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Kiev, 12 June 2017
Dear George,
Re: Ukrainian Banking Opportunity
Further to our discussion, I am sending a brief presentation on the prospect of
establishing a banking footprint in Ukraine through the acquisition of a bank.
Currently the central bank in Ukraine, the National Bank of Ukraine (NBU) is not
keen to issue new banking licenses but urge prospective investors to acquire an
existing license.
The main drivers for my positive stance on investing in the banking sector in
Ukraine are:
▪ the improving economy following the IMF program with demanding but
required structural reforms, with real GDP growth expected to reach 4% in
2020;
▪ the improving political conditions in terms of the conflict with Russia with
the support of NATO;
▪ the recent developments in the EU-Ukraine relationship with the abolition of
visa and the prospect of concluding the Association Agreement in July;
▪ the investment and commitments from supranational institutions so far
(EBRD: c. US$6 billion being the third largest exposure of the bank after
Turkey and Russia, World Bank: c. US$5 billion);
▪ the significant restructuring efforts in ensuring a healthier banking sector
following AQR that resulted to the nationalization of the biggest bank
Privatbank and the closing of half of the banks (over 90 banks), and the
preparation of the state sector banks (52% share of assets) for privatization
in the next 2 to 3 years; and
▪ the current landscape of the banking sector that allows organic expansion
because of very few notable foreign banks that have the ability to develop
business or, even more, to exploit the potential for consolidating the banking
sector where government owns 52% in a market with increasing trend in
loans and deposits and high commission income.
1
!
Economy
Following a severe crisis in 2014-15, the economy is growing again-by 2.3 percent
in 2016-and the flexible exchange rate and tight fiscal and monetary policies have
greatly reduced internal and external imbalances. GDP, which declined from its
peak of US$183 billion in 2013 to US$90 billion in 2015, is now recovering at a
growth above 2% and is expected to grow at 3.2% in 2018. Growth is projected at
3.5%-4% in the medium term (IMF).
The current account deficit fell sharply, from over 9% of GDP in 2013 to 3.6% of
GDP in 2016 and reserves-while still low-have more than doubled to US$17.6
billion (end of 2017 target at US$21.3 billion). The overall fiscal deficit-including
the energy sector’s quasi-fiscal losses, which had increased to 10 percent of GDP
in 2014, declined to 2.3% of GDP in 2016, supported by strong spending control
and the decision to raise energy tariffs to market levels.
Inflation has fallen steadily from its peak of 61% in April 2015 to 12.4% by end-
2016, well within the target range of the NBU. It is projected to reach 9% in 2017
and 5% in the medium term.
Ukraine has entered into a 4-year Extended Fund Facility (EFF) with IMF in
March 2015 for US$17.5 billion. Following the third review by IMF the fourth
tranche of US$1 billion was approved which would bring total disbursements
under the arrangement to about US$8.38 billion. The EFF aims to put the economy
on the path to recovery, restore external sustainability, strengthen public finances,
maintain financial stability, and support economic growth by advancing structural
and governance reforms, while protecting the most vulnerable.
The Ukrainian administration showed commitment to reforms by nationalising the
largest private bank, Privatbank, and liquidating over 100 banks within 3 years.
2
Also, collection of taxes has increased significantly (34% increase in 2 years) and
spending has been contained while at the same time energy/utility tariffs have
increased dramatically at full cost recovery basis.
The main reforms agreed with the IMF include the privatisation of large state
enterprises such as the Odessa Portside Plant and Centrenergo, the lifting of the
embargo on the sale of agricultural land to foreigners, the raising of the pension
age, the restructuring of the health system and the increase in efforts combating
corruption.
Most of these reforms, although not expected to be completed in the immediate
term, they are expected to be implemented in a gradual process.
For example, land reform may be initiated partially by privatising state agricultural
land (1 billion hectares). 25% of world’s black-earth soil is in Ukraine, considered
the most fertile and productive agricultural land. Over 70% of Ukraine is
agricultural land valued at US$100 billion. Ukraine is the biggest exporter in
sunflower oil globally, 2 nd in world grain exporter after the US and 3 rd in corn
exports globally. The land reform is expected to elevate the country’s performance
with significant FDIs from international investors.
