OREANDA-NEWS. June 8, 2011. On Jun 7, Ukrsotsbank, a major universal bank in Ukraine, released audited IFRS financial results for the FY10. Most figures were in line with UAS numbers published earlier except for interest income and provision charges that were lower by UAH 400-500 due to the difference in accounting method (unlike UAS, IFRS rules imply that interest is accrued on net rather than gross loans). The bottom line came up at UAH 113mn, slightly above UAS figure of UAH 29mn. NPLs (30+) stood at UAH 15,454mn, or 1.4% below FY09, yet NPL ratio has risen to 42.1% (vs 39.0% in FY09). In the annual report the management also indicated a set of strategic targets for FY11: (a) retail lending resumption with a focus on auto loans; (b) enhanced efforts to resolve the loan quality issues; (c) expansion of product lineup and (d) further steps towards integration with Unicredit Ukraine.

We deem the news is POSITIVE for the bank. The key takeaway from the report is that the quality of the loan portfolio at USCB has stabilized during FY10 as NPL volumes reported were consistent with FY09, disregarding higher NPL ratio that inched up due to the continuing loan book contraction. Among the management goals for 2011 we highlight the retail lending resumption after more than two years of straight run-offs, though we are cautious on the extent as the management emphasized cautious approach in this respect and the moribund lending activity in 1Q11 confirmed that. Our target is for ~10% loan book growth at USCB in FY11.