Alfa-Bank Ukraine’s additional capitalization by $1 billion at the expense of shareholders who fell under European sanctions is proposed to be carried out in the form of a “perpetual subord” (subordinated loan), Roman, head of the bank’s supervisory board, said.
“There was no ‘perpetual subord’ instrument in the country. This money is in the form of an eternal debt that is never repaid, interest can be paid on it, but this is a subord that goes into Tier 1 capital,” he said in an interview with Interfax- Ukraine”.
“There is no other tool. Firstly, war, and secondly, because of sanctions, we cannot enter the markets,” Shpek said.
The head of the Supervisory Board found it difficult to predict in what terms the necessary permission from European regulators could be obtained in practice and additional capitalization could be carried out in practice.
“Because this is the first time this path has been taken, no one knows how long it will take,” he explained.
According to Shpek, if this happens in half a year, then it will be “normal”, while such terms as a year are not considered.
He clarified that at present the bank’s appeal with the necessary confirmations from Mikhail Fridman and Petr Aven is in the working body in the legal directorate of the Council of Ministers of the European Union, which deals with sanctions issues.
“Now we plan to hold working meetings at the end of this month or the beginning of the next, when they are ready to talk to us, in those authorized bodies of the Council of the European Union,” added the head of the Supervisory Board.
He clarified that since the funds are in the accounts of a British bank, but in a branch in the EU, the decision to lift sanctions for $ 1 billion for additional capitalization of the bank is made in the EU.
“If it were in the UK or the United States of America, the procedure would be simpler. Since in the EU, decisions must be made by representatives of all member countries. In addition, the US has a precedent for adjusting sanctions, while the EU does not,” Shpek said.
The bank is currently operationally profitable and has sufficient liquidity, he said, and its losses are caused by the need to create reserves for loans, the quality of which has deteriorated due to Russian aggression.
Speaking about the alternative of finding an investor, the head of the Supervisory Board stressed that he does not see anyone who is ready to come to Ukraine during the hostilities. “There are no volunteers! Banks today are reducing their portfolios, working through restructuring in order to support the client, and there are not so many new projects. How to evaluate and accept risks?” he explained.
At the same time, according to Shpek, there are constant conversations with those who are interested in working on the Ukrainian financial market in order to resume such attempts when the situation improves.
Alfa-Bank Ukraine, according to the NBU, as of July 1, 2022, ranked 7th (UAH 112.67 billion) in terms of total assets among 68 banks operating in the country. Its net loss in January-July 2022 amounted to UAH 3.52 billion. The financial result of the bank was affected by deductions to reserves at the level of UAH 8.357 billion.
According to the financial institution, its largest shareholders are currently indirectly Andrey Kosogov (40.9614%, after the war the packages of German Khan and Alexei Kuzmichev, which fell under the sanctions), Mikhail Fridman (32.86%) and Petr Aven (12. 4018%), as well as UniCredit S.p.A. (Italy, 9.9%) and the Mark Foundation for Cancer Research (3.8736%). The Bulgarian ex-minister of finance, executive director of the Financial Markets Group of the London School of Economics and technical adviser to the European Commission Simeon Dyankov, in agreement with the NBU, is the trustee of the National Bank for the packages of Kosogov, Fridman and Aven, who also fell under sanctions.
In early June, Dyankov reported on the bank’s efforts to obtain regulatory approval to recapitalize with $1 billion in subordinated debt from sanctioned funds from a number of its shareholders. Speck specified that the amount of $1 billion is caused both by the possible need for $500-600 million to comply with the capital adequacy ratio in 2023, and by the desire to have a resource to increase lending.
David Arakhamia, the leader of the ruling Servant of the People faction, said in an interview with Forbes Ukraine last week that Alfa-Bank Ukraine needs additional capitalization by $1 billion, and if the asset is nationalized, then this amount will have to be paid to the state.
