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Concorde Capital Research: Oschadbank increases profit by 1/3 yoy in 3Q12

October 24, 2012

State-controlled Oschadbank (OSCHAD) reported a 33% yoy improvement in 3Q12 net income to UAH 183 mln (3.6x growth qoq), on both higher revenues and smaller provisioning. Net interest income had another quarter of spectacular 8% yoy growth (+9% qoq) as interest income rose 13% yoy and costs advanced 18% yoy in 3Q12. The bank increased client accounts 13% YTD to UAH 37.1 bln, including term deposits of UAH 23.1 bln (+20% YTD), which were partially allocated to increase lending (+3% YTD) and mainly to build up the bank’s securities portfolio (T-bills mostly) by 44% YTD (to UAH 20.1 bln). Oschadbank’s operating costs grew 24% yoy and cost/income ratio improved from 53% in 2Q12 to 47% 3Q12, which allowed it to decrease the 9M12 cost/income to 49% vs. 50% in 1H12. Pre-provisioning profit amounted to UAH 968 mln (+26% yoy) and debt provisions declined 9% yoy to UAH 678 mln in 3Q12. For 9M12, the bank posted 7% yoy growth in net income to UAH 411 mln.

Alexander Paraschiy: The bank’s improvement in cost/income in 3Q12 is a positive surprise. We also highlight the bank’s provisioning decline, in line with our expectations. On the flipside, growth in net interest income has decelerated from 12% yoy in 2Q to 8% yoy, and the decline looks set to continue. Meanwhile, Oschadbank remains one of the fastest-growing banks in Ukraine in term of top and bottom line, and we do not see any risk that its profile will change in the near future.