On the pension front, the Cabinet of Ministers approved the draft of the pension
reform-IMF and World Bank already supported the draft- and will discuss it at the
National Reform Council, to be then submitted to the Rada (parliament). The
pension reform was long overdue, given that the Pension Fund deficit reached
UAH 140 billion or 6.3% of GDP in 2016. Pension reform is considered to be one
of the most socially sensitive reforms the government is planning to implement
under the current IMF Extended Arrangement. However, it seems that the
government has managed to avoid the most unpopular measure of increasing the
statutory pension age while increasing the effective pension age. The proposed
reform will assist in reducing the deficit starting from mid-2018.
The implementation of the reforms should assist the government in managing the
debt profile of the country presented below. While there is no imminent need for
IMF disbursements, 2019 (presidential and parliamentary) elections coincide with
a US$7 billion peak of public sector FX needs, while US$12 billion is due in total
in 2017-19. The authorities need to secure sufficient FX funding in advance, while
the alternative funding sources are limited. The FX reserves increased to US$17
billion, but cover 3.8 months of imports only.
As already described in the recent IMF review, Ukraine is expected to re-access the
international capital market as early as the second part of 2017 supported by the
improved debt profile resulting from the recent debt operation (perimeter of the
debt operation included sovereign and sovereign guaranteed Eurobonds, City of
Kyiv Eurobonds, Guaranteed Commercial Loans and SOE debt) for a total nominal
3
!
value of USD 19.3 billion). The debt profile has become more favorable with the
increase of the share of official debt, a decline in the foreign currency debt share
and the very low share of short term debt. This should effectively make easier the
refinancing of the debt in 2019 and 2020.
The synthesis of the current parliament allows the government to push for reforms
in 2017 and early 2018 before they turn to populist measures just before elections.
Leading the country off-track with the IMF program will surely limit even further
the funding resources of the country.
Politics
EU has verified its support by (i) lifting its visa requirements to Ukrainian citizens
for traveling, a long awaited move that embeds symbolism of support and (ii)
following the vote by the Dutch parliament to support Ukraine’s Association
Agreement, it is expected that the ratification of the Association Agreement,
including the Deep and Comprehensive Free Trade Area component will be ratified
in the Ukraine-EU Summit on July 13.
NATO has also shown strong support to Ukraine by providing various forms of
assistance through advice and training to strengthen its defence by building
stronger security structures. The Ukrainian defence industry may also get
permission to participate in tenders for the supply of goods and services for NATO.
4
Last week Ukraine’s Foreign Minister Pavlo Klimkin stated that he expects an
expanded partnership between Ukraine and NATO will lead Ukraine to a
membership in the Alliance following a path similar to that of Montenegro.
With regard to the United States, for now President Trump’s ambiguous
positioning in Russian affairs seems to have little impact on the U.S.
Administration's Ukraine policy. The Administration is expected to continue its
support for the actions of NATO, the IMF and Secretary of State Tillerson has
reaffirmed in April 2017 that the U.S. will not lift sanctions against Russia as long
President Putin does not hand Crimea back to Kiev.
In internal politics, we would expect Mr Poroshenko, the President of Ukraine, to
sign the Association Agreement, thus improving his diminishing ratings and to
win the presidential elections in 2019. In my opinion, Mr Poroshenko is also
delaying the elections in the conflict zone of Donbass, a major requirement
featured in the Minsk Agreement, in order to avoid the negation of his good
performance on the European prospect, and then, assessing the Russian conflict
situation at that point in time, to progress with the Minsk Agreement and
effectively resolve a major part of the conflict. I do not think that Crimea will ever
find its way back to Ukraine but if all other matters are resolved, a financial
settlement would be considered.
Therefore the status of “frozen conflict” in the Donbass area would remain in the
short to medium term but the economy of Ukraine has been operating for a number
of years now without the Donbass and the annexed to Russia Crimea. All growth
estimates published by various international institutes incorporate similar
assumptions.
Banking Sector
In the past 3 years there has been a clean-up by the National bank of Ukraine
(NBU) with the support of IMF mainly as well as of EBRD and IFC. The number
of banks has been reduced from 192 to 92 and there are still banks that will be
liquidated. The most drastic action was the nationalisation of Privatbank, the
biggest bank in the country (market share 17.7% by assets, 36% of deposits of
physical persons), owned by an oligarch that was posing a systemic risk to the
country’s economy and which was found to be insolvent mainly because of bad
lending practices with loans extended to related parties. However, Privatbank is
servicing 20 million customers providing to them state-of-the-art digital banking
5
and other electronic services. IMF has demanded that the resolution of this issue as
well as the recapitalisation of other banks, as it resulted from the AQRs performed
by NBU, is a prerequisite for the disbursement of its 4th tranche which in fact was
executed successfully by the Ukrainian administration.
