Ukraine under pressure from the radicals decided on the most dangerous adventure – imposed sanctions against banks with Russian capital. The ban on the export of capital from the country is not even as bad as the alarms and the panic that carries the decision. Looks like we may be seeing the beginning of mass Exodus from Ukraine, not only Russian banks, but also of any Russian business.
“The government has no possibilities to normalize the situation. So everyone will decide for themselves to go after the banks”
Sanctions are imposed for one year in relation to the savings Bank and its “daughter” VS Bank, and Prominvestbank (this “daughter” of VEB, is an active process of its sale, which is scheduled for completion by the fourth quarter of 2017), VTB, “BM Bank” (the”granddaughter” of VTB). They are prohibited from any transactions in favor of the parent companies and the export of capital outside Ukraine.
“Everyone will decide for themselves”
Russia’s reaction was predictable.
“The situation in Ukraine scares its tendency to further degradation, to increase tension. In economic terms Ukraine is no longer a foreign, international investors a reliable and predictable place to invest money and where you can attend as a subject of economic life,” – said Peskov.
Vladimir Putin held a closed meeting with representatives of big business, which discussed the risks of companies with Russian owners in Ukraine. “We remembered that a year ago I asked the President whether it is time to leave Ukraine because of the Russian press owners, – has told following the meeting, the head of RSPP Alexander Shokhin. Today the signal was – sanctions against Russian banks. But the President believes that in Ukraine many people think that, probably, it is irrational to impose such sanctions, but the government, unfortunately, has not been able to normalize the situation in accordance with international rules and regulations. So everyone will decide for yourself (go there) after banks. Under the blow could fall, a telecommunications company. The more visible asset, the greater the chances of becoming a target of the nationalists.”
The Motives Of Kiev
These sanctions Ukrainian authorities are pushing Russian banks faster to leave the Ukrainian market, said the head of VTB Andrey Kostin. Sberbank also regarded such actions as unwillingness of the presence of the Bank’s investments in Ukraine.
But besides political there are also commercial reasons for this decision: some borrowers simply do not want to return loans to Russian banks, says Costin.
“Always, when you create havoc for borrowers is very good. I think certain circles, those that have loans in banks of three groups – Sberbank, Alfa-Bank (VTB – approx. OPINION) – of course they are interested in the fact that these banks ceased operations. Thus you can not return the money. I think that certainly there is a corrupt element in this kind of decision,” – said Kostin. “There are all kinds of borrowers are in good faith trying to (pay the debt) and not trying – “fog of war” – he said, RIA “Novosti”.
How will Russia respond
To give a symmetrical answer to Russia will be difficult, because the only Ukrainian Bank operating in Russia – Moscomprivatbank, has long gone into the hands of Russian Binbank: after CBR in March 2014 it introduced a temporary administration. But Russia may be in response to the actions of Ukraine to submit to the international court the claim about protection of capital.
“Such behavior of Ukraine violates international law on foreign investment and protection. Safeguards are in place to protect the integrity of the property comprising of foreign investment on the territory of a state, guarantees of non-discrimination, guarantees the right of a foreign investor to use the results of its operations, and more”, – says the managing partner of the group of legal and accounting firms “SBP” Kira Gin-Bariseviciute. “Our country can insist on real trials in the international courts and win them,” – concludes the lawyer.
Ukrainian “daughter” three years suffered loss and anti-Russian sentiments in the hope of improving the situation. However, it got worse. It seems that now it would be wiser to get rid of complex assets.
“This will be another opportunity for Europe to think about the reliability of Ukraine as an economic partner”
The best way to exit the market is, of course, selling the business to a new owner. The worst option, especially for Ukraine – if the country will bring the Ukrainian financial institutions to bankruptcy.
To sell Bank in Ukraine today is not easy. “In this context, the buyer will bargain to the last, getting ideal low price for a workable Bank. And the seller would have to agree,” says Anna Bodrova of Alpari. “However, it would be cheaper just to go, giving “daughter” for nothing, than to wait sprawl problems,” she adds.
