Ukrainian banks need about Hr 100 billion in additional capitalization, says Fitch expert
Oct 31, 2009 at 13:27 | Interfax-UkraineSpeaking at an annual conference held by the rating agency in Kyiv on Friday, she said the sum of the additional capitalization was arrived at from data as of July 2009 and takes into consideration the additional capital that was raised by banks by that time.
She said the indicators of the quality of banks' assets have drastically worsened due to the devaluation of the hryvnia and the steep economic decline, drawbacks in the sphere of loan underwriting, and the lack of borrowers' discipline.
The research among the banks rated by Fitch has shown that by the end of the first half of 2009, the share of problem loans had hit 34%.
As Ignatieva told Interfax-Ukraine, the share of problem loans in the Ukrainian banking sector might grow to 40% by the end of the year.
"We expected that there would be 40% of bad loans (according to the base case scenario forecasted by Fitch), the amount of dead loans would account for 28% of the loans in the banking sector," she said. She said the further development of the situation would greatly depend on how efficiently the banks handle their toxic assets.
She said additional capitalization of at least UAH 100 billion would make it possible for banks to write off dead loans and form reserves worth up to 5% of such loans. Moreover, the bank capital adequacy ratio should not be lower than 14%.
"An adequacy ratio of 14% is the level that we consider to be comfortable for the system to inject loans into the economy," she said.
She said the further growth of problem loans or complications connected with liquidity might cause new cases of private bank insolvency and a decrease in ratings.
She also said that the financial crisis might lead to the realignment of the country's banking market.