As a result the banking sector presented record losses in 2016 of US$6.2 billion
(Privatbank US$5.2 billion). 1Q17 is already in profit (US$220 million) and is
expected to continue increasing throughout the year.
The current landscape is that 40 banks make up the 98% of the assets, the top 20
the 90.2%, the top 10 the 74% and of which 10 the top 4 banks are state owned and
make up the 52% of the assets.
Top 20 banks in Ukraine
For the State Owned Banks, namely Privatbank, Oschadbank, Ukrexim and
Ukrgas, the plan is that they prepare them for sale in the medium term, in around
2-3 years. To this purpose EBRD mostly and IFC to a lesser extent has been
assisting the Government by placing directors in the Supervising Boards of these
banks, so that corporate governance is implemented.
6
The Russian government owned banks, making up the 8.4% of the banking assets,
are heavily undercapitalised being below the required norms because of
underprovided problematic loan portfolios with NBU imposing certain sanctions.
Moreover, there have been many aggressive actions from Ukrainian activists
because of the war conflict and all of them, namely Sberbank, VTB (controls two
banks in Ukraine, VTB and BM Bank) and Prominvestbank, have announced their
departure by selling the banks. So far the sale of Sberbank has been agreed to
Norvik bank of Latvia that belongs to individuals of Russian origin, pending the
approval from the NBU.
The banks with Ukrainian capital in the top 20 banks share 6% of assets with the
most notable being FUIB of Mr Akhmetov.
Proposal
I would propose the acquisition of a profitable bank with lower than the average
NPL portfolio, operated by a West European shareholder, with a reasonable market
share and of a digestible acquisition price in order to capture the projected 4-year
economic growth trend in Ukraine (base scenario by IMF and EBRD) in a market
with:
▪ Small competition
Analysing the current landscape of the top 20 banks that command around 90%
market share of assets, there are very few banks that would be competent to
pursue business development given their specific circumstances.
The state owned banks that command the 52% are obviously bothered with
trapped legacy and corporate governance issues. All four banks are also
preparing for their potential privatisation, however, the task of transforming the
mentality of the staff of these banks to that similar of a private one should be
close to impossible, at least for a period of 3 years. I would have thought that
their liquidity would be most probably invested in government titles rather than
pursuing loans aggressively by competing at low interest rates.
The Russian government owned banks that command 8.4% are already at the
“sales process” stage and I believe that there will be no European investors that
would invest in such banks that are undercapitalised as officially NBU has
confirmed, with most of their loans being NPEs.
7
!
!
!
Effectively the banks that could compete and have the size and access to
cheaper foreign exchange funding as well as trade finance capabilities are
Raiffeisen, Ukrsib, Credit Agricole and OTP accounting for 12.6% collectively.
Raiffeisen is engaged in dealing with the retail business and the work out of
their NPLs. However, its long-serving CEO Mr Lavrenchuk is rumoured to
become the Governor of NBU and the management team will be replaced with
expatriates from Raiffeisen’s head office. This move will create a major upset in
the bank’s structure and may result to a major change in strategy with a
considerable time to be needed for bringing the bank back to smooth operation.
Alfa who have bought over Unicredito’s Ukrsots bank (6.5% combined) and
who have historically being engaged in retail lending and large corporates
should continue to pursue this business and should devote resources to the
merger with Ukrsots and manage the business lending that should take some
time to grasp. Rumours say that they will initiate the merger process in not less
than a year and already they have discontinued new business lending servicing
existing customers only.
FUIB have been given a plan to recapitalise the bank or decrease their assets
and therefore they are out of the business for the time being.
ING and Citi are providing large corporate and investment banking services
only.
▪ Improving quality of borrowers
Following the improvement in collecting taxes and the enactment of new
legislation, and therefore decreasing the non-declared income, as well as the
significant increase in commodity prices and the increase in disposable income,
credit affordability has increased among business and individuals.
