Results’ releases

Joint Stock Company The State Export-Import Bank of Ukraine (Ukreximbank) has published its Consolidated Financial Statements for the year ended December 31 2008, together with the Independent Auditors' Report by Ernst & Young.

Highly disposed to further fulfil its significant public role in keeping up nation-important projects, in supporting export-import activity of Ukrainian enterprises and in executing agency functions for the Government of Ukraine in servicing credit lines under the state guarantees, in the turbulent environment of the reporting year Ukreximbank held to conservative strategy focused on sufficient liquidity, cost management and efficiency.

Today Ukreximbank reports with satisfaction full accomplishment of YE2008 plans, strict compliance with regulatory requirements, firm adherence to all financial commitments as well as to international transparency standards.

Profitability reporting: core income on the notable increase while positive net profit comparatively down to reflect future challenges

In FY2008 Ukreximbank reports core income, inclusive of net interest income before provision and net fee and commission income, up 50.3% compared to FY2007 to an amount of UAH 2,037.4 million.

Net interest income before provision increased 54.9% to UAH 1,629.7 million, making about 79.9% of core income. Net interest margin in FY2008 equalled 4.51%, down from 4.79% the year before, because of the Bank’s strategy of maintaining higher liquidity than aggressive earning capacity in its balance sheet. In the current environment, the management considers the level of NIM satisfactory.

Net fees and commissions went up by 34.6% to UAH 407.7 million, stating about 20.0% of core income. Reflecting the Bank's core activity, growth in fees and commissions largely resulted from strong cash and settlement operations income, especially international ones, and from currency conversion. Fees and commissions from cash and settlements transactions increased 28.1%yoy and contributed 47.3% to overall fees and commission income. Income from currency conversion services grew 38.6%yoy and gave 27.85% of total fees and commission income.

Despite strong operational income, the value of net profit was impacted by the Bank's intention to reserve high level of asset provision. Based on the most conservative scenario, the Bank has increased allowance for interest earning assets 6 times to total UAH 1,294 million. This was rather attributable to the management's estimation of the deteriorating operating environment and was entirely in line with the strategy adopted by the Bank and targeted at a strong balance sheet rather than profitability.

Increase in provisions brought net profit after taxation for the reported period down 77.9% compared to FY2007; however, net profit for the year remained at positive UAH 122.3 million.

Owing much to the above conservative considerations, earning ratios have also declined compared to the previous year. Annualized Return on Average Assets (ROAA) for the reporting period equalled 0.32%, down from 2.35% the year before, also much impacted by FX-assets re-valuation in view of the weakening hryvnia in 4Q2008.

Annualized Return on Average Equity (ROAE) came to 3.80%, down from 26.16% in 2007, much as a result of fresh equity injection of about UAH 1,000.0 million received in December 2008, while the indicator was calculated on the basis of average equity.

Cost to income ratio (CIR) stood at moderate 39.35%, remaining one of the best among peers. In the course of the cost optimization measures to follow, the Bank is disposed to pursue its efficiency policy aimed at shortening expenses, which is expected to further improve cost to income ratio.

Strong focus on liquidity and asset quality

In Y2008, Ukrexim continued to perform its publicly significant role of the real economy supporter and implemented a series of programs in cooperation with international financial institutions.

In terms of diversification by industries, Ukrexim exposure to trade enterprises, which accumulate sustainable FX-revenues, made the largest 27.5% share of total loan book as at year-end 2008. Agriculture, the strongest performing sector and main contributor to both GDP and exports in FY2008, took the share of 16.1%, up from 14.4% the year before. Loans to individuals, which traditionally represent minor share of Ukrexim portfolio, gave only 5.4% of gross loan book, or a comparatively low amount of UAH 2.109.2 million.

In 2008, Ukreximbank strategy was to retain its liquidity at a comfortable level and to ensure certain "extra" liquidity cushion in view of the anticipated fluctuations of the Bank's operating environment. Highly liquid assets, inclusive of cash and its equivalents, posted a significant 82.3%yoy growth and increased to 13.3% of total assets. In the most challenging period of Y2008, Ukreximbank remained one of the very few providers of liquidity to domestic inter-bank market.

Total assets in the reporting period grew 66.6% compared to FY2007 and came to UAH 47,589.2 million, mainly due to appreciation of hard currency – denominated loan book.

Non-Performing Loans (NPL), calculated on the 90-days-plus basis applicable to any kind of credit exposure, in Y2008 accounted for 0.81% of gross loan book, down from 1.36% at FY2007. Non-performing loans were covered by provisions 7x. In general, the provisioning charge increased to 5.67% of total loans in 2008 from 3.26% in 2007.

Total funding base, inclusive of customer deposits, amounts due to credit institutions, own debt securities and NBU resources, increased 68.1% versus FY2007 to UAH 43,375.4 million, including 78.7%yoy growth in amounts due to customers and due to credit institutions.

Despite wave of deposit withdrawals from Ukrainian banks, triggered in IVQ2008 by FX-volatility and bulk negative news, customer accounts with Ukreximbank in Y2008 grew 38.3%yoy to UAH 16,599.7 million.

Balances on current accounts of customers in the reporting period grew by 98.1%yoy to UAH 6,352.4 million. Corporate funds posted over-2-fold increase compared to FY2007 and reached the largest share of 88.7% in total customer current accounts, up from 81.2% in 2007.

