ВОЗМОЖНЫЕ ПОСЛЕДСТВИЯ ВЫХОДА РОССИЙСКОГО КАПИТАЛА С РЫНКОВ УКРАИНЫ

Економічні науки

УДК 336.71

Бублик Євген Олександрович

кандидат економічних наук,

старший науковий співробітник

відділу грошово-кредитних відносин

ДУ «Інститут економіки та прогнозування НАН України»

Шаповал Юлія Ігорівна

аспірантка,

молодший науковий співробітник

відділу грошово-кредитних відносин

ДУ «Інститут економіки та прогнозування НАН України»

Бублик Евгений Александрович

кандидат экономических наук,

старший научный сотрудник

отдела денежно-кредитных отношений

ГУ «Институт экономики и прогнозирования НАН Украины»

Шаповал Юлия Игоревна

аспирантка,

младший научный сотрудник отдела

денежно-кредитных отношений

ГУ «Институт экономики и прогнозирования НАН Украины»

Ievgen Bublyk

PhD in Economics,

senior scientific researcher of the monetary relations department

«Institute for Economics and Forecasting of NAS of Ukraine»

Iuliia Shapoval

Phd student,

junior scientific researcher of the monetary relations department

«Institute for Economics and Forecasting of NAS of Ukraine»

МОЖЛИВІ НАСЛІДКИ ВИХОДУ РОСІЙСЬКОГО КАПІТАЛУ З РИНКІВ УКРАЇНИ

ВОЗМОЖНЫЕ ПОСЛЕДСТВИЯ ВЫХОДА РОССИЙСКОГО КАПИТАЛА С РЫНКОВ УКРАИНЫ

THE POSSIBLE CONSEQUENCES OF THE WITHDRAWAL OF RUSSIAN CAPITAL FROM MARKETS OF UKRAINE

Анотація: Досліджено деякі аспекти діяльності банків з російським капіталом на фінансовому ринку України. З’ясовано реакцію банків з російським капіталом на застосування до них санкційних заходів. Визначено ймовірні наслідки продажу підсакційних російських банків.

Ключові слова: банки з російським капіталом, санкції, материнські структури, кредитування, продаж банків.

Аннотация: Исследовано некоторые аспекты деятельности банков с российским капиталом на финансовом рынке Украины. Выяснено реакцию банков с российским капиталом на применение к ним санкционных мер. Определены возможные последствия продажи российских банков, которые находятся под санкциями.

Ключевые слова: банки с российским капиталом, санкции, материнские структуры, кредитование, продажа банков.

Summary: Certain aspects of activity of banks’ with Russian capital in the financial market of Ukraine are investigated. The reaction of banks with Russian capital to introduced sanction measures is examined. The possible consequences of selling of Russian banks, which are under sanctions, are determined.

Key words: banks with Russian capital, sanctions, mother companies, lending, sale of banks.

During the long period of time, banks with Russian capital carried notable positions in Ukrainian financial market, while Ukrainian institutions hold small share of the total assets of mother companies: the Sberbank of Russia was less than 0,5%, Vnesheconombank Group - 2%, VTB - 0,4%.

As of the 1st January 2014, 13 banks operated in Ukraine, whose shares in the authorized capital (directly or indirectly) belonged to residents of Russia, and which accounted for 13,7% of the total shareholder’s equity of the banking sector; 14,3% of assets (15,8% of corporate loans and 17,2% of consumer loans) and 14,7% of deposits (Table 1).

Table 1

The main indicators of banks with Russian capital in Ukraine as of 01.01.2014, thousand UAH

*Banks, which are included in the sanction list according to NBU’s Resolution № 25 of 21.03.2017

Source: compiled by authors based on data from [1]

Subsidiaries of Russian banks attracted significant amounts of deposits and conducted active operations mainly in corporate lending being represented by large and small institutions with private and government capital.

Banks with Russian capital lent the following companies:

• Prominvestbank, NNEGC Energoatom, Ukrenerhoatom, Industrial Union of Donbass, DTEK, Naftogaz of Ukraine, Odessa Railway, agricultural enterprises, construction industry;
• Sberbank, Ukrtelecom, DTEK Pavlogradugol, Azot, Electrotyazhmash, Interpipe Novomoskovsk Pipe Plant, Ukrainian railways (Odessa, Lviv, Pivdenna, Donetsk, Prydniprovska), Azovzahalmash, UkrGasVydobuvannya, Donetsksteel Group, Kryukov Railway Car Building Works, Luhansk Cartridge Works, etc.