▪ Increasing loans and deposits that suffice for the credit growth
Evolution of loans and deposits 2015-2021
The European prospect of Ukraine that is supported not only politically but
also from the international financial institutions along with the effort of the
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government to execute the structural reforms and hence achieve the economic
growth projected, should allow the access of the Ukrainian enterprises to the
European market and lead to further consolidation in the banking market.
In particular the loans market should increase and is projected by IMF at
US$17.5 billion in the period 2018-2021 (9.9% CAGR). It is anticipated that
there will be a significant demand for investment loans so that SMEs and large
corporates invest in infrastructure in order to produce products and services at
standards accepted in the EU countries.
Deposits are increasing (1Q17: 1.3% comprising increase in UAH deposits of
3.8% and decrease in FC of 1.9% mainly due to the repayment of foreign
currency guaranteed deposits of liquidated banks back in hryvnia). The trend is
expected to increase because of the return of trust to the public (estimated
money “under the mattresses” US$6-10 billion).
▪ Potential for high commission income
Commission income in 2016 amounted to US$922 million representing 34% of
the total banking revenue (25% for banks with foreign capital) exceeding the
average of the European banks. The most significant types of commission are
related to foreign exchange and money transfers. The difference in the share of
commissions in the banking revenue between the banks with foreign capital and
the banking sector average is mainly due to the fact that state owned banks are
the exclusive banking providers for the government organisations. There are
actions from the Banks’ Association to change to ratings criteria to introduce
fair competition.
In 2016 total commissions returned 2.8% on assets. Considering that the
sector’s balance comprises 37% cash and securities, this return is deemed high.
In general Ukrainians are accustomed to high commissions and in paying for
services. Commission income is expected to grow even further as exports and
disposable income would be growing.
▪ Consolidation prospect
Opportunity to participate in the forthcoming consolidation of the sector,
ripping the benefits of acquiring customers from state owned banks at least and
grow organically.
9
Ukrsib bank
I have considered a number of banks (Appendix I) and given my experience in the
country, Ukrsib is my top choice for the following reasons:
▪ Image of a European reliable, ethical, healthy bank with good electronic
banking solutions (Top 5 in 2017) servicing first class corporate customers and
their employees. The shareholders comprise BNP Paribas (60%) and EBRD
(40%).
▪ Good coverage ratio of problematic loans, a practice of French banks we have
observed in many occasions with recent experience in Greece with Credit
Agricole and Soc Gen.
The NPL ratio is 31% (EUR 301 million), less than the 36.4% average for
banks with foreign capital, and coverage of around 80%. From the 2016 audited
annual accounts, the remaining 20% net of reserves NPL portfolio is covered 4
times by collateral. The most problematic loans population has been that of
mortgages in foreign currency and it seems that Ukrsib has provisioned this part
adequately.
Loans portfolio quality
(31.12.2016)
€mn
Mortgage
s
Other
mortgages
Consumer
loans
Overdraf
ts
Other
loans
Total
Neither past due nor
impaired
High grade 0.2 5 0.1 508 513.
3
Medium grade 0
Low grade 4 4
Without ranking (up to 1
year)
Without ranking (1-10
years)
Without ranking (more
than 10 years)
Total neither past due
nor impaired
Past due but not
impaired
1 3 21 7 13.3 45.3
20 3 20 0.1 3 46.1
45 5 50
66.2 15 41 7.2 529.3 658.
7
10
less than 10 days
overdue
2 0.2 0.5 0.1 2.8
11-30 days overdue 1 0.1 0.2 1.3
31-90 days overdue 0.5 0.5
91-180 days overdue
181-360 days overdue
over 360 days overdue
Total past due but not
impaired
3 0.3 1.2 0.1 0 4.6
Loans to be impaired
not yet past due 5 13 0.7 27 45.7
less than 10 days
overdue
0.3 0.3 0.6
11-30 days overdue 0.1 0.1
31-90 days overdue 3 6 9
91-180 days overdue 4 11 0.4 15.4
181-360 days overdue 8 22 0.3 30.3
over 360 days overdue 149 20 2.5 0.6 28 200.
1
Total loans to be
impaired
Total loans before
provisions
169.4 66 3.9 0.6 61.3 301.
