NBU ALLOWED PINCHUK'S BANK TO BUY ASSETS OF BANKS-DEPOSITORS, DESPITE CAPITAL SHORTFALL

NBU ALLOWED PINCHUK'S BANK TO BUY ASSETS OF BANKS-DEPOSITORS, DESPITE CAPITAL SHORTFALL

Bank “Kredit Dnipro” said in an official statement that the NBU included it in the list of pre-qualified entities that, as a receiving bank, have the right to participate in withdrawing insolvent banks from the market.

“Thus, the financial institution has the right to act as an investor that purchases the assets of insolvent banks. The regulator decides to include banks on the list of authorized institutions based on the applicant’s compliance with the required regulatory ratios and its financial performance,” the press service statement says.

“The inclusion of Bank Kredit Dnipro on the list of authorized investor-financial institutions is further confirmation that our bank currently holds stable market positions, meets the necessary regulatory requirements, and has a sufficient level of liquidity to develop its operations, including by purchasing the assets of problematic players in the financial market,” added a comment from Sergii Volkov, deputy chairman of the management board of Bank Kredit Dnipro.

P.S. Today it became known that Vladyslav Rashkovan is leaving his post as deputy head of the NBU; he was unofficially linked, among others, to V. Pinchuk.

Reference

As Finbalance wrote, Bank Kredit Dnipro (ultimate beneficiary – Viktor Pinchuk) admitted that for the results of 2015 year it violated several NBU norms:

- minimum size of regulatory capital (H1);- adequacy of regulatory capital (H2);- maximum size of credit risk to a single counterparty (H7);- large credit risks (H8);- maximum size of credit risk on transactions with related parties (H9);- limit on the total short open foreign-currency position (L13-2).

As Kredit Dnipro stated, on 28 April 2016 year the NBU board approved the Bank’s prepared Action Plan to eliminate violations of economic norms until 01 January 2019 year (which includes, among other things, an asset restructuring plan).

On 01 June the state registration of amendments to Kredit Dnipro’s charter took place, which provides for increasing its charter capital by 686 million UAH, or by 82%, to 1,521 billion UAH.

According to Kredit Dnipro’s reporting, for the results of 2015 year it declared a profit of 282,6 million UAH, whereas in 2014 year it had a loss of 1,23 billion UAH. However, the AUB reported a completely different financial result for Kredit Dnipro last year – a loss of 629,8 million UAH (possibly the difference is due to different reporting standards, - ed.). Interestingly, last year the bank declared that it received income of 25,5 million UAH from the reversal of reserves, while in 2014 year corresponding expenses amounted to 1,233 billion UAH.

At the end of 2015 year Kredit Dnipro’s equity amounted to only 31,8 million UAH. Which, however, is better than at the end of 2014 year, when it was negative 501,8 million UAH.

The bank does not provide the exact value of regulatory capital required by the NBU at the end of 2015 year. At the same time it notes that the capital adequacy ratio, calculated according to the Basel Accord requirements with subsequent market risk adjustments based on financial indicators, was “minus” 64,65 million UAH (at the end of 2014 year it was “minus” 597,3 million UAH).

In January–March of 2016 year, Kredit Dnipro recorded a loss of 202,6 million UAH. At the same time its interest expenses exceeded interest income by 30,7 million UAH (while in Q1-2015 there was net interest income of 28,8 million UAH).

Against this backdrop, the bank’s allocations to the reserve for impairment of loans and funds in other banks in Q1 decreased by more than 2 times – to 144 million UAH (from 318 million UAH in Q1-2015).

At the end of March the ratio of reserves to corporate loans (which is 96,4% of the total loan portfolio) was 35,9%.

