The international rating agency Fitch Ratings has upgraded the VR of ProCredit Bank (Kyiv) from ‘cc’ to ‘ccc-‘ and affirmed its Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘CCC-‘ and its Long-Term Local-Currency IDR at ‘CCC’.
“The upgrade reflects our view of ProCredit Bank’s moderately lower risk of failure, driven by stronger asset quality and profitability due to a less severe operating environment than previously expected,” the agency said in a statement on its website on Friday.
It added that the affirmation of the national long-term rating at ‘AA(ukr)’ with a ‘Stable’ outlook reflects the bank’s continued creditworthiness in the local currency relative to other Ukrainian issuers.
Fitch noted that ProCredit Bank’s IDRs are backed by the support of its parent ProCredit Holding AG & Co. KGaA (‘BBB/Stable Outlook’/bbb).
The agency added that the ‘ccc-‘ shareholder support rating reflects the view of the strategic importance of the Ukrainian bank for the holding, as well as potential limitations on the bank’s ability to use the parent company’s support, in particular, to service foreign currency liabilities.
It is noted that a default on priority foreign currency liabilities remains a real possibility due to the war, however, the bank maintains generally adequate foreign currency liquidity compared to its needs, which is facilitated by various capital and currency control measures introduced since the beginning of the war.
According to Fitch, ProCredit Bank will continue to service its external obligations: at the end of the first quarter of 2023, its external debt stood at a moderate 10% of total funding, consisting of EUR20 million of subordinated bonds and funding from international financial institutions.
The agency noted that the gradual improvement in the operating environment for Ukrainian banks has resulted in a more resilient loan portfolio quality for ProCredit Bank, as well as higher revenues and profitability than previously expected. As a result, although capital risks remain very high, Fitch believes that the bank is now less likely to face a material capital shortfall.
The agency recalled that ProCredit Bank’s asset quality indicators deteriorated sharply after the outbreak of the war, resulting in significant provisioning charges (3.4 times operating profit in 2022). “Risks to asset quality remain elevated and dependent on the outcome of the war, despite an improved operating environment in the first quarter of 2023,” Fitch stated.
It added that the bank earned UAH 211 million in net profit in the first quarter of this year after a net loss of UAH 1.8 billion in 2022, and expects an improvement in provisioning.
It is noted that the bank managed to increase its core capital ratio from 9.6% to 11.7% in the first quarter, but it remains modest.
ProCredit Bank was ranked 15th among 65 operating banks in Ukraine in terms of total assets (UAH 39.21 billion) at the beginning of June. Its net profit for the five-month period amounted to UAH 384.43 million.
June 23 the Rating Committee of National Rating Agency “Rurik” has withdrawn the ratings of PrJSC IC “Grandvis” (Chernihiv), according to the website of RA.
The report explains that the rating is withdrawn due to the fact that the borrower fails to provide the necessary information to update the rating or for other reasons.
As earlier reported, on March 7, 2023 RA “Rurik” has confirmed a long-term credit rating of the borrower at the level uaAА of investment category with the “in development” outlook.
Analyzing the results of the company’s activity in 2022, the agency considered as positive the high indices of the company’s liquidity. Thus, the ratio of quick liquidity as of January 1, 2023 amounted to 952% while the recommended 60%. Also the RA noted a high margin of solvency of asset quality, a sufficient level of financial autonomy of the insurer, since the coverage level of assets and insurance reserves by shareholders’ equity amounted to 85% and 1109%, respectively.
The negative factors include low diversification of the company’s insurance portfolio by types of insurance. According to the results of 2022 three largest types of insurance corresponded to 81% of insurance payments, which, as stated, indicates a high dependence of the company on the key areas of insurance activity, its significant costs, given a high specific weight of administrative expenses.
IC Grandvis has been working in insurance market since 1995. It specializes on risk kinds of insurance.
The authorized capital of the company is UAH 14,3 m.
On June 21, 2023 Rating Committee of Expert-Rating RA has decided to withdraw the financial stability (reliability) rating of the insurer Alfa Insurance PJSC (Kyiv), according to the website of RA.
As it was reported, the rating committee of RA “Expert-Rating” has decided on December 23, 2022 to suspend the rating of the company, noting that it may be restored if the license of the company has been renewed.
