Yevhen Hrebeniuk, Senior Analyst at Troika Dialog Ukraine
The National Bank of Ukraine has announced that one of the two failed banks on the country's top 20 list may be sold to a foreign investor.
The temporary administrator of Ukrprombank has received and is considering proposals from US, Russian and Swedish investors to purchase a stake in the bank. The National Bank has also submitted to the Finance Ministry a proposal to recapitalize Ukrprombank (estimating the capital need at UAH8.9 bln, or $1.1 bln) and allow the transfer of retail deposits from Ukrprombank to state-owned Oshchadbank.
The National Bank also announced that it has submitted to the Finance Ministry a proposal to recapitalize Nadra Bank that estimates the capital need at UAH6.38 bln ($0.8 bln). The National Bank noted that the temporary administrator of Nadra Bank has reached an agreement with international creditors to restructure its debt, provided that the bank is recapitalized by the state.
At the same time, acting Finance Minister Ihor Umanskiy claimed that a consensus has yet to be reached between the ministry and the National Bank regarding the recapitalization of Nadra Bank, as there has been no progress in negotiations with the bank's international creditors.
Troika's view: Although neither of these two large banks is listed or actively traded on the equity market, their recovery or quick and successful liquidation will be crucial for the restoration of trust throughout the banking system. The liquidation of either bank is hardly a viable option, as the State Deposit Guarantee Fund lacks sufficient resources to repay depositors, and thus news regarding the recapitalization or sale to an outside investor is positive for sentiment.
We believe that the temporary administration of these two remaining large banks will very likely be resolved prior to January's presidential election, as the two banks combined have more than 4 million depositors who will play a crucial role in terms of electoral support.
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