Privatbank requires an UAH8.0bn capital injection per early estimates

Макроэкономика 07.10.2015 In his response to the results of its 2015 stress test, Privatbank's CEO Mr. Dubilet contests the increase to UAH8.0bn (+35.2% compared to 2Q15 UAS report) in regulatory capital required, claiming that there was a material overstatement of this amount. He stated that the NBU insists on an additional provisioning of UAH7.1bn to cover corporate loans (+4.5% according to according to the 2Q15 IFRS report) and UAH0.9bn for retail loans (+3.5 %). Ukraine's largest bank was also the latest of the solvent banks to complete the previous year's recapitalization plan. The bank's shareholders have committed to replace US$150m of Tier 2 capital (subordinated bonds) due in January 2016 with their own funds. As of today, however, only US$70m of subordinated debt has been issued. In our opinion, Privatbank might exercise its market power and bargain for a lower amount. In our opinion, the bank's loan portfolio, at least 40% of which is related third party loans, is significantly under-provided. As of 2Q15, the bank has formed reserves for corporate borrowers of only 10.3% of the gross portfolio and 19.0% for retail loans.