Some Ukrainian subsidiaries of Russian banks were pro-active investors, particularly investing in securities (bonds) of Ukrainian enterprises. For example, Sberbank (3,5 billion UAH of the total securities portfolio – 6th position), Prominvestbank (2,9 billion UAH – 7th position) and Alfa-bank (1,0 billion UAH – 15th position) stood out for their terms of portfolio securities.

As of the 1st January 2017, there were 9 banks, whose shares in the authorized capital were directly or indirectly owned by residents of Russia.

During 2014 – 2017 banks with Russian capital withdrew partially from Ukrainian market. However, most of them stayed and in terms of stagnation, shrinkage of market, massive «cleaning», the share of Russian capital increased significantly. In January 2017 these institutions already accounted for 24,7% of shareholder’s equity, 35,2% of assets (22.6% of corporate loans, 33,9% of consumer loans) and 14,5% of deposits (Table 2). Mentioned banks made loan loss reserves in the amount of 94,8 billion UAH.

Table 2

The main indicators of banks with Russian capital in Ukraine as of 01.01.2017, thousand UAH

Source: compiled by authors based on data from [1]* Banks, which are included in the sanction list according to NBU’s Resolution № 25 of 21.03.2017

According to reports, during 2014 - 2015 some banks continued to lend to Ukrainian companies[1] and developed profitable business segments to the extent possible. In particular, in this period foreign exchange earnings built up a significant fraction of income and NBU’s deposit certificates were the main component of banks’ security portfolios.

According to NBU, banks with Russian capital received refinancing loans: in 2014 - 5,931 billion UAH; in 2015 - 802 million UAH; in 2016 - 0,848 billion UAH. Alfa-Bank received a large portion of this refinancing. In 2014 - 2016 refinancing for Russian banks accounted for 5,1%; 4,6% and 22% in total volume.

Banks with Russian capital carried compliance with NBU’s requirements concerning recapitalization mainly by the mother companies. According to State Statistics Service of Ukraine in 2016 Ukraine received 1,67 billion dollars USA of investment from Russia [2]. According to the statement of NBU’s head, the bulk of these funds were mother companies’ loans to Russian banks with the aim of recapitalization of their subsidiaries in Ukraine.

 Specifically, in accordance with banks’ financial statements, in April 2016 Sberbank increased its equity capital by 4,3 billion UAH (166,4 million dollars USA) by shareholders’ capital contributions. By the end of the third quarter of 2016 Prominvestbank increased its equity capital by 21,6 billion UAH (860,8 million dollars USA) by mother company’s contributions. In 2015 VTB Bank received two loans from mother company of 5,2 billion UAH (225,5 million dollars USA), which were converted into authorized capital in 2016.

Up to now, two groups of banks with Russian capital are operating in Ukraine:

• Banks that are in contact with government institutions of the Russian Federation. According to NBU’s Resolution № 25 of 21.03.2017 sanctions against 5 banks were introduced. These sanctions include a ban on the withdrawal of funds outside of Ukraine, as well as payment of dividends, interest, return of interbank deposits and loans, funds from correspondent accounts of subordinated debt (Table 3);
• Banks, whose capital sources are related to the Russian Federation (Russian citizens or legal entities, which belong to Russian companies, formed the capital of banks).

Table 3

The list of sanctioned banks

Bank	Nominee shareholders	Ultimate beneficiaries
Sberbank of Russia	Sberbank of Russia, the Russian Federation, 100%	The Central Bank of the Russian Federation, 50% + 1 share
Prominvestbank	Vnesheconombank, the Russian Federation, 99,7%	The Government of the Russian Federation, 99,7%
VTB Bank	VTB Bank, the Russian Federation, 99,9%	The State Corporation Deposit Insurance Agency, 47,2%, Ministry of Finance of the Russian Federation, 32,9%, The Federal Agency for State Property Management,  the Russian Federation, 12,1%
BM Bank	Bank of Moscow, the Russian Federation, 99,9%	The Russian Federation through VTB Bank
VS Bank	Sberbank Europe AG, Austria, 99,9%	The Central Bank of the Russian Federation through Sberbank of Russia

Until the last moment, the majority of banks’ owners with Russian capital (besides Alfa-Bank, which expanded due to purchase of Ukrsotsbank) marked time maintaining financial conditions and market potential of their institutions. After sanctions announcement in March 2017, the representatives of banks assured of compliance with the same strategy.

