Privatbank to Boost 2013 Corporate Lending 15%, CEO Says

Privatbank, Ukraine’s largest lender by assets, wants to boost credit to large businesses by between 10 percent and 15 percent this year, Chief Executive Officer Alexander Dubilet said.

Privatbank, which sold $175 million in Eurobonds last month, will use the funds for lending to corporate clients, Dubilet said in a phone interview from the eastern Ukrainian city of Dnipropetrovsk. Its clients include PO Yuzhmash, a state-run company that produces satellites, rocket boosters, airplane parts and tractors, and includes utility service companies, energy distributors and sea ports, he said.

“Large and medium-scale businesses very much need sources of credit,” Dubilet said on Feb. 28. “A lot will depend on the recovery in the steel sector and the success in the agriculture sector.”

The Ukrainian government is urging banks to increase lending after the economy slipped into recession last year because demand for its exports such as steel weakened on world markets. Prime Minister Mykola Azarov’s Cabinet is ready to subsidize principle and interest to help companies and boost economic growth to 3 percent this year, Azarov said Feb. 27.

Privatbank, owned by Ukrainian billionaires Igor Kolomoisky and Gennady Bogoliubov, will post a net income of about 2 billion hryvnia ($246 million) this year, compared with 1.53 billion hryvnia in 2012, with the profit to be earmarked for a capital increase. Of last year’s profit, 65 percent came from the corporate sector and 35 percent from retail business, Dubilet said.

The yield on the bank’s dollar-denominated bonds due in February 2018 fell 2 basis points to 10.85 percent today, according to data compiled by Bloomberg. The security started trading at a yield of 10.93 percent on Feb. 28.

‘General Risk’

There are no “systemic” risks for the banking industry, Dubilet said. “There is a general risk, as the economy is very weak and very much depends on Ukraine’s trading partners.”

Ukraine’s banking industry returned to profit last year for the first time since 2008, according to the central bank. Still, foreign banks such as Erste Group Bank AG and Commerzbank AG sold their Ukrainian units.

“Foreign banks have lost interest in many programs in Ukraine, they would not like to increase their risks,” Dubilet said. “It is possible that some of their clients will now focus more on banks with Russian or Ukrainian capital.”

Deposits of individuals rose 22 percent to 85.86 billion hryvnia last year, Dubilet said. Privatbank expects to increase deposits this year at the same rate as in 2012, he added.

One of the most promising segments of retail banking is remote access and self-service terminals, Dubilet said.

The hryvnia will not weaken “sharply,” he said. “Based on purchase power, the hryvnia is more undervalued than overvalued.”

“We do not expect a significant fluctuation in interbank rates,” Dubilet said. “Interbank rates will to a larger extent depend on the situation on the currency market and also from central bank actions to regulate currency rates.”

Privatbank has a package of state domestic bonds denominated in dollars, equivalent to more than 160 million hryvnia.

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