2
240 82 46 8 591 967
Provisions -140 -38 -5 -1 -55 -239
Net loans 100 44 41 7 536 728
11
Net Loans coverage by collateral value
(31.12.2016)
€mn
31th of December 2016 31th of December 2015
Assets
balance
value
Fair value of
collaterals
Assets
balance value
Fair value
of
collateral
s
Mortgages
Neither past due nor impaired 65 213 109 393
Past due but not impaired 3 12 10 27
Loans determined to be
impaired
31 168 104 242
Other mortgages
Neither past due nor impaired 15 62 78 192
Past due but not impaired 0.3 4 9 7
Loans determined to be
impaired
28 97 31 109
Consumer loans
Neither past due nor impaired 41 5 30 8
Past due but not impaired 1 0.2 1 0.3
Loans determined to be
impaired
0.1 2 0.3 2
Overdrafts
Neither past due nor impaired 7 2 6 4
Past due but not impaired 0.1 0.2
Loans determined to be
impaired
Other loans
Neither past due nor impaired 519 150 419 98
Past due but not impaired 0.1 0.1 0.1 0.3
Loans determined to be
impaired
17.4 33 3 10
Total 728 748.3 800.6 1092.6
Total loans net of
impairment
76.5 300 138.3 363
Collateral coverage 392% 262%
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▪ Large clientele of about 2 million customers (including 150,000 business
customers) serviced out of 378 branches with excellent retail product offering,
for which, however, the know-how contribution of Paris must have been
significant. They are also offering private banking and asset management
services in cooperation with their Swiss subsidiaries.
▪ They are leaders in trade finance, assisted by their operations in Switzerland.
They have corporate relations with the best local enterprises and they cross sell
their retail services to their customers and their partners.
Loans portfolio by sectors
€mn
31th of December 2016 31th of December 2015
€mn % €mn %
Individuals 319 33.0 374 39.6
Trade and finance 251 25.9 196 20.8
Agriculture and food industry 231 23.9 190 20.1
Telecommunication services 61 6.3 107 11.3
Transport services 47 4.9 2 0.2
Manufacturing 26 2.7 11 1.2
Chemical undustry 11 1.1 13 1.4
Construction 9 0.9 13 1.4
Transport vehicles trade 4 0.4 18 1.9
Gas and oil 4 0.4 12 1.3
Minning and metallurgy 3 0.3 3 0.3
Other 1 0.2 5 0.5
Total loans (before
provisions)
967 100.0 944 100.0
The product mix in the loans portfolio that is not in delay is 81% business and 19%
retail lending with business lending focusing in the agricultural sector.
▪ Excellent funding mix with the majority being current accounts at low cost.
13
Customer accounts
€mn
31th of
December
2016
31th of
December
2015
Current accounts
legal entities 301 303
individuals 624 489
Total current accounts 925 792
Term deposits
legal entities 276 349
individuals 80 129
Total term deposits 356 478
Total customer accounts 1281 1270
Customer accounts by sectors
€mn
31th of December 2016 31th of December 2015
€mn % €mn %
Individuals 406 32 417 33
Manufacturing 219 17 213 17
Trade 446 35 437 34
Financial services 96 8 91 7
Transport and connection 87 7 83 7
Culture and education services 17 1 17 1
Other 10 1 12 1
Total customer accounts 1281 101 1270 100
▪ High commissions covering their staff costs (2016: 112%). Net commissions
make up the 32% of their Net Banking Revenue and yielding 3% on Assets.
14
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▪ The published financial statements for 1Q17 are “cleaner” in terms of “grossed
up” balances such as accruals of NPLs and therefore present a better base to
project 2017 financial results.
15
1Q 2017 P&L
€ mn
Ukrsibbank
Q1 2017 Q1 2016
Interest income 29 38
Interest expense -6 -14
Net interest income 23 24
Net commission income 12 10
Trading & other income 3 7
Employee costs -10 -9
Depreciation -1 -1
Administrative and other
operating costs
-6 -6
Other provisions 0 0
General & Admin.
Expenses
-18 -16
Pre Provision Income 20 25
Provision for loan
impairment
-9 -56
Profit before tax 11 -31
Income tax expense -2 -0
Net profit 8 -31
Please see summary of 2016 audited financial statements for Ukrsib, Ukrgas
and Raiffeisen as well as their 1Q17 statements in Appendix I.
▪ The bank is overcapitalised at 21.37% CAD mainly due to subordinated debt
provided by EBRD in USD during the years of crisis. About EUR 135 million
were outstanding at 1.5% (1Q17: EUR 104 million) with their contribution to
regulatory capital being EUR 73 million which is equivalent to 7.51% CAD
ratio. The minimum CAD required by NBU is 10%. 71% of the subordinated is
due to be repaid in 2019.
