The European Investment Bank (EIB) agreed with the Ukrainian Government on a series of new financing operations, in particular, the sides signed an agreement on lending EUR 50 million to finance transport infrastructure improvements throughout the country and a grant of EUR 10 million to finance the implementation of the Ukraine Higher Education Project, the bank has said in a press release. “The projects signed today will result in faster and safer transport infrastructure, better academic facilities and more resources for higher education programmes, all of which will strengthen the country’s competitiveness,” the press service of the bank reported, citing EIB Vice-President Vazil Hudák.
The EUR 50 million EIB loan to improve connectivity in Ukraine and in the Eastern Neighbourhood provides support for transport projects expected to have significant positive local impacts. Road safety, connectivity, and traffic management and control projects are under consideration, with a view to contributing to the economic development of Ukraine.
The project’s first phase will focus on the development of intelligent transport system on national roads, the construction of a missing section of the northern by-pass around the city of Ternopil forming part of the extended TEN-T (Trans-European Transport Networks), and a number of multi-level railway crossings.
Furthermore, the project will support the development of future investment in railway connections between the European Union and Ukraine.
“The project is backed by a EUR 14 million EU grant for the Ternopil bypass investment and a EUR 1.85 million EU grant for project preparation and implementation. Both grants are being provided under the Neighbourhood Investment Platform (NIP),” the bank said.
Ukraine and the EIB also signed the EUR 10 million grant agreement under the multi-donor E5P fund that supports municipal investments in energy-efficiency and environmental projects in the Eastern Partnership countries.
“The grant will help finance the implementation of a Ukraine Higher Education Project, which the EIB is already supporting. Furthermore, the EIB concluded a Memorandum of Understanding with the Ukrainian Ministry of Education and Science for the preparation of a project to create several centres of excellence in the country,” the bank said.
The Ukraine Higher Education Project has already received a EUR 120 million loan from the EIB and EUR 30 million from Nordic Environment Finance Corporation (NEFCO), the EIB said.
The grant will be used to finance, in particular, seven universities in the cities of Chernihiv, Kharkiv, Kyiv, Lviv, Poltava, Sumy and Vinnitsa in order to significantly reduce the energy consumption of their buildings with positive environmental impacts.
The project is also supported by a EUR 3 million EU grant from the Neighbourhood Investment Facility (NIF) to assist implementation arrangements, the bank said.
According to the report, the agreements were signed at the EU-Ukraine Association Council meeting held in Brussels on Monday.
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Ukrainian banks in 2018 would likely to see a record profit in the past 10 years, First Deputy Governor of the National Bank of Ukraine (NBU) Kateryna Rozhkova said at a press conference in Kyiv. “By the end of 2018, the sector will see profit and, according to our preliminary estimates, this profit could be a record in more than 10 years,” she said, recalling that for the 10 months of this year, banks posted about UAH 15 billion in net profit. According to Rozhkova, the respective result is due to both an increase in operating profit – interest and commission, and a decrease in sending funds to reserves.
“Interest income continues to be the main source of bank profits against the background of a significant decrease in the cost of borrowed funds over the past few years, cleaning up unproductive assets, as well as enhancing lending,” the first deputy governor of the NBU said.
The growth of commission income, she said, is due to the intensification of consumer lending and the development of banking technology.
In turn, Director of the NBU financial stability department Vitaliy Vavryschuk said that banks, which account for more than 40% of the sector’s assets, are currently operating with a return on capital of more than 30%. “This has never happened in the history of the Ukrainian banking sector,” he said. Moreover, the NBU predicts that the profitability of the banking sector will continue to increase next year, primarily due to the completion of work on cleaning up balance sheets and reducing the amounts sent to reserves. Speaking about the risks of the banking system, Rozhkova noted the short term of the resource base. “Due to significant volumes of high-quality and highly liquid assets on the balance sheet of banks, this situation does not cause concern to the regulator, but given the expected increase in lending next year – these discrepancies in terms of assets and liabilities can carry a risk, and therefore will encourage banks to extend the resource base,” she said.
