June 04, 2015

Ukrainian banks have found themselves caught in a trap of deteriorating asset quality following the dramatic devaluation of the hryvnia that occurred over the past autumn and winter. The share of foreign­denominated assets in total banking assets was at 41% as of end­2014 at the official exchange rate of 15.77 UAH/USD. The current exchange rate of 21.08 UAH/USD means Ukrainian banks are facing a notable deterioration of their foreign currency denominated loan portfolios, as many borrowers have become unable to service their debts at the new UAH/USD rate. The total net loss of the banking system was UAH 81bn (USD 3.5bn) in 1Q15, drastically outpacing FY14’s net loss of UAH 52.0bn. As usual, in the Eavex Banking Quarterly, we provide a brief update on the sector’s performance, and publish 1Q15 and FY14 results for banks with outstanding Eurobonds. Although there has been no final announcement regarding the restructuring of UkrEximBank­15s, OschadBank­16s, and PrivatBank­15s bonds, we as