Banks of Russia in Ukraine. Current position and prospects

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

According to the authoritative rating agency Standard&Poor's, the total amount of capital of Russian banks in Ukraine is from 23 to 25 billion dollars. Of these, 8 billion dollars are direct investments of parent institutions in their Ukrainian subsidiaries, and about 15-17 billion more are loans issued in this country.

Russian banks in Ukraine

Which Russian banks are currently operating in Ukraine? At the end of 2016, there were seven banks with Russian capital operating in Ukraine. These include Sberbank Ukraine and VS Bank controlled by Sberbank. In addition, VTB Bank and BM-Bank are controlled by the VTB Group. Prominvestbank is a subsidiary of Vnesheconombank. As well as Alfa-Bank, which is part of Alfa Group, and Forward Bank, which is controlled by Russian Standard.

It should be noted right away that in 2016, the assets of Russian banks in Ukraine decreased, and quite significantly. Thus, Sberbank Ukraine lost 9%, Alfa-Bank - 2.8%, BM-Bank - 6.3%, and VTB Bank - as much as 19.1%. Such indicators made Russian parent companies think about exiting the Ukrainian segment of theiractivities. For example, the VTB group is now actively exploring the possibility of selling its stake in the Ukrainian banking sector. By all indications, it is this Russian holding that will be the next to stop its business in Ukraine. At the same time, the head of the VTB group, Andrei Kostin, notes that it will probably be somewhat easier to sell BM Bank than VTB Bank, because it is now extremely problematic to sell large property at an acceptable cost in Ukraine.

Exception to general rule

It would be appropriate to say that not all Russian banks in Ukraine have faced serious problems. So, Alfa-Bank is not going to leave the country yet. This is primarily due to the fact that this financial institution was not included in the sanctions list of the Ukrainian government.

According to one of the leaders of the group, Petr Aven, the main thing in this situation is to maintain normal working relations between Alfa-Bank and the National Bank of Ukraine. Aven also said that the management of Sberbank has not yet come out with a proposal to buy out its subsidiary in Ukraine. Apparently, Vnesheconombank is not going to leave the Ukrainian banking sector either. The basis for such statements is the fact that on March 27, 2017, a decision was made to additionally capitalize Prominvestbank for an as yet unknown amount.

Declining profitability

Russian banks in Ukraine faced a sharp drop in the profitability of their activities. At the veryin the midst of the crisis phenomena of the Ukrainian economy, it was possible to attract funds from outside only at the highest rates. At the same time, the level of income from the issuance of loans has been steadily declining, which was due to the overall decline in the level of lending in Ukraine.

In addition, it should be noted that, given the above, the Ukrainian "daughters" of Russian banks had to reduce rates on deposits. This, in turn, had a negative impact on the possibility of attracting additional financial resources. It can be stated that at the end of 2016-beginning of 2017, bank lending in Ukraine practically stopped, and the growth of deposits in previous months was due to exceptionally high deposit rates of that period.

It should be noted that five of the ten most unprofitable banks in Ukraine are Ukrainian subsidiaries of Russian parent companies. And the main loss was provoked by the requirements of the National Bank of Ukraine to constantly increase reserves.

Political risks

Political events in Ukraine at the end of 2013-beginning of 2014 increased the risks many times over, including for doing business. Considering today's relations between the two states, it is especially difficult for Russian enterprises to work. Therefore, at the moment, for Russian banks, and even more so with the participation of state capital, there are practically no options for a painless way out of this situation. The only acceptable one is the sale of your business in Ukraine. Will and how many Russian banks remain inUkraine? This question is more relevant today than ever and there is no clear answer to it yet.

Introduction of restrictions in the work of Russian banks

It should be emphasized that the Russian banks in Ukraine that were included in the sanctions list actually lost the opportunity to conduct normal business in this country. The Ukrainian government has introduced a number of restrictions, including a ban on the withdrawal of finance from the Ukrainian economy, on the payment of dividends and interest, as well as the return of interbank loans and deposits. In addition, there is a restriction on the return of funds from correspondent accounts of subordinated bonds, as well as on the distribution of profits. In fact, the measures taken by the Ukrainian government establish a ban on Russian banks from financial activities in Ukraine.