The most important part of the financial system and economy of any country is the banking sector. Ukraine is not an exception. Over the past few years, there have been significant efforts by the National Bank of Ukraine (NBU) and banking sector professionals to stabilize and develop the country’s banking sector. We regard these developments as a move in the right direction. Since 2013, the quantity of banks operating in Ukraine has decreased by half, while the quality of banks has increased by half. It is therefore possible to talk about this cleanup as a positive factor for Ukrainian economy.
The list of liquidated banks includes those that allowed money-laundering schemes. Some had problematic credit portfolios and cash flows due to bad risk assessment or corruption. Others collected deposits mainly to finance the businesses of the bank’s shareholders. These practices needed addressing. Another positive was the nationalization of Privat Bank, which will secure the deposits of Ukrainian citizens and help to increase public trust in both the Ukrainian banking system and the government.
These measures are producing tangible results. In the first two months of 2017, the return on equity of the Ukrainian banking system reached 17.71% after having spent the previous two years deep in the negative band. We believe that at the current time, the Ukrainian banking sector is quite strong and is now able to cope with potential challenges. In the nearest future, we anticipate that it will contribute more to the GDP growth of the country.
Despite this progress, there remains room for further improvements in order to bring the Ukrainian banking system up to the highest international standards. The NBU and Ukrainian parliament need to adopt measures to ensure the protection of creditors’ rights and carry out the appropriate reforms in the judicial system. Another important issue is the development of financial markets in Ukraine and the adoption of best world practices in the regulatory field. This will improve the ability of Ukrainian companies to attract and allocate financial funds and allow for the hedging of foreign currency, interest, credit and other financial risks, while also bringing more liquidity and stability to Ukrainian foreign currency and stock markets. These instruments would make Ukrainian companies more competitive on well-developed markets.
Last but not least is the crucial question of free repatriation of foreign investments, including dividends. If executed properly, this could boost foreign investment in Ukraine by USD 10 billion or more. Taken collectively, this wish list of banking sector reforms could turn the current guarded optimism about Ukraine’s banking industry into a long-term growth perspective.
Ten Years in Ukraine
As a participant in the Ukrainian banking system and active operator on the country’s financial market, Creditwest Bank supports the reform process. The bank cooperates with a range of international businesses operating in Ukraine but the core focus remains on financing local enterprises. This spring, Creditwest Bank is celebrating its tenth anniversary in Ukraine. The bank has overcome a range of challenges including the 2008 economic crisis, and now enjoys excellent financial standing along with the necessary resources to develop further in Ukraine. In 2016, the bank’s credit portfolio grew by 62%. Forecasts for 2017 are even more optimistic, envisaging a 70% increase. These results have only been possible thanks to a highly professional team and comprehensive support from the bank’s shareholder Altinbas Holding.
Altinbas Group began its operations with a jewelry business in Turkey in the middle of the twentieth century. Altinbas Holding currently includes a range of brands such as Altinbas Jewelry, Assos, Onsa Refinery, Creditwest, Alpet and Transal. The Group’s activities encompass prime jewelry manufacturing, trading in oil products, and the provision of financial and logistical services. The Group is also active in the education sector with the Istanbul Kemerburgaz University. In total, Altinbas Holding consists of 21 companies employing more than 4,000 people with an annual turnover of over USD 3 billion.
Altinbas Holding’s only presence in Ukraine is in the financial sector as the sole shareholder of Creditwest Bank. The bank was established in spring 2007 with a focus on servicing corporate clients by offering flexible financing together with high quality forex and forward operations. There are plans to open SME business services in 2017. Creditwest Bank has a successful record of passing regulatory inspections and currently meets all NBU requirements. It has one of the healthiest credit portfolios on the Ukrainian market, with NPLs making up 0.24%. The bank has developed a good reputation among foreign investors, securing long-term funding from the Black Sea Trade and Development Bank in 2015 to support clients engaged in international trade.
One of the key focuses of the bank’s activity is the agribusiness sector. In 2016, Creditwest Bank acquired a number of large agrarian groups involved in grain production, processing, and export. While the bank will continue to seek credit portfolio diversification in different industries, agribusiness clients will remain a top priority.
The strategy for 2017 includes engagement with new clients from among the top ranks of the agribusiness industry along with increased engagement with small farms starting at 1000 hectares in size. This segment has particularly exciting potential, with fast-growing companies offering strong financial standing and reliable collateral. Our approach to the agribusiness sector is in line with the Creditwest Bank philosophy of developing long-term partnerships. We aim to be a reliable partner, providing companies with support during times of temporary turbulence as well as in periods of market growth.