Due to the complicated economic and political environment, continuous conflict in the Eastern Ukraine, severe hryvnia depreciation and other difficulties Ukraine had faced - the year 2014 showed itself as a challenging and stressful period for all sectors as well as for the banking sector in particular. Despite those hard times, Oschadbank remains a solid, stable and reliable institution for its customers and partners.
Below please find the main financial highlights in brief.
Statement of financial position:
· Gross loan book picked by 46.7% as of 31 December 2014 driven by increased volume of new loans granted as well as UAH depreciation. In monetary terms, net amount of newly granted loans during 2014 year comprised UAH 8.3 bln (2013: UAH 2.1 bln).
· Naftogaz remains the largest borrower of the Bank with 16% stake in the total gross loan book as of 31 December 2014, but with tendency to decrease caused mainly by UAH devaluation (2013: 23.7%).
· Allowance for impairment losses grew almost twice mainly due to situation with loans provided by the branches in Donetsk, Lugansk and Crimean regions. As of 31 December 2014 their total gross value comprised UAH 12.5 bln (or 13.3% of total gross loan portfolio) and allowance - UAH 10.8 bln (incl. 100% allowance under loans granted to Crimean customers). This led to increase of NPL ratio: as at 31 December 2014 and 2013, NPL loans constituted 17.9% and 10.8% of the total gross loan portfolio, respectively; other than the loans granted to the customers of the Crimean branch – 7% and 11%, respectively. UAH devaluation was another factor that influenced allowance for impairment losses.
· Customer Accounts grew by 21.1% mainly due to UAH devaluation. As of 31 December 2014 net loans-to-deposits ratio comprised 125.0% in comparison with 112.4% as of beginning of 2014 year.
· Amounts Due to Int. and Other Financial Entities increased by 131.3% mainly due to UAH exchange rate developments. During 2014 year net cash inflow comprised UAH 3.0 bln.
· Continued strong State support was again evidenced by new injection into share capital of the Bank which took place in 2014 year. In particular, on 19 November 2014, the Government of Ukraine decided to increase the share capital of the Bank through the issue of 9,999 new shares with the nominal value of UAH 1,160,000 per share. The Bank’s new shares were paid for by the indexed Ukrainian government debt securities (domestic government loan bonds) of the special issue with the nominal value of UAH 11,598,840 thousand. Respective amendments to the Bank’s Charter regarding the increase in the share capital were agreed with the NBU on 17 March 2015 and registered by the State Registrar of Legal Entities and Individual Entrepreneurs at the Head Justice Department in the city of Kyiv on 23 March 2015. It allowed keeping capitalization of the Bank strong and welling above the regulatory minimum with CAR 18.6% and Tier 1 ratio 18.0% (24.7% and 23.2% as of YE2013, respectively).
· Net interest income before provision slightly decreased by 3.5% during 2014 year and reached UAH 5.3 bln (2013: UAH 5.5 bln) causing decrease of Net interest margin from 5.7% to 4.3%, which nevertheless still remains strong.
· Provisions for impairment losses grew almost three times during 2014 year mainly due to increase of provision under loans granted to UAH 11.9 bln (2013: UAH 2.1 bln). The material increase occurred under loans granted to the customers of Crimean, Donetsk and Lugansk branches. UAH devaluation also significantly influenced amount of provision.
· Net non-interest loss grew twice in comparison with 2013 year due to negative translation differences resulted from respective devaluation of UAH against major world currencies during 2014 year.
· Operating expenses rose by 21.5% y-o-y to UAH 4.2 bln, due to the extraordinary expenses caused by losses of the Bank’s assets (cash, property and equipment) in Crimea and certain arrears of Donetsk and Lugansk regions as well as translation differences caused by UAH devaluation. As result of these changes Cost-to-income ratio grew substantially to 111.9% during 2014 year. At the same time, after excluding extraordinary expenses and losses due to translation differences this ratio would comprise 54.8% (2013: 50.9%).
· Due to reasons described above, the Bank reported Net Loss of UAH 10.0 bln in 2014 year, which, nevertheless, was fully compensated by new injection into share capital in the end of 2014 year.