to increase the institution's loss to UAH 3.76 billion

In the first half of the year, the nationalized Rodovid Bank increased its loss to UAH 3.76 billion, thereby confirming its status as the most problematic credit institution. However, its unprofitability is caused not only by large contributions to reserves, but also by the almost twofold excess of interest expenses over income. To make a profit from operating activities, market participants advise Rodovid Bank to quickly improve the quality of its loan portfolio and abandon expensive deposits.

Recapitalized by the state, Rodovid Bank in the second quarter confirmed its status as the largest Ukrainian bank in terms of the size of the loss (last year amounted to UAH 4.22 billion), increasing it by UAH 580 million - up to UAH 3.76 billion for the first half of the year, follows from what it published in Friday report. Unlike other unprofitable institutions, the negative result of Rodovid Bank is caused not only by large expenses for the formation of reserves - UAH 2.96 billion, but also by the unprofitability of operating activities. Without taking into account the growth of reserves, its loss would have amounted to UAH 802.5 million due to high interest expenses.

As of June 30, Rodovid Bank's deposit portfolio was almost twice as large as its loan portfolio - UAH 9.24 billion and UAH 5.23 billion, respectively. This gap appeared due to the fact that deposits of individuals from Ukrprombank in the amount of UAH 7 billion were transferred to the bank, and some of the deposits were extended by clients for a new term. At the same time, loan reserves continued to grow - from 57% in the first quarter to 63% in the second, which explains the almost halving of customer payments for interest on loans compared to the first half of 2009 - to UAH 420.6 million. At the same time, the bank paid twice as much as interest on deposits this year - UAH 925.2 million. It was impossible to get comments from its temporary administrator Nikolai Onishchenko yesterday.

Market participants say that Rodovid Bank has the opportunity to start making profits from operating activities. To do this, it is necessary to return expensive deposits or attract cheap NBU funds for lending. However, a one-time return of deposits will require a lot of funds, and the NBU refused to provide cheap incentive loans (see Kommersant on July 23). “The bank still does not have clear management, so to solve the problem it is necessary to put things in order in the loan portfolio and classify it. The National Bank should demand from the new board a program for turning a profit,” says Dmitry Grijuk, Chairman of the Board of the Khreshchatyk Bank. “If interest expenses exceed income, then expensive liabilities must be replaced with cheaper ones." Now the rates on annual deposits of Rodovid Bank in hryvnia reach 19%, in dollars - 11%, in euros - 9%. According to the Prostobank Consulting company, market rates on deposits are 4-5% lower.

The institution should also attract new clients. “If you transfer the accounts of state-owned enterprises to the bank and start servicing them, this can improve the situation. Although this is a long and complex process,” believes Alexander Pecheritsyn, head of the financial markets analysis department of ING Bank Ukraine. “The bank can lend more actively at the expense of deposits, or can reduce them bets and start returning them, but this will require funds.”

Elena Gubar

Rodovid Bank clients made a deposit