Thus, the chairman of the board of directors of VTB Bank (Ukraine) announced that they wouldn’t expand business actively, but would concentrate on improving the effectiveness of cost management, network optimization, back-office administrative costs and development of remote customer service channels [3].

 VS Bank’s top management assured that they aimed to keep the usual financial and economic activities to meet the needs of all their clients [4].

The selling of Ukrainian subsidiaries of Russian banks, against which sanctions were introduced, might be the next consequent step for their owners. According to NBU management, all banks with the state Russian capital, which are operating in Ukraine now, are negotiating potential sales. In addition to the above NBU considers that selling is the best way to withdraw from Ukrainian market, because «in the current climate, unfortunately, it’s impossible to talk about some development of these banks in Ukraine» [5].

 However, taking into account the specificity of current situation in Ukraine, the realizable sale of these banks to foreign or domestic investors at a bargain price is impossible. The selling of them to companies affiliated with the current beneficiaries would be more probable.

In particular, it is confirmed by published on 28 of March 2017 data on sell transactions of Sberbank to consortium of investors, which include Norvik Banka (Latvia) and a Belarussian private company. In addition, AS Norvik Banka have business relations with other Russian bank (it is a part of the same group of companies) and belongs to a British citizen of Russian origin and as well Belarusian company is tied up with the same businessman of Russian origin [6].

On the one hand, the facts of selling of Russian banks, which are under Ukrainian sanctions, (even with evident artificial transactions) will remove the factor of political leverage on these institutions that will have a positive impact on their business.

On the contrary, today it is not completely clear how far the initiative of displacement of Russian capital from the Ukrainian banking system will reach. Under that logic, the next step will be the pressure on tangentially related banks, in particular Alfa-Bank. It is not under sanctions, but appears as Russian bank in mass media and street actions (and then Ukrsotsbank, which was bought by Alfa-Bank). In this case, the process of reducing of the domestic banking market will extend indefinitely and the situation of mopping up Ukrainian banking system of 2014 – 2016 will occur again. At that time the confidence in all institutions in the banking market was lost due to uncertain process parameters and unexplained criterias of banks withdrawal.

To sum up, under current law, all banks with Russian capital within Ukrainian jurisdiction operate as residents. Redouble attention to them by society is mainly due to political factors. Along with that, their concentration in the Ukrainian banking sector is quite noticeable (especially in the shareholder’s equity and corporate loans) that carries certain risks. In particular, the sanctioned banks accounted 11,2% of shareholder’s equity of the banking sector, 20% of assets (109 billion UAH of assets, including 80,8 billion UAH of corporate loans), 5,2% of consumer deposits (22,4 billion UAH) and 3,8% of corporate deposits (16,2 billion UAH).

The funding base of sanctioned banks is made mainly by interbank loans from mother companies. That fact to some extent mitigates the risk of runs by depositors under the conditions of information attacks and potential popular frustration. Total loans of sanctioned banks from mother companies amount to (in equivalent) more than 1,3 billion dollars USA. The potential volume of these loans’ interest withdrawal (about 90 million dollars USA per year) doesn’t affect largely the financial position of mother companies.

Along with that, a significant amount of corporate loans to Ukrainian industrial companies in the portfolios of sanctioned banks (80,8 billion UAH) comes under notice. This factor creates a potential risk for domestic companies, as it will be difficult to refinance these loans in the current circumstances.

The behaviour pattern of Ukrainian banks with Russian capital demonstrates their management’s wait and see attitude with mitigation of damage to reputation: limitation of loan-granting and deposit-taking, abiding by the schedule of recapitalization institutions, focusing on optimization of networks and costs.

Under the present circumstances, the probable sales transactions of these banks are likely to have formal (conditionality or scheme) nature. If there is basic premise of Russian political circles concerning Ukrainian financial market presence, then the change of the legal form will occur.

Taking these circumstances into account, it is advisable to keep a fixed official public communications policy with explaining of further relation to banks with Russian beneficiaries to overcome the common factors of uncertainty.

References

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