16
Regulatory Capital
€mn
31 December
2016
Tier 1 146,079
Additional Capital-Sub Debt 72,515
Deductions -12,167
Total Regulatory Capital 206,427
CAD Ratio 21.37%
Implied RWA 965,965
Regulatory Capital excluding
Additional 133,912
CAD Ratio Adjusted 13.86%
Due to the large interest margins and the high commissions, the capital to be
created from profits is growing faster than the reduction of the capital
contributed by the subordinated debt.
******************************************************************
Although Raiffeisen has already undergone a sales process twice, the last being 3
years ago, without success, I still consider the amount of its equity at EUR 350
million a very large amount to invest for gaining 0.8% more market share than that
of Ukrsib.
This information is as much I could gather but I will meet with EBRD for other
reasons and will try to extract more information mostly on the intentions of BNP in
dealing with their Ukrainian presence. From what I know EBRD’s 40% is
considered exceptionally high as equity participation percentage comparing to their
usual 10-15% and most probably they would be willing to listen to exit scenarios,
possibly remaining as shareholders at a lower percentage.
I think it is too early to discuss potential price but having EBRD inside already I
would assume that 1x less due diligence adjustments should be the maximum,
17
possibly around 0.8, with 0.5x being the floor. An indicative amount for buying the
90% of the shares with EBRD holding the remaining 10% should be in the region
of EUR 110 million.
I expect that an IRR greater than 25% can be achieved considering the profitability
of the current assets at c. EUR 50 million excluding trading gains, the additional
profitability from organic expansion in lending at the levels assumed by IMF for
the banking market and assuming that the exit from the investment will be
achieved at the same multiple as that of the entry level (0.8x).
I am available at any time to discuss the above. Should your investors be interested
in the project I would be more than happy to meet them and arrange their meeting
with EBRD. The next step following our meeting with EBRD would be to meet
BNP and, in case they accept a bilateral process, to arrange and manage the deal
process. As discussed my main objective is to lead manage the bank with a
competent management team, to be compensated by “sweat equity”, and looking
forward to be a major participant in the consolidation of the industry.
I will also send to you the latest benchmarking review of the banking sector we are
preparing for your perusal.
Best regards,
Yannis
18
Appendix 1 -2016 Balance Sheet
€ mn
Assets 31 /
12/16
Cash and cash
equivalents, banking
metals
Accounts in NBU and
other banks
Ukrsibbank Ukrgasbank Raiffeisen Bank Aval
31 /
12/15
31 /
12/16
31 /
12/15
31 /
12/16
31 /
12/15
68 475 88 152 362 480
561 9 229 353 358 244
Derivatives 0 0 0 1 0 0
Loans and advances to
customers
728 799 716 535 985 964
Trading securities 0 0 14 0 28 9
Investment securities
available-for-sale
Investment securities
held-to-maturity
Securities at fair value
through profit or loss
Fixed and intangible
assets
136 252 704 318 0 0
0 0 35 115 0 0
0 0 0 0 74 77
45 45 53 44 83 98
Investment property 1 0 2 2 4 6
Investments in
subsidiaries
0 13 0 0 2 8
Assets held-for-sale 0 0 40 37 2 0
Deferred income tax
assets and current
income tax prepayment
Other financial and
non-financial assets
38 43 3 3 39 50
20 19 13 11 33 20
Total assets 1,596 1,656 1,897 1,585 1,970 1,954
Liabilities
Due to NBU and other
banks
1 0 59 354 22 88
Derivatives 2 0 1 1 0 0
Customer accounts 1,282 1,270 1,625 1,049 1,561 1,523
Provisions for liabilities
and other liabilities
33 26 26 17 33 24
Subordinated debt 135 291 0 0 0 80
Total liabilities 1,452 1,587 1,710 1,421 1,616 1,715
19
Equity
Share capital 178 68 487 528 217 235
Acquired property
rights on shares
Result of operations
with shareholders
0 0 -18 -20 0 0
0 0 -39 -42 0 0
Emission differences 29 31 0 0 0 0
Additional paid-in
capital
0 0 5 5 107 116
Other provisions 0 0 21 -5 44 50
Retained profit/losses -63 -30 -269 -303 -13 -162
Net equity 144 69 186 164 354 239
Total liabilities and
equity
1,596 1,656 1,897 1,585 1,970 1,954
Appendix 1 –2016 Profit & Loss €
mn
20
Ukrsibbank Ukrgasbank Raiffeisen Bank
Aval
2016 2015 2016 2015 2016 2015
Interest income 142 157 193 134 232 237
Interest expence -44 -65 -167 -106 -58 -86
Net interest income 98 93 25 28 174 151
Net commission
income
46 61 12 8 67 65
Trading&other income 20 12 -0 -1 30 25
Employee costs -38 -40 -20 -16 -53 -50
Depreciation -6 -8 -4 -2 -12 -13
Administrative and
other operating costs
-23 -29 -22 -18 -50 -50
Other provisions 0 0 -1 -5 -9 0
General & Admin.
