Pivdenny Bank successfully passed the stability assessment of the NBU in 2018

28.12.2018

Pivdenny Bank Joint-Stock Bank passed the National Bank sustainability assessment and fulfilled all the regulator requirements according the assessment results. The audit confirmed the high assets quality, the regulatory capital adequacy and the proper financial statements of Pivdenny Bank. The estimated capital requirement of the bank according to the basic scenario was fully compensated in September 2018. In October 2018, the capital need according to the an unfavorable scenario was almost fully compensated (by 93%).

According to the requirements of the Resolution of the Ukrainian National Bank Board of December 22, 2017 No. 141 “On Approval of the Regulation on the Sustainability Assessment of Banks and the Banking System of Ukraine”.

The sustainability assessment of the largest banks in Ukraine was carried out in three stages with an independent auditor involvement in accordance with the requirements of the technical specifications of the National Bank. At the first stage, an independent auditor assessed the quality of banks' assets and the collateral acceptability for credit operations. According to the results of the audit, it was established that the financial statements of Pivdenny Bank do not require adjustments, and the regulatory capital is sufficient.

Relying on the audit report, the NBU conducted stress testing* of banks according to two macroeconomic scenarios - basic and unfavorable. Stress testing included the calculation of the negative factors influence on the banks capital adequacy to cover risks. The capital requirement calculated by the NBU under the basic scenario should be compensated by banks until the end of 2018. According to the negative scenario - until the end of 2019.

As of the end of 2018, Pivdenny Bank took all necessary measures to achieve the capitalization target level and fulfill the National Bank of Ukraine requirements.

Thus, the capital requirement under the basic scenario (UAH 33 million) was offset by attracting in September 2018 additional subordinated debt in the amount of $ 1.2 million.

The capital requirement under the unfavorable scenario (UAH 2 280 million) was almost fully compensated on October 1, 2018 by improving the quality of assets and increasing the bank’s capital. These measures have reduced the need for capital by UAH 2,111 million. The remaining capital requirement in the amount of UAH 169 million will be compensated by the end of 2019 by repaying foreign currency loans according to a agreed schedule with the National Bank of Ukraine.

Pivdenny Bank conducts a well-considered and balanced policy to minimize credit risks and increase the capitalization level. In November 2017, through additional contributions from shareholders, the bank increased its authorized capital by UAH 130 million. Since the beginning of 2018, the loan portfolio in foreign currency has been reduced by $ 49 million (by 12.5%). This contributes to a significant reduction in exchange rate risks, which have become the main source of the need for additional capitalization established by the National Bank of Ukraine.

The high profitability level allowed the bank to achieve a significant increase in the regulatory capital adequacy ratio from 10.4% to 11.8% (with a regulatory value of 10%).

We would like to remind, that at the end of December 2018, the international rating agency MOODY`S revised the Pivdenny Bank ratings. As a result, Pivdenny Bank rose one line in the risk assessment rating (Caa1 → B3). The long-term deposit rating of the bank was also revised upwards (Caa2 → Caa1 with a “stable” outlook). In addition, MOODY`S increased by one step the basic assessment of the bank's creditworthiness (Caa2 → Caa1). This is the maximum possible value for the Ukrainian bank with the current sovereign rating of Ukraine (Caa1), which was also revised one step up (Caa2 → Caa1).