The strategic investor announced by PrivatBank has not obtained the necessary permits to acquire a qualifying holding in the bank’s capital, according to information published by PrivatBank.
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At the same time, the announcement also states that the previously published information regarding the attraction of a strategic investor has become obsolete.
It has already been reported that the bank’s annual report for 2021, on which the audit company “Grant Thornton” refused to give an opinion, stated that the strategic investor had acquired 52.59% of “PrivatBank” shares last September, but the transaction requires European Central Bank (ECB) acceptance.
The report mentions that in October 2020, the bank’s shareholders decided to start the process of attracting a strategic investor. The bank managed to attract a strategic investor from Europe, and in September 2021, an agreement was signed to purchase 52.59% of the bank’s shares.
“The bank ‘s management is confident that after The Financial and Capital Market Commission (FCMC) and the ECB will approve the strategic investor, and once the capital adequacy is increased by the capital increase, the bank will successfully implement the new development strategy to ensure a positive future cash flow, which will allow management to apply the going concern principle in the future, “the annual report said.
It also states that, notwithstanding the above, there are some aspects of the bank’s ability to continue to operate that are not entirely dependent on the bank’s management activities.
Among other things, the report notes that the bank and its group ended 2021 with a loss.
“However, despite the ongoing approval of the bank’s strategic investor by the FCMC and the ECB, the bank reoriented its operations to focus on serving existing customers and restructuring its internal processes to reduce operating costs. The bank developed a capital strengthening plan to identify compliance with the bank ‘s and the group’ s own funds requirements and which would provide sufficient capital for the bank and the group, “the report states.
It also states that the bank’s management continues to work to return the bank to profit by the end of 2023, offering deposit services, payment services, as well as loans with an individual approach to both small and medium-sized businesses to promote business growth and private customers, taking into account a specific project. needs and providing a personalized approach to each situation.
In addition, on December 17, 2021, the Extraordinary General Meeting of Shareholders decided to issue additional fixed-income Tier 1 securities in the amount of EUR 11 million, adding that the bank’s management expects that the investor’s adequacy.
“The management of the bank and the group recognizes the expected results of attracting a strategic investor, promising strategic goals, increasing and strengthening capital adequacy as a consideration for the continued operation of the bank and the group,” the annual report said.
In its turn, the bank’s audit company explains in the report that it has not been able to obtain sufficient and appropriate audit evidence to form the basis for the auditors’ opinion on PrivatBank’s report.
Among other things, the auditor mentions that the minimum capital adequacy ratio set by the FCMC for the bank and its group is set at 10.5%, but the bank’s capital adequacy ratio as at 31 December 2021 was 10.05% and that of the group was 10.43%.
At the same time, the auditors note that the bank has fixed assets in Ukraine with a book value of EUR 12.367 million at the end of last year, including a passenger aircraft with a book value of EUR 10.895 million. considering Russia Following the start of the war in Ukraine, there is a risk that these assets may be damaged, thereby reducing the value and additional pressure on the bank’s and its group’s capital adequacy ratio in the post-balance sheet period.
The auditor also notes that the applicability of the going concern principle depends on the ability of the bank and the group to raise additional capital over a sufficiently short period of time.
In its turn, PrivatBank explains in the report that, in view of Russia’s unprecedented military aggression against Ukraine at the end of February 2022, the bank is constantly monitoring the changes in sanctions, taking all necessary actions. Even the bank monitors the security on an ongoing basis.
“As early as January 2022, the bank significantly reduced its Russian correspondent bank accounts. As a result, the bank has no significant exposure in Russia and may take the necessary steps to close its correspondent accounts with Russian banks as they appear on the sanctions lists,” the report said.
The report also states that the bank constantly and closely monitors the development of the situation in Ukraine, maintains active communication with partners to analyze and evaluate the bank’s assets located in Ukraine. The net asset value of the Bank’s assets located in Ukraine as at 31 December 2021 consisted of an aircraft worth EUR 10.895 million and a building leased under EUR 1.472 million.
“The bank also monitors information on loans to customers whose core business could be affected by events in Ukraine and Belarus,” the report said.
Last year, PrivatBank made a loss of 5.933 million euros, which is 2.3 times less than in 2020. The bank’s assets on 31 December 2021 amounted to 102.945 million euros, which is 24.3% or 33.013 million euros less than at the end of 2020, when PrivatBank’s assets amounted to 135.958 million euros.
At the same time, PrivatBank’s accumulated losses at the end of 2021 amounted to EUR 81.364 million.
It is also reported that in March 2021, the FCMC initiated an administrative case against PrivatBank for non-compliance with the deadlines regarding the necessary actions to ensure the bank’s profitability and sustainability. “In March 2021, the FCMC initiated an administrative case against the bank for non-compliance with the deadlines regarding the necessary actions to ensure the bank’s profitability and sustainability. The bank’s shareholders and the Board are actively working to resolve this issue in order to avoid possible sanctions in the future,” and also in the 2021 annual report.
In terms of assets, PrivatBank is one of the smallest banks in Latvia. The bank ‘s largest shareholder is Ukraine PrivatBank (46.54%), which was nationalized by the Ukrainian government in December 2016.
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