks record losses. If the bank manages to reduce the amount of problem loans, provisions can be reduced, and as a result, the bank records profit. Therefore, large losses of the bank VTB, UniCredit Bank and Ukreximbank are primarily due to the fact that they have big problems with repayment of loans, and they are forced to form enormous reserves that actually develop into huge losses. Worsen, when large losses are fixed by small banks. Big bank even with significant losses is always more resistant and stable than a small one. While in fact, one has to deal with problem loans as soon as possible,"- says President of the Ukrainian Analytical Center, Alexander Okhrimenko.

The negative financial result in OTP Bank was explained by the provision for loans. "In the third quarter we have formed additional reserves on foreign currency mortgages and loans in Donetsk and Lugansk regions, and plan to complete this process by the end of 2015 so that from the beginning of 2016 exclude the influence of this factor on financial results of the bank" - said chairman of OTP Bank, Tamas Haq-Kovacs.

We shall note that only two banks of I and II groups have managed to reduce the losses in January-September 2015:

1) Hungarian OTP Bank - from ₴1.311 billion to ₴1.276 billion;

2) Rodovid Bank (has the remedial bank license, so it doesn’t actually operate) - from ₴297.5 million to ₴121.6 million.

Rating list of profitable banks

The leader in terms of profitability for three quarters of 2015 became Citibank (being a part of the international financial US holding) which earned ₴1.3 billion. Profits of remaining banks whose activity has been successful, as of October 1 was from less than ₴1 million to less than ₴300 million.

01.10.2015, mln, UAH

National Bank of Ukraine

At the same time, Citibank has become one of the two banks, which during three quarters of this year received more profits that over the same period of last year (its profit amounted to ₴1.107 billion as of 01.10.2014). Also Credobank managed to increase profits, from ₴74.3 million to ₴120.3 million.

Let’s note, that two of the most successful banks managed to get in the black comparing with last year's results:

1) ING Bank Ukraine - from loss of ₴174.192 million to ₴228.2 million profit;

2) UkrSibbank - from loss of ₴732.150 million to ₴88.6 million profit.

"Despite the stabilization of the hryvnia and the increased liquidity, the economic situation remains tense on the background of the further reduction of GDP. However, some banks, including ours, managed to get a small profit at the end of the third quarter," - says the chairman of board of UkrSibbank BNP Paribas Group, Philip Dyumel.

Taking note that the Citibank and ING Bank Ukraine are specific narrow-profile banks, which do not work with physical persons, so their financial results cannot be compared with the performance of the universal banks, which operate in all market segments.

"The best results in the first three quarters of 2015 showed the banks with a clear business model, which have not stopped lending. This is the niche corporate Citibank and ING Bank, and Polish Credobank - focused mainly on the segment of small and medium-sized enterprises. Among other market players acceptable results show banks that are actively restructured and cleared its loan portfolio before the crisis (until the elimination of the troubled loan portfolio from its balance sheet). Smaller losses suffered banks whose business has been poorly represented in the most "problematic" regions of Ukraine such as Crimea, Donetsk and Lugansk regions, - Roman Lepak (Credobank), the bank director of the department of organization and strategy commented on the positive financial results.

Profits& losses indicators in group breakdown of the NBU classifier

In general, in the banking system the biggest banks group set an anti-record over the tree quarters of 2015; having increased the figures of the last year almost in 12 times and received ₴51.5 billion loss, large and medium sized financial institutions were able to reduce losses, while a group of small banks reported profits.

As can be seen from the statistics, the largest banks reported the greatest losses.

“To a large extent it can be attributed to obtaining by them and by the National Bank of Ukraine of the results of conducted diagnosis, in the course of the volume of necessary creation of additional provisions and capital requirements were identified. In the last quarter of this year and the first semester of 2016 we will see similar processes of creation of additional provisions for banks from the second and three scores, the diagnosis of which take place on the next stage, - predicts Roman Lepak.

Let us recall, the credit risk estimation of the first score of banks, the results of which were determined by the need to create additional reserves and capitalization of financial institutions, scheduled to be completed by the end of August. The first deputy head of the National Bank of Ukraine Alexander Pisaruk then reported that the NBU cannot see systemic risks to financial stability. Then the head of the NBU Valerie Gontareva noticed the excess liquidity in the banking system and offered to enhance a lending to the real economy.

In connection with the introduction of the new instructions for the assessment of the credit risk of banks, the duration of the diagnosis of the second score of banks, which was scheduled to be completed by October 2015, transferred to the next year.

In general, the loss of the Ukrainian banking system, excluding the insolvent banks amounted to ₴52.4 billion in the first nine months of this year. Experts believe that it’s not worth counting on the fact that in the near future banking system will be released on profitable activities.

In the second half of the year the banking system of Ukraine continues to be in a "frozen" state – the insolvent banks are derived from the market, while the majority of healthy banks restrict their market activity, waiting for the economic situation development.

Related: 58 Ukrainian banks are under liquidation

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