Earlier, on December, 5 of 2022, the National Bank of Ukraine has applied to PrJSC IC “Alfa Insurance” a measure of influence in the form of temporary suspension of the license to provide financial services.
The NBU also noted that these measures were applied in connection with the company’s non-compliance with the requirements of the Regulation on licensing and registration of financial service providers and the conditions of their activities to provide financial services …, namely the requirements for business reputation of financial service providers. The company must eliminate the violations by December 5, 2023.
Later, the Motor (Transport) Insurance Bureau of Ukraine reported on its website that due to the temporary suspension of IC “Alfa Insurance” license for compulsory insurance of civil liability of owners of vehicles (MTPL), it lost the right to enter into new contracts.
As it was reported, IC “Alfa Insurance” was founded in 2000. It offers a universal portfolio of services, including comprehensive programs for protection of business interests and a wide range of insurance products for individuals
President of Ukraine Volodymyr Zelensky, volunteer Serhiy Prytula and advisor to the head of the presidential office Mykhaylo Podolyak top the list of politicians and public figures trusted by Ukrainians, according to results of a poll conducted by the Razumkov Center polling service from 22 February to 1 March 2023 as part of the MATRA program financed by the Dutch Embassy in Ukraine.
According to a press release with the results of the survey, which was released on Wednesday, 85% of respondents trust V. Zelensky, S. Pritula – 65% and M. Podolyak – 59.5%.
More than half of Ukrainians trust also Kiev mayor Vitaliy Klitschko (58% of respondents), the Secretary of the National Security and Defense Council of Ukraine Oleksiy Danilov (55%), Prime Minister Denis Shmygal (52%), and Defense Minister Oleksiy Reznikov (51%).
More often trust than distrust were expressed by the Head of the President’s Office Andriy Ermak (41% and 36% respectively), the Speaker of the Verkhovna Rada Ruslan Stefanchuk (35% and 27% respectively), activist and volunteer Sergei Sternenko (29% and 18% respectively), the Minister of Internal Affairs Igor Klimenko (27% and 17% respectively).
The majority of respondents do not trust MPs Yuri Boiko (82%) and Yulia Tymoshenko (76%), the fifth President of Ukraine, MP Petro Poroshenko (65%), former presidential advisor Oleksiy Arestovych (59%). The head of the parliamentary faction “Servant of the People” David Arahamia is also expressed more often in distrust than trust (39% and 27% respectively).
“Compared to 2021, the share of those who trust V. Zelenski (from 33% to 85%), S. Pritula (from 22% to 65%), V. Klitschko (from 26% to 58%), A. Danilov (from 12% to 55%), D. Shmygal (from 11% to 52%), A. Yermak (from 10% to 41%), S. Sternenko (from 15% to 29%) and P. Poroshenko (from 18% to 24%) increased. During the same period the percentage of those who trust Y. Boiko (from 18% to 6%) and Y. Tymoshenko (from 20% to 13%) decreased,” sociologists concluded.
The survey was conducted by the sociological service of the Razumkov Center from February 22 to March 1, 2023 in the framework of the MATRA program, funded by the Dutch Embassy in Ukraine in 22 regions of Ukraine and in Kyiv (the survey was not conducted in Lugansk and Donetsk regions, in the ARC and Sevastopol, and in Zaporozhye, Nikolayev, Kharkiv and Kherson regions – the study was conducted only on the territories controlled by the government of Ukraine and on which no military operations are conducted).
As part of the face-to-face survey, 2,020 respondents aged 18 years and older were interviewed. The theoretical sampling error does not exceed 2.3%.
International rating agency Moody’s Investors Service has changed its outlook for the U.S. banking system to “negative” from “stable,” the agency said in a statement.
The decision follows “a rapidly deteriorating operating environment” following the bankruptcies of Silicon Valley Bank, Signature Bank and Silvergate Bank.
“Although the Treasury Department, the Fed and the Federal Deposit Insurance Corporation have announced that all SVB and Signature Bank depositors will receive full compensation, the rapid and significant decline in depositor and investor confidence underscores the asset-liability management risks among U.S. banks, which are exacerbated by rising interest rates,” the press release said.
International rating agency Fitch Ratings has affirmed Ukraine’s Long-term foreign currency Issuer Default Rating (IDR) at “CC”, the agency said in a statement on its website.
