Ukraine’s PrivatBank has written off Hr 5.56 billion ($211 million) worth of loans that were issued before the bank was nationalized in December 2016. The bank identified the group of loans as non-performing, the FinBalance website reported quoting the bank’s financial statements, which it obtained.
“Management believes this portfolio has similar credit risk indices, regardless of classification by economic sector and the direction of commercial activities at the time of such loans’ issuance,” the company’s financial statements said.
As of Dec. 31, 2017, the volume of such loans amounted to Hr 185.6 billion ($7.06 billion) compared to Hr 191.14 billion ($7.28 billion) at the end of 2016 — in other words, Hr 5.56 billion less. Meanwhile, the reserves backing the loans stood at Hr 181.9 billion ($6.93 billion), compared to Hr 169.15 billion ($6.44 billion) at the end of 2016. However, the portfolio’s true value was only estimated at two percent of that.
Last year, payments into the loan loss provision for this portfolio amounted to Hr 17.3 billion ($659 million). In late 2017, the bank valued real estate it received as a settlement of overdue loans at Hr 11.27 billion ($429 million), compared to Hr 21.84 billion ($832 million) in 2016. The overvaluation of the bank’s assets was one of the reasons Ukraine’s Cabinet of Ministers decided to increase PrivatBank’s capitalization in 2017.
The Cabinet of Ministers has stated that it does not expect the troubled loans in PrivatBank’s portfolio to be repaid anytime in the near future, Dzerkalo Tyzhnya reported.
Ukraine nationalized PrivatBank in December 2016 amid rumor of massive insider lending. At the time, the bank’s assets amounted to 20 percent of the country’s banking sector. After nationalization, the Ukrainian authorities discovered a hole in the bank’s ledger of Hr 148 billion ($5.5 billion).
Later, National Bank Governor Valeria Gontareva announced that the bank’s entire corporate loan portfolio had gone to companies closely tied to its previous owners, oligarchs Ihor Kolomoisky and Gennady Bogolyubov.
The National Bank also accused the two men of embezzling money from PrivatBank through loans to shell companies backed by faulty collateral.
In January, after carrying out a forensic audit covering ten years of the PrivatBank’s activities, the corporate investigations firm Kroll concluded that Kolomoisky and Bogolyubov had embezzled $5.5 billion, the Economichna Pravda website reported.
