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Tamara Savoshchenko: it is difficult to predict the format of the deal with Alfa


The first interview of Tamara Savoshchenko, CEO of UniCredit Bank Ukraine, concerning possible sale of the bank, UAH rate and the problem borrowers. On 6 of August NBU approved Tamara Savoshchenko as chairman of UniCredit Bank Ukraine. It seems that Savoshchenko will have time for adaptation on the new position because summer is a holiday period, especially for Italians. But this August turned out to be hot for Ukrsotsbank. The very next day after the appointment of Savoshchenko market was excited about the news on possible fast sale of UniCredit Bank Ukraine. UniCredit Group, bank’s parent structure, published a press release in which stated its plans to sell the bank before the end of 2015. On August 8 Alfa ABH Holdings SA (ABHH) announced that it has entered into exclusive negotiations with the UniCredit Group on the purchase of Ukrsotsbank in Ukraine (PJSC Ukrsotsbank) in exchange for a minority ownership stake ratio in ABHH. Tamara Savoshchenko has told to LigaBіznesІnform in her first interview as CEO how this news was perceived by a new management.

- Your appointment coincided with the news about the possible sale of UniCredit Bank Ukraine. Were Italians confident in selling the bank at that time and therefore decided to make personnel changes?

- This is nothing more than a coincidence. Management change is a predicted and planned step. The contract of Graziano Cameli, former CEO of UniCredit Bank, ended. He spent five years in Ukraine. The Group does not practice such a long stay of expat in one country. In fact, at the group level my appointment was agreed on July 1. But since it was necessary to get the NBU approval, the process took some time.

- Was a message about a possible sale a surprise for you?

- Message about this format was real news. However, UniCredit Bank is counted as "assets available for sale" for quite a long time in the group - from March last year. The negotiations have been conducted during this time with varying degrees of intensity. The press release, which was released last Friday by the Group, confirmed that exclusive negotiations with one particular buyer have started. This is a negotiation and nothing more. Now it is very difficult to predict its outcome.

- In April, Graziano Cameli said that Italians did not intend to leave Ukraine. But UniCredit Group said that negotiations lasted more than one and a half years. You did not want to display this news?

- It did not make sense to speak about any particular negotiations at a time when Graziano Cameli gave a press conference. Furthermore, he said that group was rather looking for conditions to stay.

- The conditions weren’t found?

- We haven’t left the market yet. The status of the bank has not changed. This press release has changed nothing in the bank or in its status at the moment. We are treated as a subsidiary bank of UniCredit Group.

- Have people who carry out the audit, check the documentation of the bank from the Italians side already arrived?

- So far negotiations are not completed and while the results are unknown, no actions aretaken.

- Did you meet the UniCredit Group management after the statements about the possible sale?

- No, because the official press release was issued recently. In July, we met with the management of the CEE Division during the quarterly meeting of the top management of banks, which took place in Croatia. This issue wasn’t raised that time.

- Is the decision to leave Ukraine final?

- There is no decision. Everything will depend on the outcome of negotiations.

- What will be the actions of the bank, if the Italians come to an agreement with the buyer?

- Everything will depend on the decision itself. If you carefully read the release, three months are needed to determine what could become a solution. The format may be different. At the moment, we focus on solving current tasks.

- How do you estimate the amount for which the bank can be sold?

- It’s hard to say. There is a price of investments, but there is a market price based on the country risk and on a number of factors that can have an impact. In addition, any sale is a result of the agreements, which are impossible to work out in advance.

- Why do Italians want to sell the bank? They are not satisfied with the performance of the Ukrainian UniCredit Bank due to the macroeconomic situation or they’ve got a good offer?

- There is no offer yet. The Group never had an intention to leave Ukraine at any cost. On the contrary, recently management of the Group visited Ukraine with an institutional mission. We met with Petro Poroshenko, Arseniy Yatsenyuk, Valeria Gontareva, Natalia Yaresko, Aivaras Abramavičius, Vitali Klichko. The issues related to improving the investment climate in Ukraine, the problems faced by foreign investors were discussed. The main message of the group was - UniCredit Group seeks for possibilities of better management model of asset in Ukraine.

- You have increased a capital by 3.4 times. Why so much?

- It was a decision of the Group. As a result of the diagnosis, which the NBU carried out in 2014, an increase was necessary because of reduction of H2 standard. We have provided NBU with a restructuring plan. But in fact the capital increase was carried out at a higher level than that was required by the restructuring plan based on the results of the test in 2014.

- Was it a preparation for the sale?

- I do not think so.

- The main problem of UniCredit Bank in Ukraine is old borrowers-legal entities. How do you intend to solve this problem? Isthere a progress in the negotiations with these borrowers?

- It's really a big problem, not only for ours, but for the entire banking system. We are actively working with a portfolio of bad debts, which includes both the standard legal procedures to recover the debts, and individual approaches for loyal customers. Unfortunately, we have long-running lawsuits with bad borrowers. There are less than 100 such cases. But they are drag on for a very long time. These loans were granted mainly in 2008.

- What do you do with those customers who do not want to pay? Who is it?

- In general, we work with such clients at a legal level: law suits, appeal claims, cassations, and foreclosure on collateral object. In fact, this is the most difficult part of our work, as of today, unfortunately, the creditor has only a few effective tools to protect their rights.