One of the incentives, according to the first deputy governor of the central bank, is the net stable funding ratio (NSFR), which approval is expected to be finalized by the NBU with banking community in the first half of 2019, after which it will be gradually introduced. According to Vavryschuk, the short term of deposits is mainly the result of the crisis that has passed, after which the share of funds in the current account has significantly increased. “Currently, more than 62% of the total funding of banks is liabilities for up to one month. If you look only at the hryvnia segment, this share is about 76%,” he said. Considering the fact that banks over these short liabilities have long-term assets, the NBU notes the systemic importance of equalizing the terms of assets and liabilities.
“Banks should create more incentives [for extending the term of deposits], perhaps through interest rates. Even a minor extension – up to three from one month, will have a significant fundamental effect on the stability of funding of the banking sector,” Vavryschuk said. In addition, Rozhkova noted the continued high level of dollarization of some banks, especially with Ukrainian private capital, among potential risks.
“Our calculations show that with significant shocks, the risks of these banks are increasing, so we continue to strongly recommend banks to reduce the level of dollarization, especially in the active part of the balance,” Rozhkova said.
The first deputy governor of the NBU also said that in 2019, new stress tests of banks would be held. In addition to the standard approach, the National Bank intends to pay special attention to the quality of consumer loans. In addition, the NBU intends to review the regularity of these tests (now they are held annually).
Zhydachiv Pulp and Paper Mill (Lviv region), which resumed operations in May 2017, made products for UAH 411.86 million in January-November 2018.
According to the UkrPapir association, this month the plant produced 4,280 tonnes of paper and 27,180 tonnes of cardboard (including corrugated paper), as well as 15.85 million square meters of corrugated boxes.
Another enterprise of the holding, Izmail Pulp and Paper Mill (Odesa region), produced goods for UAH 177.88 million in January-November 2018, which was 49% more than a year ago. The mill increased package cardboard output by 31.5%, to 13,370 tonnes and corrugated box output by 25.7%, to 16.59 square meters.
Zhydachiv Pulp and Paper Mill, once one of the top three enterprises in the industry and the only manufacturer of newsprint in Ukraine at that time, was put into operation in 1951, in the best 2000s its output reached UAH 500 million. It had been standing idle since September 2014 till May 2017.
President of the European Business Association (EBA) Tomas Fiala, his group of companies Dragon Capital and its employees contributed a total of UAH 22.6 million for charity and sponsorship purposes in 2018 to support Ukrainian projects for economic and social development, while in 2017 over UAH 10 million was sent for these purposes.
According to a press release of Dragon Capital issued last week, the Centre for Economic Strategy, an independent policy think tank, analytical platform VoxUkraine and its VoxCheck project, the New Leaders National Project, Anti-Corruption Action Centre, Transparency International and other NGOs working to support economic reforms, improve the business climate and help fight corruption in Ukraine together received close to UAH 12 million compared with UAH 6.1 million a year ago.
More than UAH 4.9 million was raised to finance the development of children’s hospital Ohmatdyt, help patients fighting cancer, buy a hemo-analyzer for the Western Ukrainian specialized children’s medical center (Lviv), support orphanages, repair a kindergarten, and sponsor the IWCK Charity Bazaar.
Last year Dragon Capital said in the report that the group contributed some UAH 1 million to Army SOS and IWCK Charity Bazaar. The group said that this year Dragon started to cooperate with Veteran Hub, Ukraine’s first open space for veterans of the war in eastern Ukraine and NGOs serving to protect their rights, as well as with other veteran associations in order to facilitate former soldiers’ social adaptation, particularly through employment.
According to the press release, over UAH 5.1 million went this year (UAH 3 million a year ago) to finance the Ukrainian Emerging Leaders Program at Stanford University, the Prometheus educational platform, the GoGlobal program aimed at promoting studies of foreign languages in Ukraine, the Ukrainian Academy of Leadership, etc.
According to the press release, Dragon Capital also donated UAH 0.6 million to support a public organization, whose mission is to preserve and promote the cultural, historical and archaeological heritage of Ukraine; the Lviv Media Forum, etc.
Dragon Capital group of companies, founded in 2000, is one of the largest in the Ukrainian investment market. Fiala said that in the past three years jointly with partners from the EU and the United States the group invested almost $500 million to Ukraine.
