OREANDA-NEWS. September 15, 2010. VAB Bank shareholders, at an EGM on September 9, agreed to further increase equity capital by UAH 550 mln (USD 70 mln), which would constitute a 50% increase from current equity capital (charter fund together with additional paid in capital).

Concorde Capital: approval of the additional equity injection comes in line with our expectations (see our note on VAB’14 dated August 30). After the injection, VAB’s CAR (capital adequacy ratio) should go up 24%, from the current 15% (other things being equal). Most likely, the injection will also be accompanied by an increase in the stake of Netherlands-based private equity Kardan (now 71%). Since the beginning of September, the price of VAB’14 notes went up 7% and YTM dropped from 19.2% (spread to sovereign of 1,332 bps) to 17% (1,091 bps). We still see VAB’14 notes as a buy opportunity as YTM of 17% is still higher than that of Finance and Credit’14 (a bank with worse financial conditions in our view). The upside price potential of VAB’14 could be another 4%-6% (with a target YTM of 15.0%-15.5%), implying a 250-300 bps spread over FUIB’14.