Special project: TOP-10 most reliable banks of Ukraine

Спецпроект: ТОП-10 самых надежных банков Украины

The nationalization of the “PrivatBank” has led many customers to think seriously about the risks that affect even the most innovative large banks.

Attentive investors know about the financial problems of “PrivatBank” in advance:

– First of all, the Bank lost foreign and state the criterion of shareholder support and the risks associated with the owners, as evidenced by their strained relations with the government, slow pace of formation of reserves, delays in the recapitalization and repayment of the NBU refinancing;

– Secondly, in 2015 fall the Bank’s ability to generate net interest income due to the deterioration of credit portfolio quality, to keep the depositors of Bank No. 1 had to keep Deposit rates higher than the market, thus constantly increased the ratio of interest expenses to income;

– Thirdly, the sectoral structure of corporate lending, published in the quarterly reports of the Bank indirect pointed to the significant share of loans to related parties, the real quality which is difficult to assess, there are also risks of non-repayment in case of problems in the core business or decisions of the owners.

The story of the “Private” teaches more carefully interpret the data of financial statements of banks, to consider the possibility of manipulation of net profit by reducing the costs of formation of reserves, and most importantly, when choosing a Bank for Deposit and long-term cooperation to draw attention to the international reputation and financial capacity of the shareholders. While technological innovations, high quality of service and friendliness of the Bank do not always correspond to financial stability. A tale of two crises indicates a high reliability for investors of financial institutions with a good level of foreign or state support: none of these financial institutions went bankrupt.

Based on the lessons of the fall of the Bank No. 1, analysts YouControl included in the list of best alternatives exclusively foreign and state-owned banks, which are reporting more credible, and the factor of external support with high probability is able to compensate for possible financial losses.

Banks were selected according to indicators such as efficiency (return on assets, capital, net interest margin and the ratio of interest expenses to income), liquidity, capital adequacy, the ratio of deposits to loans, the dependence on deposits of natural persons, the scale of activities (the Bank’s market share in retail assets and deposits, number of branches).

Absolute financial indices, million UAH
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Спецпроект: ТОП-10 самых надежных банков Украины

Raiffeisen Bank Aval

Share in the assets of the system: 4.1 percent

Market share of deposits of the population: 3.8 per cent

Number of branches: 551

One of the oldest players in the banking market, since 2005 is part of international group Raiffeisen International Bank Holding with its headquarters in Austria. At the end of the crisis 2014/15, the Bank received financial support from the European Bank for reconstruction and development (EBRD) through the sale of 30% of the share capital. Significant anti-crisis cost saving, on the one hand, led to the reduction of the territorial network and the number of staff, with another – has allowed to improve the financial stability of the Bank, to release resources for the creation of reserves, to hold high in comparison with market profitability and net interest margin.

Спецпроект: ТОП-10 самых надежных банков Украины

Credit Agricole Bank

Share in the assets of the system: 2.3 percent

Market share of deposits of the population: 1,4%

Number of branches: 164

Subsidiary Bank holding the largest French Credit Agricole Group, created by the merger of two financial institutions: corporate credit Agricole CIB (Crédit Lyonnais Ukraine), founded by the French in the ‘ 90s, and retail credit Agricole, formerly known under the brand of the reserve Bank and repurchased by the group to domestic investors. Credit Agricole Bank is experiencing strong growth in market share in all key segments of the banking market, has high indicators of liquidity, profitability and capital adequacy. One of the banks which is a leader in the sector of agricultural credit.

Спецпроект: ТОП-10 самых надежных банков Украины


Share in the assets of the system: 15,0%

Market share of deposits of the population: 14.6% of

Number of branches: 3 798

State-owned Oschadbank was able to “collect tops” the crisis of 2014-2015, as viewed by many customers as a safe haven compared to private domestic banks, most of which went bankrupt during the cleaning process of the banking system. Also contributed to the shift of depositors in the state Bank higher Deposit rate compared to European banks, a unique 100% guarantee of deposits above 200 thousand UAH, and lobbying for legislative changes that expanded access to maintenance of salary projects of state employees. The Bank increased its market share, reformatted a number of offices in a more modern format service and timely dokapitalizatsiya at the expense of the state budget. On the other hand, its profitability, asset quality and cost efficiency are lower than in European banks.

Спецпроект: ТОП-10 самых надежных банков Украины


Share in the assets of the system: 0,8%

Market share of deposits of the population: 1,0%

Number of offices: 24

Average size of Ukrainian “daughter” is part of the international ProCredit group, which is owned mainly by international financial organizations, among which the German ProCredit holding, the German state development Bank KfW and the international Finance Corporation (IFC). In addition to financial support from quasi-governmental agencies of leading countries of the world and of the maximum credit rating by Fitch, the Bank has good rates of profitability, net interest margin and cost efficiency. Despite the closure of branches, ProCredit Bank is actively increasing its market share in the segment of corporate lending and Deposit market, paying maximum attention to clients from segment of small and medium-sized businesses.

