UkrGasBank’s development momentum has outperformed the average performance of Ukrainian banking system
By the results of 2007 Ukrainian banking system showed significant achievements, which were mostly related to dramatic changes on the market of individual consumers’ interests. Last year became practically the turning point, when a considerable part of Ukrainian population actively began to use bank credits for financing their own needs, which led to a substantial growth of demand for credits and other bank products.
By the results of 2007 total assets of Ukrainian banks rose by 75,9%, which reflects an important increase of banking operation volumes. Within the development of the banking system on the whole, progress of several banks should be noted. In particular, the achievements of a strong “average” institution of the Ukrainian banking area, «Ukrgasbank», are indicative for analysis. Under new conditions of development in the banking sector of economy, the bank succeeded and confirmed that its development follows the trends and general development of Ukrainian banks. During 2007 the Bank assets increased by 131,2%, which shows a more rapid development of the financial institution comparing to other banks of Ukraine.
Analyzing the indices of 2007, a few significant factors are to be pointed out. The increase of assets in the Ukrainian banking area took place mostly due to the growth of credits extended by banks to their customers. According to the NBU information in 2007 the volume of extended credits rose comparing to 2006 by 80,3%. Over the same period of time Ukrgasbank increased the volumes of the extended credits by 124,9%. In their structure crediting individuals rose faster than crediting legal entities. All in all, by the results of 2007 the growth of credits, given to individuals was 97,6%, while the increase of crediting legal entities was only 64,7%. A similar situation was observed in the Ukrgasbank activities. Thus by the results of last year the growth rate of crediting legal entities was 125,8%, and that of crediting individuals was 140,5%. At the same time it is to be noted that the structure of the Bank assets has certain differences from the generalized structure of banking sector assets. In the banking area the average share of assets from credit operations is 78,8%, while in the structure of Ukrgasbank the share of these assets is over 84%, which indicates the ultimate focus of the bank on investing by expanding credit mechanisms. At the same time, the share of the Bank investments into securities is at the rate of 4,7% of the assets, which corresponds with the average rate of investments into securities in the banking area. It is forecasted that in 2008 the trend of increasing the share of credit operations in the structure of bank assets will strengthen. Herewith in 2008 the advance growth of crediting individuals comparing to legal entities will be observed as well. According to experts’ forecasts for 2008 the rate of increase in the volumes of extended credits in the whole banking system will equal at least 70%, while the increase in the volumes of crediting individuals may exceed 90% over the year.
Provided the rapid growth of the credit base, in 2007 banks actively increased their equity capital to be able to keep liquidity indices on the proper level. By the results of last year the equity capital of Ukrainian banks rose by 64,2%. Over the same period of time the equity capital of Ukrgasbank rose by 94,9%. In the structure of this financial institution capital the authorized capital share is 53,8%, which complies with the general tendency on the market, where this share reaches the rate of 61,4%. In 2008 the banking institutions’ equity capital growth tendency will continue, mostly due to the increase in the bank authorized funds. And though the rate of capital expansion in the banking area will be lower than in 2007, and is expected not to exceed 50%, in the absolute values the volumes of bank authorized funds will grow considerably, which is an urgent requirement for the Ukrainian market development.
In 2007 banking liabilities grew significantly. According to the data provided by the NBU, the general growth rate of liabilities of Ukrainian banks in 2007 increased in comparison with 2006 by 77,5%, which has been one of the highest growth rates over all the period of Ukrainian banking development. In 2007, in comparison with 2006, the total amount of liabilities of Ukrgasbank rose by over 135,5%, which is a very positive result of the Bank operations, reflecting a new quality potential of the institution operations. In the structure of liabilities of the Ukrainian banks the largest share - 30,9% of the total amount belongs to the funds of individuals, followed in terms of volumes by interbank credits (29,4%) and funds of legal entities - 21,2%. The structure of liabilities of Ukrgasbank by the results of 2007 is somewhat different from the banking sector on the whole. The Bank liabilities include 37,7% of interbank credits, funds of individuals take the second place and are 37,7%, followed by the funds of legal entities with 22,5%. This shows that the Bank focuses on borrowing the funds from individuals and working with other banking institutions. In prospect the trend of banking liabilities formation will stay. According to the forecasts, in 2008 the funds of individuals will continue playing a crucial role in forming liabilities of Ukrainian banks, only mechanisms of borrowing these funds may change.
Analyzing the final result of the bank operations in 2007, in terms of profit, the situation is as follows. Over this period the profit of the banks was over 7,1 billion hrn., which was one of the best indices of performance among the industries of Ukraine. The essential source of incomes for Ukrainian banks became interest incomes, which took 74,6% of the bank incomes structure in 2007. The second place in the structure of Ukrainian bank incomes belongs to commissions, which by the results of 2007 were 18,3%. The structure of incomes of Ukrgasbank has certain peculiarities, showing a different approach to the organizing relations with customers.
By the results of 2007 the share of the Bank interest incomes was only 48,8%, while the share of commissions was 24,8%. More considerable differences in the Bank operations are observed in the area of sales operations with customers. Formation of incomes from the Bank sales operations takes 12,3% while the average rate in the system is on the level of 4,6%. The increase of the share of commission and sales operations in the incomes structure of Ukrainian banks will remain in 2008 as well as in the longer term. Leaving the focus on interest incomes and the expansion of commission receipts is one of the most important tasks for the development of the banking area under new conditions of banking market functioning.
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