Page 56 - Eastern Europe Outlook 2020

The National Bank of Ukraine (NBU) will stress test 45 banks in in 2020 as part of its ongoing campaign to clean up the sector​, the regulator said on its website on January 6. ​The bank sector has stabilised and returned to profit in 2019​, as bne IntelliNews reported, but financial institutions remain weighed down by a high level of non-performing loans (NLPs) that make up just under half of the sectors aggregate loan book, according to NBU statistics.
At the same time the regulator is continuing to work on improving the transparency and risk management of the sector in an effort to get banks function more efficiently as financial intermediates.
According to the NBU statement, the 2020 Inspection Plan will be based on a risk-assessment approach that incorporates the bank's categorisation based on its importance in the banking system, the nature and complexity of its operations, and its inherent risk level, as well as the total SREP (Supervisory Review and Evaluation Process) score, Interfax Ukraine reports. A total of 45 banks, about half of all the licensed banks in the country, are slated for testing.
● Bonds
Since Zelenskiy’s landslide electoral victories in 2019, foreign investors have been highly positive on the new president’s reform commitments and parliamentary support, giving Ukraine’s sovereign bonds a huge 31% return in 2019. Tim Ash of BlueBay Asset Management described 2019 as “stellar”, adding: “We just want to make sure this continues.”
What a difference six months makes. At Tuesday’s weekly bond auction, the finance ministry sold six-month euro-denominated bonds with an average weighted yield of 2.22% – half the level of 4.6% at the last auction, on June 18. Raising €198mn, this placement had the lowest yield for such a bond in Ukraine’s history, reported the ministry.
Local currency bond yields fell across the board: three-month bonds decreased by 128 basis points to 11.78%; one-year bonds by 158 bps to 11.42%; two-year bonds by 91 bps to 11.10%; and four-year bonds by 77 bps to 10.90% per annum. The ministry said 67 out of 85 bids for the purchase of T-bills were satisfied. These auctions raised the hryvnia equivalent of $265mn.
56​ EASTERN EUROPE Outlook 2020​ ​ ​www.intellinews.com