Financial condition of Pinchuk’s other businesses

As Finbalance wrote, on 31 May and 06 June the Commercial Court of Dnipropetrovsk region granted two claims by Alfa-Bank for the recovery of 1,2 billion UAH from PJSC Interpipe Nizhniy Dnipro Tube Rolling Plant (the borrower) and its two guarantors – LLC Interpipe Niko Tube and LLC Interpipe Ukraine – under the credit line agreement No. 16-MB/12 dated 30.03.2012 (the ultimate beneficiary of the three companies – Viktor Pinchuk).

Alfa-Bank also filed motions to take interim measures by seizing the defendants’ funds up to the amount of the claimed claims. However, the court denied those motions.

In addition, the same court on 07 June satisfied Alfa-Bank’s claim against LLC Interpipe Ukraine (borrower) and PJSC Interpipe Nizhniy Dnipro Tube Rolling Plant (guarantor) for joint recovery of 123 million UAH of indebtedness under the credit line agreement No. 154-MB/13 dated 20.12.2013.

In that case the court also denied the plaintiff’s motion to secure the claim (although in that case it concerned not funds but real estate, in fact – all the debtors’ real estate). Reference:

According to Interpipe (ultimate beneficiary – V. Pinchuk), for the results of 2015 year its production (sales) volumes of pipe and wheel products decreased by 29% compared with 2014 year and amounted to 600 thousand tons. Pipe products sold amounted to 507 thousand tons, wheel products – 93 thousand tons. The share of exports was 80%.

The structure of pipe product sales in 2015 year changed significantly compared with 2014 year. The main markets became Europe (22%), the Middle East (17%), the CIS market (20%) and Ukraine (21%). The traditionally important Russian market consumed only 10% of produced pipes (in 2014 - 27%), the American market – 10% (in 2014 - 15%). As the company noted, the decline in pipe sales volumes was due to negative external factors: a sharp drop in pipe sales in the Russian market; reduced demand for pipe products in the US due to low oil prices and decreased oil extraction; and a shortage of scrap metal on Ukraine’s domestic market.

In the wheel business the share of European supplies almost doubled, amounting to 31% for 2015 year (2014 year - 18%). Shipments to the US market, started the year before last, amounted to 8% of wheel sales. The Russian market lost its dominant position, although it remained significant with a share of 35% (2014 year - 48%). The Ukrainian market consumed 17% of wheels produced (in 2014 - 27%). In addition to the scrap metal shortage, wheel product sales were negatively affected by the effective halt of Ukraine’s car-building industry and the lack of funds for modernizing the rolling stock at Ukrzaliznytsia, the company noted.

At the end of October, Fitch confirmed Interpipe’s long-term issuer default rating (IDR) at “RD” (restricted default), which had been downgraded to that level after a payment default. As the agency noted, interest payments on the debt are no longer being made. The company continues negotiations with its group of creditors on debt restructuring. According to the negotiation schedule, Interpipe Limited was to make an official offer to banks and bondholders by the end of 2015 year. Fitch analysts expected Interpipe Limited’s revenue for 2015 year to be 700–800 million USD, and EBITDA to be 60–75 million USD. Interpipe defaulted, in particular, on eurobonds with an issue size of 200 million USD maturing in February 2017 year.

In January of this year it was reported that Viktor Pinchuk on the one hand and Ihor Kolomoiskyi together with Hennadii Boholiubov on the other agreed to settle a business dispute without hearing it in the High Court of London. According to sources in Ukrainska Pravda, Kolomoiskyi agreed to pay Pinchuk 500 million dollars in installments.

Pinchuk accused Kolomoiskyi and Boholiubov of breaching a contract during the privatization of Kryvyi Rih Iron Ore Plant and, according to the BBC, demanded compensation of two billion pounds in damages and 90 million pounds for his initial investment in the enterprise.

In October 2015 year it also became known that Kolomoiskyi and Pinchuk reached a settlement in another dispute between them – regarding the ferroalloy business. According to unofficial data, Kolomoiskyi and Boholiubov are to pay Pinchuk either 500 million USD or 250 million USD.