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IBI-Rating has affirmed the credit rating of JSCB «Lviv» at uaAA- grade

02.12.2022
IBI-Rating informs on affirming of the credit rating of JSCB «Lviv» at uaAA- grade, the rating outlook is «negative». The credit rating has been maintained on the CreditWatch listing. The rating remains on CreditWatch List with negative outlook due to the martial law imposed in connection with Russian invasion of Ukraine, which has a significant negative impact on the economic condition of the country and its financial stability. The rating of bank deposit reliability has been affirmed at «5» grade (excellent reliability).

The new ownership structure of JSCB «Lviv» (further — Bank Lviv) was registered in 2018 when the independent Swiss asset management company ResponsAbility Participations AG acquired the controlling share of 51%. ResponsAbility is a leading asset management company in the field of investment, which provides financing through borrowing and financing from its own resources in emerging economies; the shareholders of the company are reputable institutions in the Swiss financial market. As a result of the contributions of ResponsAbility, the authorized capital of Bank Lviv has been increased by UAH 133 million. On March 29, 2021, the National Bank of Ukraine approved the acquisition of a significant stake of 13.94% in the statutory capital of Bank Lviv by the Nordic Environment Finance Corporation (NEFCO), an international financial institution. In the second quarter of 2021, shareholders contributed funds totaling UAH 270 million to the statutory capital, which amounted to UAH 708.4 million as of October 1, 2022. As a result, the shares owned by ResponsAbility Participations AG and New Progress Holding LLC as of October 1, 2022, was 48.56% and 27.98%, respectively. The regional network of the institution is represented by the head office and 19 branches in 7 regions of Ukraine, including the capital region. The bank is mainly represented in the Western region, the largest number of branches is located in Lviv and Lvivska oblast.

During analyzed period the bank complied with prudential requirements and limits for currency position. It is worth noting that the bank maintains a significant reserve to comply with the liquidity coverage ratio (LCR) requirements. As of the end of the 9 months of 2022, the activity of Bank Lviv was profitable, which in particular was due to the growth of the loan portfolio and securities portfolio, reflected in a significant increase in net interest income. The positive financial result for January-September 2022 amounted to UAH 67.5 million, which is one of the highest indicators in recent years. The ratio of administrative expenses to total income remains at a low level, which, against the backdrop of the growing dynamics of commission, interest and trading income, contributes to a high value of the efficiency ratio of about 190% as of January-September 2022.

The bank's credit rating affirmation is based on: strong financial support from shareholders, including strategic investors - Swiss asset management company ResponsAbility Participations AG and the international financial corporation NEFCO; strengthening the institution's market position; increasing its statutory capital; positive dynamics of key financial indicators; good diversification of the resource base, represented by a combination of customer deposits and microfinance organization funding. It is also worth noting further improvement in credit portfolio diversification and a decrease in the share of large borrowers in the overall loan portfolio, sufficient liquidity, and improved efficiency indicators. However, some factors may have some impact on the institution's future development and lead to a decline in efficiency indicators. These factors include low or limited demand for bank lending, vulnerability of the banking system to operational risks, unexpected legislative restrictions, economic slowdown, and prolonged military actions in Ukraine due to aggression from Russia. At the same time, the implementation of a new bank strategy, increasing the bank's capital, and the interest of international financial institutions to support the bank's development by providing necessary funding underlies further dynamic development of Bank Lviv and increasing its stability, leading to growth in profitability indicators.

In order to conduct the analytical research, the materials provided by Bank Lviv, have been used, including: annual financial statements for 2020-2022, other necessary internal information, as well as the information from the public sources, which the Rating agency considers credible.

Finance department
For more information please contact:
Press service of IBI-Rating
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press(at)ibi.com.ua