Losses Predicted for JUGRA Bank Due To Many Foreign Currency Loans

JUGRA Bank takes ruble deposits from citizens, but gives loans to legal entities in foreign currency. It faces losses from the revaluation of foreign currency assets and ruble income of borrowers, even if the ruble would slightly strengthen.

National Rating Agency (NRA) at the request of RBC analyzed JUGRA Bank's balance sheet (32nd place in terms of assets), which, according to sources of Vedomosti newspaper, is controlled by the owners of Gorbushkin Dvor – Yury and Alexey Hotin. A former top manager of JUGRA confirmed to RBC that they indeed own the bank.

According to financial reports, 78.3% of JUGRA's assets denominated in foreign currency, despite the fact that most of the liabilities denominated in rubles, – notes Senior Analyst at NRA Pavel Martynyuk. He believes that this creates a currency risk: even a slight strengthening of the ruble could lead to significant losses from the revaluation of foreign currency assets. 'Another risk – the non-payment of loans denominated in foreign currency, especially if a borrower's income is in rubles,' said Martynyuk.

Assets of JUGRA as of November 1 amounted to 326 billion rubles, the credit portfolio – 235 billion rubles. Almost all loans are issued to legal entities (loans to citizens account for only 0.2% of the portfolio). Since the beginning of the year the loan portfolio has doubled, and the currency portfolio has more than doubled – it amounted to 120% (99.1 billion rubles).

The bank's financial reporting under IFRS for 2014 shows that more than 70% of loans is not secured. The President of JUGRA Bank Alexey Nefedov assured RBC that the situation has now changed: 86% of the loan portfolio is secured. Pledges, he says, are in the form of real estate (30 billion rubles) and shares of oil companies.

Nefedov did not name the customers, citing trade secrets. As RBC previously wrote, besides Gorbushkin Dvor, Hotins own a small oil company Dulisma, Rusoil (storage of petroleum products), as well as five-star hotel 'Moscow', which has been recently bought by them from the business structure of Suleiman Kerimov.

Funding of operations is carried out largely at the expense of individuals. Deposit portfolio as of November 1 amounted to 142 billion rubles (about 70% of all client resources in the bank) against 66 billion rubles at the beginning of the year. According to Nefedov, more than 30% of the individuals deposits are large – more than 5 million rubles.

Its currency risks Bank hedges using forward transactions on the foreign exchange market, explained Martynyuk, the turnover did not reach 90 billion rubles per month at the beginning of the year, and in September and October exceeded 450 billion rubles per month.

As Nefedov explained, the bank was active on the futures market due to the volatility of the currency market. 'More than ten counterparties contacted the bank in order to hedge currency risks. The bank concluded this contracts of different amounts,' he said, pointing out that these operations were funded from the passive base of the bank, including balances on accounts of legal entities. 'The economic sense of the bank is a commission,' highlighted Nefedov.

Hedging of currency risks costs the bank quite a lot, stressed Martynyuk. The balance of foreign currency transactions in the first 9 months of the year was minus 4.7 billion rubles, he says.

Vedomosti has already mentioned that the bank plans to name its main owners at the insistence of the Central Bank. According to Nefedov, it is planned to do when publishing the fact of additional issue of 6.8 billion rubles, which should happen before the end of the year. What kind of owners would be disclosed, Nefedov did not elaborate.

JUGRA's net income from the revaluation of foreign currency in the first ten months of the year amounted to 13.3 billion rubles, net profit – 7.64 billion rubles. As for securities, according to Nefedov, the bank mainly has dollar-denominated government Eurobonds for $150 million.

RBC, 19/11/2015