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country and in relations with international financial organisations. Separately, Tim Ash, Senior Sovereign Strategist at BlueBay Asset Management warned that if the bank were returned to its former owner then that would be a “deal breaker” for the International Monetary Fund (IMF) which could suspend its Stand by agreement (SBA) signed last December.
PrivatBank, Ukraine's largest state-owned bank in terms of assets, will pay dividends for 2018 to its shareholder, the state represented by the Ministry of Finance, in the amount of UAH11.52bn, which is 90% of net profit, the bank said on May 2. According to the bank's annual report confirmed by the auditing company E&Y, its net profit in 2018 amounted to UAH12.846bn, compared with UAH0.406bn a year earlier. The report indicates that UAH30.75bn in interest income includes UAH11.36bn received from investment securities, the overwhelming majority of, which are government bonds received by the bank as part of capitalization during its nationalization in December 2016. A year earlier, interest income from investment securities was UAH10.72bn from UAH24.49bn in the bank's total interest income. PrivatBank's net assets at the beginning of 2019 were estimated at UAH278.12bn, liabilities were UAH246.55bn, and PrivatBank's capital was UAH31.58bn. Over the past year, its net assets increased by 9.6%, liabilities grew by 7.2%, and capital expanded by 33.2%.
8.2 Central Bank policy rate
The National Bank of Ukraine (NBU) disclosed more details of its April decision to cut its key policy rate by 0.5pp to 17.5% in its minutes of the monetary policy committee meeting published on May 6. It revealed that eight committee members called for lowering key policy rate by 0.5pp, while one member called for keeping it unchanged at 18.0%. All committee members found the current macroeconomic conditions supportive for commencing a cycle of monetary softening. The current sustainable downward inflationary trend corresponds to the NBU’s forecast. At the same time, elections-related developments didn’t affect the positive trend in inflationary expectations. The NBU also noted increased investment in Ukraine’s local bonds by non- residents, which was one of the factors of national currency appreciation.
The NBU noted that the postponement of lowering the key policy rate might result in accumulated imbalances in the economy. In particular, high interest rates might stimulate the inflow of short-term capital and the enlargement of the current account deficit. At the same time, softer monetary policy should stimulate interest in government bonds with a longer term of maturity. Analysts do not expect the central bank to rush with more rate cuts in the nearest months. Further monetary softening is possible only if the IMF offers a positive decision on issuing Ukraine a new loan tranche in the semi- annual review to be completed in May.
53 UKRAINE Country Report June 2019 www.intellinews.com