Archive for January 4th, 2011

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Ukrainian banking makes a loss of UAH 9 billion in 2010

January 4, 2011

The net loss of Ukrainian banks in 2010 could reach around UAH 9 billion, while in 2011 the banks could enjoy profits, according to the president of the Association of Ukrainian Banks (AUB), Oleksandr Suhoniako.

“November is a first month without losses since the start of the crisis. I think that we would see around UAH 9 billion in losses for the [whole] system [in 2010]… I hope that next year we would not have losses,” he said at a press conference in Kyiv on Tuesday.

Suhoniako said that in 2010 the deposit growth pace would be around 26%: the refinancing funds issued by the National Bank of Ukraine (NBU) to commercial banks at the start of the financial turmoil, are gradually replaced by deposits, and this is evidence of a gradual recovery of the banking sector after crisis.

He said that Ukrainian banks failed to resume crediting in full in 2010 due to the absence of high-quality borrowers on the market, vulnerability of creditors from the point of the law, and due to the absence of long-term funds that could be taken for crediting.

The major part of additional resources raised by banks on the deposit market was invested in government bonds, which share of the banks’ assets has doubled since the start of the year.

Suhoniako said that there are risks for banks due to a large bad credits share. He said that over the first 11 months of 2010 overdue credits at banks jumped by 1.3 times, to UAH 90.3 billion.

“The absence of the bad credit market, the absence of instruments and institutions, which would have given a chance to operate with UAH 90 billion of bad credits is a serious problem, which we enter the new year with,” he said.

Commenting on NBU resolution No. 544, which lifted a ban from changing the currency exchange rate during one working day by banks, he said that the decision was made in a proper time, as the measure was efficient only in the period of the financial crisis.

“This is a step towards internal currency liberalization. This is a step, which would be welcomed by banks… This step is a right one, I think,” he said.

Hmmmm – not sure how things will improve considerably in 2011 and return the sector to profits.

The key paragraph above is “due to the absence of high-quality borrowers on the market, vulnerability of creditors from the point of the law, and due to the absence of long-term funds that could be taken for crediting.”

I don’t see how those underlying factors will change in 2011, particularly with so much global debt needing to be restructured and refinanced.   It is more likely that only the highest quality borrowers will get to borrow, vulnerable creditors will remain vulnerable and long-term funding will be as rare as rocking horse shit given the global demand for it.

Then what do I know?

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