Ukrainian economist Oleksandr Okhrimenko believes that to sell any Bank in Ukraine is now impossible. “Not just price. There is no single Bank that would not have financial problems. Regardless of whether in Russia or EU countries it is. If you buy in Ukraine, the Bank, in fact, you get huge problems, such as the six billion debt. In their right mind to buy this is ridiculous,” – says Okhrimenko. According to the economist, technically, the sanctions only strengthened the status quo. In the last three years in respect of transactions with the withdrawal of capital from Ukraine and acted prohibitions or restrictions for any of the banks.
“For the Ukrainian banking system is quite large assets. Therefore, local buyers, probably not. And foreign will not risk for fear of legal prosecution,” also skeptical Georgy Vashchenko of “freedom Finance”.
However, according to another version of the Ukrainian “daughter” of Russian banks, by contrast, remained the only financial assets in the country that can still be of interest to investors. “I heard that this is the only healthy part of the banking system of Ukraine. I suspect that Russian banks have established the appropriate reserves for investments of Ukraine for a long time,” said Deputy Finance Minister Alexei Moiseev.
Most likely, it is. “Despite the common challenges, Russian banks continued to operate in Ukraine. Part of the losses of the parent banks was charged immediately, and then to support the activities occurred capitalization,” recalls head of investment advice “KIT Finance Broker” Vladimir kapustyasky. Due to the fact that a lot of Russian money invested in the Ukrainian “daughter”, Russia became the main investor for Ukraine at the end of last year, invested 38% of the total, and billions of dollars.
What can you offer investors? “The total amount of deposits (of Russian banks in Ukraine – approx. OPINION) is 5-5,2%, significantly less compared to the same PrivatBank, whose share exceeded 30% of the total,” – said kapustyasky. It is clear that the Ukrainians against the background of anti-Russian hysteria preferred to keep their savings in Ukrainian banks. Although from a financial point of view, the same Sberbank looked far more stable than it turned out to PrivatBank.
But greater commercial interest will have a loan portfolio. “Aggregate credit portfolio of Russian banks to Ukraine is less than 2%, while the share of loans granted to legal entities, reaches 18.6 percent. Here is something to compete for potential buyers,” – said kapustyasky. In other words, the new owner will buy the debt of Ukrainian companies with a huge discount, but it will be to dislodge them refund in full. And it may be for the buyer’s gold mine.
According to the NBU, the Ukrainian “daughter” of Russian state banks to hold funds of Ukrainian individuals and legal entities on 36 billion hryvnias, or $ 1.3 billion. In other words, it is the fact that banks owe to their customers. However, the Ukrainians owe the “daughters” of Russian banks twice more – 80 billion, or nearly $ 3 billion. As many estimated, the total loan portfolio of the subsidiaries in Ukraine at the end of 2016.
The worst scenario
But the worst thing now for “daughters” Russian banks – not the sanctions and the reaction of customers, who in fear want to withdraw all their funds, which in turn will lead to the bankruptcy of financial institutions. Sberbank has already had to impose restrictions on withdrawals “on the background of the physical block of the Central office and a number of branches representatives of radical organizations, as well as repeated acts of vandalism against the property of the Bank with the connivance of law enforcement”.
To reassure the population can only the national Bank of Ukraine. Not coincidentally, the savings Bank said it plans to negotiate with the regulator for further action and hopes for the support of the NBU. Sberbank also appealed personally to Poroshenko, “to restore law and order, to unlock the Central and other offices of the Bank and to ensure normal conditions of service for Bank clients – several tens of thousands of Ukrainian legal entities and more than million individuals – citizens of Ukraine”.
To help soothe the population in the interests of Ukraine itself. Because the bankruptcy of five major banks in the country it will cost her too much – until the collapse of the private banking system and a social explosion left with nothing Ukrainians.
For Russia, the forced withdrawal of our banks from Ukraine in some ways even be useful. After all, it will be another excuse for Europe to think about the reliability of Ukraine as an economic partner. “Anyway, since opponents of the construction of the Turkish and North “flows” in Europe have diminished,” says Vashchenko.