Спецпроект: ТОП-10 самых надежных банков Украины


Share in the assets of the system: 0,8%

Market share of deposits of the population: 0.8% of

Number of branches: 109

Kredobank is a subsidiary Bank of the largest Polish financial institution PKO Bank Polskі SA, which in turn is 29% owned by the state Treasury Western neighbor. Occupying a middle position on the national market, the Bank is a major regional player in Western Ukraine, and also serves many European companies. Over the last 3 years the Bank’s market share increased in most segments of the banking sector and the financial indicators are characterized by high profitability and rapid growth of net interest income. At the same time, additional formation of reserves under credit risks, unlike other European banks, has occurred more slowly.

Спецпроект: ТОП-10 самых надежных банков Украины


Share in the assets of the system: 3.2 percent

Market share deposits: 3.5% of

Number of branches: 104

The Bank, positioning itself as part of European financial group ABH Holdings S. A. (ABHH), with its head office in Luxembourg, despite the fact that the majority of the group’s operations are concentrated in Russia, Ukraine, Kazakhstan and Belarus. The shareholders of Alfa-Bank, came from industrial businesses, have embarked on the development of universal banking less dependent of other areas and countries primitive accumulation of capital. Their strategic interest in the Ukrainian banking market is showing in the transaction on the receipt of Ukrsotsbank by the Italian UniCredit in exchange for a minority stake of 9.9% in ABHH. “The deal will undoubtedly lead to the emergence in Ukraine a strong player on the joint platform of the two banks,” – said the Chairman of the Supervisory Board of “Alfa-Group” Mikhail Fridman. From a financial point of view, Alfa-Bank has sufficient liquidity and capital adequacy, has the potential for the formation of reserves, but high interest costs reduce the net margin of the Bank, and profitability remains negative for the first 9 months of 2016.

Спецпроект: ТОП-10 самых надежных банков Украины


Share in the assets of the system: 3.3 percent

Market share of deposits of 2.6%

Number of branches: 407

A subsidiary Bank of a major international holding company BNP Paribas headquartered in Paris at the end of the crisis undertook a recapitalization through the sale of 40% shares of EBRD. UkrSibbank has significantly reduced its presence in the market, especially in the retail segment after 2009 due to significant write-downs of the portfolio of mortgage loans, reduction of the branch network and minimum Deposit rates. At the same time, the Bank has successfully managed to increase their capitalization, to reduce dependence on external funding and confirm the high stress. While improving the operating efficiency of the Bank is not reflected in the figures of net profit as a rigorous approach to the assessment of credit risk leads to great deductions on formation of reserves.

Спецпроект: ТОП-10 самых надежных банков Украины


Share in the assets of the system: 12,0%

Market share of deposits: up 5.7%

Number of branches: 87

The second after the savings Bank, the state Bank, whose origins in the Soviet past. Ukreximbank specializiruetsya on servicing corporate clients has significantly less territorial network, thus became very attractive to depositors during the crisis. Its competitive position was strengthened in December after the adoption by the Verkhovna Rada law No. 5553, which has expanded 100% guarantee of deposits of physical persons to clients of PrivatBank and Ukreximbank. In 2015, the Bank with the help of Natalia Yaresko restructured debts due to poor financial performance asset quality, profitability, adequacy of capital, which began to improve only in 2016. State support allowed the Bank without problems to pay off depositors and serve the customers.

Спецпроект: ТОП-10 самых надежных банков Украины


Share in the assets of the system: 0,4%

Market share of deposits of the population: 0.4% of

Number of departments: 99

A subsidiary Bank of a major Italian group Intesa Sanpaolo SPS in 2008 purchased from Leonid Chernovetsky. To the shareholders and the Bank’s management in times of crisis it had to solve the problem of the old poor-quality loan portfolio and significantly reduce the network from 600 to 99 units. At the same time, due to external financial support, the Bank implemented the necessary capitalization, increased cost effectiveness, operating profit, and the level of redundancy loans. If after the stabilization of stock price of Intesa, which was observed in the second half of 2016, the Italians will remain a strategic interest in the Ukrainian market, the Bank will remain one of the safest places for savings.

Спецпроект: ТОП-10 самых надежных банков Украины

OTP Bank

Share in the assets of the system: 1,9%

Market share of deposits of the population: 2,2%

Number of offices: 83

OTP Bank, the Hungarian capital is gradually emerging from the zone of negative profitability, showing a UAH 874 million net profit in the first 9 months of 2016, after 2.8 billion loss in 2015. Thanks to foreign shareholders the Bank is committed to recapitalization and formation of reserves. Opportunities to continue the work of strategic investor in Ukraine continue as the OTP Group for the first three quarters of 2016, has increased the financial result by 67%, mainly due to the profit of the Bulgarian and Hungarian units.

Roman Korneluk, Ph. D.,

financial analyst YouControl