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Banking Market in Ukraine 2009-2011 - Research Brief
Inteliace Research, Nov 2009, Pages: 53
Banking Market in Ukraine 2009-2011 is the latest edition of CEE banking research series published by Intelace Research, delivering a well structured and synthetic information about the present state anf future perspectives of the Ukrainian banking sector. Report provides key banking statistics and includes separated sections on retail and corporate banking. Report contains league tables for major market/product segments. For each of the TOP 5 players a one-page profile has been prepared. A separated section has ben also devoted to the overall banking system profitability. Moreover the report gives information about 25 major M&A deals in the Ukrainian banking sector closed during 2005/2009, and provides actual valuation ratios effecting from those deals including: P/A, P/BV and P/E. Finaly, the report contains a mid-term forecast of key banking volumes up to 2011.
Macroeconomic situation.
In the late 2008 the Ukrainian economy witnessed a dramatic swing from solid growth observed during almost a decade to the deepest recession since early 90s. The collapsing manufacturing output, GDP lower by 20%, depreciating currency and still high inflation are just few indicators of the situation observed in the 1H of 2009. Also the political situation is not supporting the economy. The upcoming presidential election (2010) does not encourage politicians to take necessary steps including public sector spending cuts, which is undermining Ukraine negotiations with international institutions and implies extremely high lending costs.
Banking sector.
The latest development in the banking sector are following current condition of Ukraine`s economy. After a turbulent beginning of the crisis in Q4 2008 with few banks standing shortly before a collapse and with depositors taking cash home or converting to foreign currencies, the situation has temporarily calmed down, however, banks are suffering a continuous drop of volumes. The situation is particularly difficult in corporate banking sector, where troubled enterprises are reaching for accumulated deposits, while the lending quality is falling quickly. In contrary retail business is less affected, thanks to still low unemployment and little cuts in wages.
Market structure.
Ukrainian banking sector is still extremely fragmented. With 185 licensed banks in the country and very low concentration ratios, (HHI* Index =356 as of 1H2009) the market is still awaiting a phase of consolidation. The recent entry of various foreign players (over 24 significant M&A transactions during 2006-2008) has not significantly changed the market structure. Although top players are on average growing slightly faster than the rest, not surprisingly, the only clear winners in the crisis are so far the two state-owned banks: Oschadbank & Ukreximbank. Both of them have been able to increase market share in 2008/2009 by leveraging the increased need of banking clients for trust and security.
Future prospects.
In our base scenario we assume that the Ukrainian banking sector will start to stabilize on a low level in 2009-2010. The year 2010 will be challenging and the recovery of the economy will most probably occur first in the early 2011. We expect that assets of commercial banks will exceed UAH 1 trillion first in 2011. In the mid term perspective retail banking segment is again likely to perform significantly better than the corporate one.
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