IBI-Rating informs on upgrading of the credit rating of JSCB «Lviv» to uaA grade. The rating’s outlook was change to «stable». The rating of bank deposit reliability has been affirmed at «5» grade.
The rating of bank deposit reliability has been affirmed at «5» grade
Since its foundation in 1991, JSCB «Lviv» (hereafter Bank Lviv) has been working in the Western Ukraine. The new ownership structure of 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 ResponsAbility, the authorized capital of Bank Lviv over the past year has been increased by UAH 133 million and as of the 01 April 2019 amounted to UAH 438.4 million. The sizable contributions, to the paid in capital, made by Swiss ResponsAbility has provided much needed means for bank to grow its lending portfolio, moreover ResponsAbility has placed additional funds on subordinated debt terms.
During the analyzed period Bank Lviv complied with prudential requirements and limits for open currency position. The liquidity standards maintained at a sufficient level to offset the current liquidity risks, and significantly exceeded the minimum required values set by the regulator. Moreover, Bank Lviv shows a significant buffer above the requirements for the new liquidity coverage ratio (LCR), set by the regulator at the beginning of 2019. The negative financial result of Bank Lviv for the year 2018 amounted to UAH (-)41.6 million. The key reasons being the formation of additional provisions, recognition of re-evaluation for repossessed assets and advisory service cost. The trend has improved in 2019 and during the Q1 Bank Lviv registered, a net profit of UAH 1 million, this is well above its targets.
The upgrade in the credit rating of Bank Lviv is based on assessment and positive development in areas such as strong financial support from shareholders, positive dynamics of key financial indicators, acceptable diversification of the funding base representing a mix of client deposits and IFI funding. Additionally, it should also be noted the improvements in the diversification of the loan portfolio and significant decrease of the share of top borrowers in total loan portfolio, sufficient liquidity and key performance indicators. Factors, which may to some extent, affect the future development of the institution and could potentially lead to lower 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 and strong interest of the international financial institutions to support development of the bank by providing necessary dept, lays at the foundation of further dynamic development of Bank Lviv and increased sustainability resulting in increased profitability.
Analytical research was based on materials provided by Bank Lviv, including: financial statements 2016-2018 and Q1 of 2019, target performance indicators, other necessary internal information, as well as the information from public sources, which the Rating agency considers credible.