Owners of companies and banks are folding financing of their businesses

Over the first five months of 2014 the National Commission for Securities and Exchange (NCSE) registered only 53 emissions of shares in the total amount of UAH 5.16 bn, according to the informational memo of the regulator on development of the Ukrainian stock market. At that, the volume of registered emissions of shares of companies over the same period of 2013 was three times higher at UAH 16.85 bn.

Banking issue

The banks effectuated the main issues of shares in the reported period mainly with the objective of increasing authorized capital, according to the data of the commission. Among them are Delta Bank, UkrSotsbank, Ukrainian Innovational Bank, National Credit, Bank Credit Dnipro, Prime Bank and Alliance Bank. Additional capitalization in conditions of economic instability is to maintain stable operation, says Chief of the Strategic Development Department at IBI-Rating Ihor Andrusyk. That was the reason the volumes of emissions increased since the start of the year. According to the NCSE report, the largest emissions of shares were observed in January – UAH 2.5 bn and the lowest were in May – only UAH 63 mn.

“The resources on the market are limited, which is why owners are not in a rush to increase the capital of their business if it is not necessary given account to the high risk level,” commented Andrusyk. The greatest risk is the military conflict in the eastern part of the country. Unlike the western market, the volume of emission in the majority of cases here is tied to investment of money by existing investors, says private investment consultant Leonid Bilozerskiy. “Emission of shares in Ukraine is, frequently, registration of ownership, not a process of attracting an investor,” he says.

Waiting for stress

In June, the volumes of emissions of shares will remain rather low, same as in May, predicts partner at the Investor Relations Agency Oksana Paraskeva. A new wave of emissions is likely to happen later, based on the results of stress tests. As for the real sector, no significant emissions should be expected, says Andrusyk. The NBU completed a preliminary stress testing of certain Ukrainian banks. As a result, according to Capital, the regulator sent to the Deposit Guarantee Fund of Ukraine a list of 37 financial structures, in which provisional administration can be potentially introduced. The main reason for that is failure to meet the requirements of the central bank, primarily as it applies to the level of their capitalization.

To date, the banking system is short of around UAH 50 bn, according to experts. “Practically every bank needs a capital increase,” said Hulei. The only question is whether shareholders will manage to do it on their own or will they have to turn to the government for assistance.