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IBI-Rating has affirmed the credit rating of JSCB «Lviv» at uaA grade, the rating outlook is «evolving»

01.07.2020
IBI-Rating informs on affirming of the credit rating of JSCB «Lviv» at uaA grade, the rating outlook is «evolving». The rating of bank deposit reliability has 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 — up to UAH 438.4 million. Significant contributions to the authorized capital made by Swiss ResponsAbility has provided the bank with the necessary funds to increase its loan portfolio, moreover, ResponsAbility has placed additional funds as subordinated debt. At present, the process of raising the authorized capital by converting a part of subordinated debt funds in the amount of UAH 104 million is ongoing. That is, after completion of the procedure for registering changes in the capital of the institution, the authorized capital will amount to UAH 542.4 million. The regional network of the institution is represented by the head office and 21 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. Moreover, Bank Lviv with a significant margin meets the requirements for the new liquidity coverage ratio (LCR), set by the regulator at the beginning of 2019. Unlike the previous years, the financial results of the Bank Lviv by 2019 and Q1 2020 were profitable, in particular, it contributed to an increase in the quality loan portfolio, which was reflected in a significant increase in net interest income. The positive financial result for the last year and the first quarter of this year amounted to UAH 19 million and UAH 13.5 million, respectively.

The affirmed rating grades of Bank Lviv is based on assessment and positive dynamics of such indicators as: strong financial support from shareholders, positive dynamics of key financial indexes, acceptable diversification of the resource base represented by a set of customer deposits and MFI financing. Additionally, it should also be noted the further improvements in the diversification of the loan portfolio and significant decrease of the share of top borrowers in total loan portfolio, sufficient liquidity and improvement of the performance indicators. However, there are some factors that may extent effect on the future development of the institution and could potentially lead to decrease of the performance indicators. These could include: low or limited demand for bank lending, vulnerability of the banking system to operational risks, unexpected legislative constrains, the slowdown in the economy. At the same time, implementation of new strategy in the bank by Swiss shareholder, commitment of both owners to provide needed funds and to rise capital base of the bank as well strong interest of the international financial institutions to support development of the bank by providing necessary financing, lays at the foundation of further dynamic development of Bank Lviv and increased sustainability resulting, which leads to higher profitability. The «evolving» rating outlook is due to uncertainty about the impact on the financial condition of the banking institution by expected significant slowdown in business activity due to the deteriorating of the epidemiological situation in the country, economy and administrative restrictions on entities and individuals.

Analytical research was based on materials provided by Bank Lviv, including: financial statements by 2017-2019 and January-March 2020, target performance indicators, other necessary internal information, as well as the information from public sources, which the Rating agency considers credible.

Finance department
For more information please contact:
Press service of IBI-Rating
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