Shareholder's Equity: standing support from the sole shareholder

The Government of Ukraine as the sole Ukrexim shareholder has reaffirmed its readiness to support Ukreximbank and to keep its efficient performance as a leading corporate sector financier. Such commitment was particularly evidenced by regular capital injections and continued non-dividend policy realized through capitalization of the Bank's profits.

In 2008, the Government made three injections into Ukrexim authorized capital, total worth UAH 1,576.6 million, including capitalization of profits amounting UAH 476,634.5 million. As a result, total shareholder's equity in FY2008 grew 58.2% compared to 2007 to UAH 3,939.4 million.

In January 2009, Ukreximbank share capital was increased by UAH 3,700.0 million to UAH 6,762.6 million. This capital injection led to a comfortable capital adequacy level of 19.70%, significantly up from 10.98% as at year-end 2008.

Agency services for the Government: publicly important and honorary role

Since 1992, Ukreximbank remains the sole Ukrainian bank acting as financial agent for the Cabinet of Ministers of Ukraine (the Government) in servicing international loans extended under the guarantees of the state.

As the Government agent, in 2008 Ukreximbank has serviced over 150 loan facilities for total amount of USD 2.86 billion under 13 credit lines from Germany, USA, France, Japan, Switzerland, Spain etc. Agency proceeds received by the Bank were directed at delivering its priority objectives in economic stabilization as well as at financing "critical" imports to Ukraine.

Corporate banking: back up of core business by partnership with IFIs

In 2008, Ukreximbank continued to expand its long-term efficient partnership with world-leading IFIs. Such included the World Bank, the European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC), Kreditanstalt fur Wiederaufbau (KfW), and others.

Ukrexim partners prominent IFIs under a number of nationally important programs, in particular, those promoting energy efficiency of national producers or facilitating their foreign trade activity.

IFI's programs, implemented by Ukreximbank in Ukraine, include the World Bank's Second Export Development Project (EDPII) under USD 154.5 million Facility approved by the World Bank back in 2006 after efficient accomplishment of the first Export Development Project. Ukrexim acts under EDPII as a wholesale export finance and guarantee institution.

Ukreximbank continues to cooperate with EBRD under Energy Efficiency Program (UKEEP), successfully launched in April 2007. EBRD loan facility under UKEEP is aimed at financing large and medium-sized energy efficiency and renewable energy projects to help private companies reduce their energy consumption and costs. In January 2009, Ukrexim received USD 50 million loan extension from EBRD for further utilization of UKEEP.

Since 2007, Ukreximbank is an active participant of the EBRD Trade Facilitation Programme (TFP) aimed at promoting foreign trade with Eastern Europe and the CIS region. Operating under USD 70 million EBRD Facility and resting upon good relationship with long-term international partners, Ukrexim remains leading trade finance provider for Ukrainian exporters and importers.

Also, in 2008 Ukreximbank became the first Ukrainian bank participating in the EBRD factoring transaction under the TFP in Ukraine. EBRD Factoring Finance Facility for total USD 10 million to Ukrexim under TFP aims at settling sales by small and medium-sized producers, importers and traders across the country, allowing sellers to receive their proceeds without delay.

In February 2008, Ukreximbank and KfW signed new Agreement under the terms of KfW Loan Facility in the amount of EUR 40 million to help modernize assets and provide working capital for Ukrainian small and medium sized enterprises (SME Programme).

In March 2008, Ukreximbank and IFC signed Agreement on Ukrexim participation as a confirming bank under trade financing delivered in the challenging markets (Global Trade Finance Programme).

Large debt maturities: comfortable redemptions for YE2009

Two largest Ukrexim external debt maturities in 2009 include USD 345 million syndicated loan facility due April 2009 and USD 252.75 million Eurobonds due September 2009. Ukreximbank is quite comfortable about its external debt maturities scheduled for Y2009 and is determined to fully and timely meet all its commitments.

Management estimation of YE2009 developments

In YE2009, Ukrexim management does not target any loan book growth, except a marginal one, due to expanding partnership with IFIs. In the view of ongoing global and local operation environment weaknesses, Ukrexim business strategy for Y2009 shall be focused on liquidity, higher increase of domestic deposits to loans’ ratio, reduction of FX-exposure in the loan book and prudent provision policy.

FY2008 HIGHLIGHTS BY IFRS:

• Net interest income up 54.9%yoy to UAH 1,629.7 million; net fees and commissions income up 34.6% to UAH 407.7 million
• Total funding base up 68.1%yoy to UAH 43,375.4 million
• Customer accounts up 38.3%yoy to UAH 16,599.7 million, with individuals' deposits up 51.8%yoy, to 69.3% of total term resources from 63.3% in FY2007, and corporate accounts up over-2-fold to 88.7% of total current accounts
• Total shareholder's equity up 58.2%yoy to UAH 3,939.4 million with fresh capital injection in January 2009 bringing authorized capital to UAH 6,762.6 million and capital adequacy to a comfortable 19.70%
• Non-performing loans down to 0.81% of gross loan book from 1.36% in FY2007

Full text of IFRS FY2008 Consolidated Financial Statements for the period ended 31 December 2008 together with the Independent Auditors' Report available for review and downloads from http://www.eximb.com/eng/financials/financial/ifrs/auditors2008/

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For any additional information you are welcome to contact:
Ms. Vera Posadska, Head of Macro Analysis and Investor Relations Department
E-mail: vposadska@hq.eximb.com
Tel: +38 044 247 38 76
Fax: +38 044 247 80 82