Ievhen Metsger, Chairman of JSC “Ukreximbank” Management Board

You can never be ready for certain things, no matter how much you "train". For me they are: human tragedies and… recognition of loss. For 20 years in the banking sector, I still can't agree with loss in cold blood.

Even now, sending to the NBU the report for 2020, which recorded a negative result of UAH 5.6 billion, I feel great discomfort.

Every line of the balance can be explained, though not everything can be accepted. You may realize that this is a legacy of the past, not your personal report, and yet, take each "minus" at your own expense. You can publicly predict such an option, which, in fact, I have done many times, but still internally not reconcile with it…

Especially when you realize that the society’s biggest and fairest objection to JSC “Ukreximbank” today is its negative financial result.

But one of the main values ​​of the Bank today is transparency, and the social capital of a banker is, first of all, trust. Therefore, our communication will be as direct and frank as possible.

JSC “Ukreximbank” entered 2020 with a heavy burden of accumulated problems - structural distortion of the balance sheet, weak currency position, a significant amount of overdue debt, a pool of expensive borrowings in foreign markets. Many of them were due to political factors, and in the context of the pandemic, macroeconomic challenges intensified.

Moreover, we were surprised to find out that the actual operating model - the Bank’s annual life cycle was set up to automatically generate loss: the amount of loan support regularly exceeded the operating income by an average of 50%! And this accumulated portfolio of toxic assets had been applying constant pressure on the financial result. First, a sufficient level of provisions was not formed, and secondly, it does not generate interest income for the Bank. According to 2020 results, the Bank's expenditures to cover the expected losses from credit risk of non-performing assets amounted to UAH 4.3 billion.

In addition to the already formed amount of negatively classified assets, we received delayed problems, the situation with servicing the credit load of lockdown-vulnerable industries, the presence and condition of collateral, and changes in their market value deteriorated rapidly. Against this background, some companies began to demand unjustified preferences, and chronic defaulters intensified their opposition, trying to avoid or extend as much as possible the procedures of debt enforcement.

Therefore, JSC “Ukreximbank” loss by the end of the year was expected and natural. But, at the same time, our team managed to avoid the worst, after a thorough and honest diagnosis of the Bank by the Supervisory Board, Management and the regulator early last year, we were then faced with two objective scenarios:

Naturally, we chose the action. This scenario clearly required an adequate capital increase on the part of the owner, the Cabinet of Ministers of Ukraine. The resulting UAH 6.8 billion turned out to be the minimum amount needed to reduce the pressure of formed provisions for non-performing loans. These funds allowed to level the balance and comply with regulatory standards.

To stabilize the Bank, the primary task of the new management was to carry out emergency work to improve the financial condition and minimize the identified risks. The currency position was closed, mechanisms for early response to changes in market indicators were introduced, and the rate of repayment of problem debts was accelerated. Changes began in the "difficult" operational processes (customer identification, currency control, study of credit documents), which allowed to return former customers to the Bank and attract new ones.

For the first time in the history of the Bank, systematic NPL workout has begun, which will allow to increase the loan portfolio at the expense of own resources. In the last quarter of 2020 alone, we have already ensured repayment of more than half a billion hryvnias in several important cases (both through voluntary settlement and in bankruptcy cases).

As a result, the Bank's net operating income in 2020 amounted to about UAH 2 billion.

I will not report on the triumph of a "complete overhaul", but I can note the first positive changes. The main thing is that today the Bank is already able to generate operating profit. Moreover, I am sure that the figures for January of this year will be a pleasant surprise for both the owner and the Bank's customers.

The new development strategy of the state-owned bank, hard won by our independent Supervisory Board and, as a result of its consistent work, eventually adopted by the government at the end of the year, provides for a comprehensive transformation of our operating and business model, as well as further recapitalization due to stable profits of at least UAH 1 billion annually. I believe that this year the coordinated work of our entire dream team will return Exim to the charts of bank profitability ratings and I have no doubt that in a short time - to their top.