- How do such borrowers behave? They go into denial or leave?

- Lots use imperfection of legislation and corruption in judicial system, first of all, for manipulations with collateral. The problem of banks with foreign capital is that we can not afford to play by these rules, we act only in the legal field.

- Give an example of such a borrower?

- Group ISA "Prime Developments", the largest unscrupulous borrower, which blocks work of UniCredit Bank in Ukraine. Since 2011 we have to defend our rights in the court. During this time, the bank has won about 50 cases against the loans and collateral of the borrower. A few months ago "Project A" company (which claims to have financed the construction of the property that has been pledged as collateral on loans of Group ISA "Prime Developments"), filed a lawsuit against the bank, referring to the fact that in the period from 2010 til 2013 it incurred costs to improve the property in amount of more than UAH 18 million, and wants to receive compensation.

Kyiv Economic Court has blocked more than UAH 18 million on correspondent accounts with UniCredit Bank Ukraine on the claim of the borrower "Project A". The court has not even begun to consider the matter in fact, but only сommissioned an expert assessment to find out the reality of the claimed amount of the borrower’s damages. The Bank has already submitted to the General Prosecutor a statement on the breach of law by judge, and will appeal to the High Qualification Commission of Judges to bring judge to justice.

- You have increased provisions for impaired loans to legal entities by twice - to UAH 8 billion, and of individuals by 60 - to 13 billion. What is the reason of such an increase in provisions?

- Increasing the amount of reserves is related, first of all, to the deterioration of the economic situation and as a result, deterioration in the quality of loans servicing. In addition, we have formed 100% of reserves for customers in ATO area.

- UniCredit Bank showed the biggest loss in the first half of the year - why?

- Losses are associated primarily with the devaluation of the hryvnia and the formation of a reserve in the amount of 6.4 billion UAH. The need for a reservation is now for banks much bigger than they show in their balance sheets. I think that this is nothing more than pulling the moment when you need to create reserves according to the results of diagnostic and stress testing, which is conducted by the National Bank. Now the regulator completes diagnostics on the top 10 banks. According to my estimates, in the IV quarter the amount of provisions and, as a result of losses, will be very significant for the whole banking system.

- In the second half of the year you will generate less reserves than in the first one?

- Probably, yes. But the situation can change, and it depends on many factors.

- According to the year results, do you predict for the banks an income or loss?

- I think that I will not be mistaken if I say that almost all the banks will be forced to show significant losses associated with the need to create reserves also as the results of diagnostic and stress testing.

- What was the dynamics of currency deposit portfolio of the bank in the 1st half of the year?

- Unfortunately, the trend of outflow of deposits, which took place in the banking system in the first half of the year, did not come over us. There was no real growth of the deposit portfolio of individuals in foreign currency denomination for 6 months in 2015, and there was a decrease. Capital of individuals in the dollar decreased by $57.8 million to $296.7 million, in euro - by 8 million euros to 46 million euro. Increase of UAH equivalent denominated in foreign currency deposits (as the official statements are all in UAH equivalent) is due to a significant increase in foreign exchange rates. Compared with the beginning of the year the USD/UAH rate has increased from 15.77 to 21.05.

- Do the outflows in the banking system persist?

- Now the outflow in hryvnia has started. This is primarily due to the fact that people are beginning to "eat away" their savings. In addition, inflation expectations are quite high, and people want to convert their savings into hard currency or invest it into large purchases. Plus banks have lowered interest rates a little.

- What is your forecast of the dynamics of attracting deposits until the end of the year?

It is difficult to predict. Traditionally, the fall in this regard is a difficult period. Perhaps an increase in inflation, currency appreciation. We’ll see.

- You predict that the rate will grow?

I think that NBU is able to keep the exchange rate within the corridor of the currency, which has been defined - up to 25 UAH/USD. I'm sure we will not leave the currency corridor, but inside it can oscillate.

- The National Bank said they would not exclude the liberalization of the foreign exchange market in case of the agreement with the creditors. Do you think this is possible?

- The validity of the decision, which introduced the restriction, ends in September, 3rd. Then you need to either renew an existing form, or fully or partially cancel the restriction. In any case, for cancellation (even partially) a positive signal is required. That signal can be an agreement on the restructuring of external debt. If that happens, maybe some restrictions will be lifted or softened. But restrictions will likely not be canceled. And my feeling is that most likely everything will remain as it is. September is the beginning of autumn, and who knows know how the market will behave. I do not expect the lifting of restrictions until the end of the year.

- Is the banking community puts pressure on the NBU in this issue?

- Let's say that the banking community is looking forward to liberalization. Bankers are most concerned about the issue of restrictions on foreign currency deposits. Because it is a deterrent to the return of currency into the banking system.

- What changed for you after the entry into a new position? What is the key difference of deputy CEO and CEO?

- The key difference is the level of responsibility. Understanding that destiny of the bank and the team may depend on your decisions, that is a totally different feeling. You have less right for mistake.

- What was the management style of Mr. Cameli?

- It was very comfortable to work with him. Graziano was a brilliant representative of a democratic leader. For him friendly atmosphere in the team and team spirit, whose presence allows us to solve any, even the most complex tasks, has always been important. This ia a style of management that I most like. Especially when you're in command.

Date: 17.08.2015

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