Expenses
-67 -76 -48 -41 -124 -113
Pre Provision Income 98 90 -11 -5 147 129
Provision for loan
impairment
-127 -93 20 17 1 -191
Profit before tax -33 1 9 12 147 -62
Income tax expense -2 -0 1 -2 -13 7
Net profit -35 1 10 10 134 -55
21
Appendix 1 -1Q17 Balance Sheet
€ mn
Ukrsibbank Ukrgasbank Raiffeisen Bank
Aval
31/3/1
7
31/3/16 31/3/1
7
31/3/16 31/3/1
7
31/3/16
Assets
Cash and cash
equivalents, banking
metals
Accounts in NBU and
other banks
73 68 124 88 466 362
471 561 260 229 253 358
Derivatives 0 0 0 0 0 0
Loans and advances to
customers
663 728 727 716 1,005 985
Trading securities 0 0 13 14 36 28
Investment securities
available-for-sale
Investment securities
held-to-maturity
Securities at fair value
through profit or loss
Fixed and intangible
assets
137 136 972 704 0 0
0 0 0 35 0 0
0 0 0 0 93 74
45 45 52 53 82 83
Investment property 1 1 2 2 4 4
Investments in
subsidiaries
0 0 0 0 2 2
Assets held-for-sale 0 0 38 40 2 2
DTA and inc. tax prepay. 35 38 2 3 28 39
Other financial and nonfinancial
assets
16 20 11 13 20 33
Total Assets 1,440 1,596 2,201 1,897 1,992 1,970
Liabilities
Due to NBU and other
banks
0 1 54 59 18 22
Derivatives 0 2 0 1 0 0
Customer accounts 1,162 1,282 1,956 1,625 1,547 1,561
22
Provisions for liabilities
and other liabilities
24 33 17 26 29 33
Subordinated debt 104 135 0 0 0 0
Total Liabilities 1,290 1,452 2,027 1,710 1,594 1,616
Equity
Share capital 175 178 478 487 213 217
Acquired rights on
shares
Result of operations with
shareholders
0 0 -18 -18 0 0
0 0 -38 -39 0 0
Emission differences 28 29 0 0 0 0
Additional paid-in
capital
0 0 5 5 105 107
Other provisions 0 0 11 21 43 44
Retained profit/losses -53 -63 -263 -269 38 -13
Total Equity 150 144 174 186 398 354
Total Liabilities and
Equity
1,440 1,596 2,201 1,897 1,992 1,970
23
Appendix 1 -1Q17 P&L € mn
€ mn
Ukrsibbank Ukrgasbank Raiffeisen Bank Aval
Q1 2017 Q1 2016 Q1 2017 Q1 2016 Q1 2017 Q1 2016
Interest income 29 38 51 43 57 55
Interest expense -6 -14 -36 -37 -10 -17
Net interest
income
Net commission
income
Trading & other
income
23 24 15 5 46 39
12 10 4 2 17 13
3 7 4 -17 7 10
Employee costs -10 -9 -6 -4 -14 -12
Depreciation -1 -1 -1 -1 -4 -3
24
Administrative and
other operating
costs
-6 -6 -6 -4 -12 -11
Other provisions 0 0 -4 -0 -1 -0
General & Admin.
Expenses
Pre Provision
Income
Provision for loan
impairment
-18 -16 -17 -9 -31 -27
20 25 6 -19 39 35
-9 -56 -5 20 22 -10
Profit before tax 11 -31 1 1 61 25
Income tax expense -2 -0 -1 -0 -11 -2
Net profit 8 -31 1 1 50 23
25