Public Joint Stock Company “State Savings Bank of Ukraine” (Oschadbank) has released its Interim Condensed Consolidated Financial Statements for the six months ended 30 June 2014, with an independent auditor’s report by Deloitte & Touche

The first half of 2014 showed itself as a quite challenging and difficult period for the Ukrainian banking sector. A turbulent political and economic background as a result of Crimea annexation and on-going external military aggression in the Eastern Ukraine underpinned the local currency depreciation and significant deposits outflow, which resulted in the overall sector’s liquidity problems. Oschadbank, however, continued its profitable and steady operation during the first six month of 2014, remaining a reliable partner to its customers and business partners.

Please find below the main financial highlights in brief.

Income statement:

· Net interest income before provision for the six months of 2014 was up by 16.6% YoY and reached UAH 3.1 bn, keeping net interest margin at a strong 5.6% (5.9% as of 1H2013);

· Net fee and commission income driven mainly by proceeds from off-balance, payment cards and settlement and cash operations grew by 10.2% YoY to UAH 0.6 bn;

· Operating expenses increased by 19.1% YoY to UAH 1.9 bn as of 1H2014, with staff and administrative costs remaining the main contributors. This resulted in the cost-to-income ratio of 67% vs. 51% for YE2013;

· Total provision charge for impairment losses for the six months of 2014 totalled UAH 0.6bn, while loan loss provision charge amounted to UAH 1.0bn vs. UAH 1.1bn during the same period of 2013;

· Net profit for the first six months of 2014 reached UAH 220.9 mln versus UAH 480.6 for the same period of 2013. The return on average assets (ROAA) amounted to 0.42%, compared to 1.11% for the same period of 2013.

Statement of financial position:

· Total assets during the first six months of 2014 grew by 6.3% and amounted to UAH 108.1 bn, with the share of liquid assets (cash, interbank and securities available for sale) representing 38% as of 30 June 2014 (45% as of the beginning of 2014);

· Gross loan book totalled UAH 77.5 bn as of 30 June 2014, picking up by 20.6% YTD for the account of new loans to customers and also as a result of local currency depreciation;

· Loans to Naftogaz amounted to UAH 15.1 bn, comprising 19.4% of the bank’s gross loan book as of 30 June 2014 vs. 23.7% in 2013 and 58.1% back in 2009;

· The ratioof NPLs, defined as loans overdue by more than 90 days, to gross loan portfolio amounted to 20.2% as of 30 June 2013, compared to 10.8% as of the beginning of the year. Increase in NPLs during the first six months of 2014 was mainly for the account of the loan portfolio of the annexed Crimea. The level of NPLs excluding Crimean loan portfolio remained flat – 10.7% as of 30 June 2014 versus 10.7% as of the beginning of the year;

· Total customer accounts decreased in 1H2014 by 5.8% to UAH 43.7 bn, being in line with the system-wide deposit outflow trend during the first six month of 2014. This, together with the loan portfolio growth, resulted in the net loans-to-deposits ratio of 144.6%, compared to 112.4% as of the beginning of 2014;

· Total equity was slightly down for account of investment portfolio revaluation and amounted to UAH 18.8 bn vs. UAH 19.2 bn as of the beginning of 2014. Oschadbank’s capitalization remained strong with the capital adequacy ratio of 21.5%, being well above the regulatory minimum of 10%, and Tier 1 ratio of 20.3% (24.7% and 23.2% as of YE 2013, respectively).