“The affirmation of Ukraine’s ‘CC’ long-term foreign currency IDR reflects Fitch’s view on the likely further restructuring of its commercial debt in foreign currency, given the scale of economic damage from the war with Russia and the significant financial damage associated with it,” the agency explains its decision.
Fitch believes that burden sharing with commercial creditors is a likely condition for large financial assistance provided by international official creditors.
The agency notes that a 24-month grace period on Ukraine’s Eurobonds, reached in August 2022, provided relief on servicing Ukraine’s $6 bln external debt, but leaves unresolved medium-term debt sustainability risks. It estimates that sovereign foreign debt service will rise to a relatively high level of $5.4 billion in 2024 (excluding $3.5 billion of deferred interest payments on Eurobonds that can be capitalized) and $7.0 billion in 2025, laying the groundwork for a possible new restructuring.
Fitch forecasts Ukrainian GDP growth of 2% in 2023, as the ongoing war prevents the return of significant numbers of refugees or large-scale investment, and power outages following Russian shelling create an additional constraint. The agency recalls a GDP decline of about 31 percent in 2022 and a net outflow of 8 million people, according to the UN, while pointing to a possible overstatement.
The agency predicts that inflation will fall to 21% in 2023 from 26.6% in 2022 as lost production capacity, power shortages, and only gradual elimination of supply chain disruptions offset weak domestic demand.
Fitch expects the war to continue in 2023 within its current broad parameters, as there are no politically credible concessions in the near future that could form the basis of a negotiated settlement. The agency believes that President Putin’s goal remains to undermine the sovereign integrity of the Ukrainian state, while Ukraine’s successful counterattacks in Kherson and Kharkiv make it even less likely that it will cede its territory to Russia.
According to Fitch, although the strategic advantage has shifted more in favor of Ukraine in recent months, neither side appears to have a decisive military advantage to achieve the objectives that could lead to a protracted conflict. “Over a longer period, the prospect of a negotiated settlement becomes more likely as the costs to both sides increase, although this may well take the form of a ‘frozen conflict’ rather than a sustainable peace,” Fitch admits.
Fitch forecasts the deficit to shrink to 15.2% of GDP in 2023 from 20.1% of GDP in 2022 because of the partial implementation of budgeted cuts in real terms to social spending and slightly higher grants, but defense spending remains well above the government’s target. “We expect high deficits in the medium term due to reconstruction needs, increased social spending, including on war veterans, and increased prewar defense spending,” the agency adds.
Fitch also estimates a 37 percentage point (pp) increase in total government debt to GDP in 2022 to 80.2% (excluding government guarantees of 7.5% of GDP) and forecasts it will rise to 84.0% by the end of 2023. It adds that the share of government debt in foreign currency has risen to 66%, which has increased currency risks, although the share of long-term concessional debt has also increased.
The agency expects the goal of raising $38bn in external budget funding in 2023 to be fully achieved, and the local currency public domestic debt rollover ratio, which fell to 65% in 2022, will partially recover this year thanks to recent changes in reserve requirements, further growth in government bond yields and the current record high level of bank liquidity, which will reduce the National Bank financing of the state budget deficit.
“Little is currently known about sources of funding beyond this year’s end due to risks associated with potential donor fatigue, increased stress in the banking sector weakening demand for domestic debt, and restrictions on the use of NBU fiscal funding if inflation remains high and external financing pressures resume,” Fitch notes/
It adds that the size of capital outflows from the private sector remains relatively stable, restrained by capital controls, and international reserves stood at $28.5bn at the end of 2022, up from $27.6bn at the end of February. Fitch forecasts that the current account surplus will shrink to 2.6% of GDP this year amid higher import growth, and international reserves will be 3.8 months of current external receipts at the end of 2023, down from 4.0 months at the end of 2022.
The local currency IDRs are affirmed at “CCC-“: the lower default risk than for foreign currency debt reflects a greater barrier to including local currency debt in any further debt restructuring, given that non-residents hold only 5%, while 55% is held by the NBU and another 32% by the domestic banking sector (half owned by the state), for which financial stability risks may be associated.
“We also do not expect strong international pressure to restructure domestic debt, partly because of additional concerns that this could undermine efforts to revive demand for new government debt issuance,” Fitch said.
