Dnipropetrovsk Governor Ihor Kolomoisky's PrivatBank appears to be seeking to cover all its losses at the state's expense. At first glance, the bank appears to be one of the largest and most resilient in Ukraine, with a huge number of branches and millions of clients (40,6% of all Ukrainian depositors hold their deposits there). However, according to an analytical report by NBU Governor Valeria Gontareva, which was leaked to the media, PrivatBank is effectively bankrupt.
As you know, Privatbank came under a refinancing program in the framework of supporting the domestic banking sector. Many experts and observers immediately noticed that the Kolomoisky bank and several others close to the then head of the NBU, Stepan Kubiv, received the lion's share of the funding. (Moreover, not for the first time, in 2009, Privat was also allocated more than 7 billion UAH of refinancing). To date, the refinancing amount is 1,1 billion US dollars. At the same time, the bank, more precisely, its owner Igor Kolomoisky, as was repeatedly written in the media, was involved in the spring collapse of the hryvnia, when within a few days the hryvnia fell to a historic low against the dollar: 12 to 1. It turned out that the banks that received the money for refinancing , used them for self-enrichment. This money entered the foreign exchange market, collapsing the national currency, and brought huge profits to its owners.
In addition, as Gontareva herself mentioned, there are questions regarding property left by banks as collateral for refinancing. Kolomoisky here managed to circle everyone around his finger. His bank left as collateral 10 billion hryvnia property in the Crimea. It was in April, and even then it was clear that, most likely, all the property located in the Crimea was lost. The Dnepropetrovsk governor left air as a guarantee. A separate question is why the NBU, or rather, its head Stepan Kubiv, accepted such property as collateral. Not only as between Kubivy and Kolomoisky there were certain agreements not without benefit for their own pockets.
But that's not all. PrivatBank is currently seeking another 10 billion hryvnias in refinancing. This despite the fact that the bank has been repeatedly criticized for late payments, refusing to pay interest on time, or even returning deposits. Clients have repeatedly complained about fraudulent interest calculations. In general, PrivatBank is known for its harsh treatment of clients and has a history of ripping off business partners. Recently, an unpleasant story surfaced for Kolomoisky. It turns out that PrivatBank was levying large fines on clients living in the Anti-Terrorist Operation (ATO) zone. Moreover, no amount of persuasion worked with the bank's employees. They categorically demanded payment, or face a fine of 50 hryvnias for each day of delay. PrivatBank, without a shadow of a doubt or conscience, sent debt collectors to the relatives of ATO participants. Only after this story became public were clients granted relief. However, it seems likely that this will not last long.
According to journalist Anatoly Shariy, Ihor Kolomoisky suffered significant losses due to the annexation of Crimea and military operations in the east. Specifically, two PrivatBank branches, 337 branches, 773 self-service terminals, and 483 ATMs operated in Crimea. These 337 branches constitute 13,7% of what remains, and 483 ATMs constitute 6,3%. Additionally, the Privat gas station network includes the brands AVIAC, AVIAC Plus, Ukrnafta, ANP, Sentosa OIL, and Maveks. In total, there were 43 stations on the peninsula, which the new Crimean "authorities" successfully seized.
Sevastopol authorities have seized 12 gas stations, a gas station, and an oil depot in Inkerman.
The Belbek Airport near Sevastopol ($15 million), the Tavria health resort ($20 million), the Foros sanatorium, and the unfinished Lazurny Bereg boarding house were lost. Several other non-residential buildings, which housed Privatbank branches, were also lost. The Niva Yayla recreation center, the Yunost children's health complex, and another unfinished building in Katsiveli were also lost.
Privat Group owns 23 gas stations in the Donetsk region and 17 in the Luhansk region. Due to military conflict, fuel sales in the Donetsk region fell by 64,3%, and in the Luhansk region by 92%—in other words, they practically fell.
Kolomoisky owns a ferrosilicon production facility in the Luhansk region—the Stakhanov Ferroalloy Plant. The plant was quite profitable, but has now been seized by separatists. Naturally, production is out of the question. When, and whether, the plant will be operational again remains an open question.
PrivatBank has 311 branches in the Donetsk region. Assets total UAH 2,942 billion. Furthermore, loans to individuals total UAH 2,8 billion, demand deposits from individuals total UAH 1,1 billion, loans to legal entities total UAH 0,223 billion, and deposits from individuals total UAH 4,522 billion.
In the Luhansk region, the bank's presence is almost half that: 144 branches with assets totaling UAH 1,474 billion. Individual loans total UAH 1,3 billion, individual demand deposits UAH 0,43 billion, corporate loans UAH 0,144 billion, and individual deposits UAH 1,67 billion. Currently, the bank's activity in the Donetsk region accounts for 42% of the bank's total assets, and 14,6% in the Luhansk region.
Most bank branches in the east are closed. Despite PrivatBank imposing fines on Ukrainian citizens living in the ATO zone, it's clear the bank won't see this money anytime soon. Essentially, the loss of Crimea and the war in Donbas has left the bank without significant sources of income. In other words, if not bankrupt, it's very close. It's a matter of time.
Meanwhile, PrivatBank is seeking another refinancing tranche, as mentioned above, in the amount of 10 billion hryvnias. It's interesting to see what Ihor Kolomoisky will offer as collateral this time – Donetsk and Luhansk property, some of which may also have been lost for a long time. Furthermore, many of PrivatBank's assets in Donbas are currently worth next to nothing due to the fact that they are either inoperative or destroyed.
There are serious doubts about the purpose of the refinancing funds. Will this money end up back on the foreign exchange market, further depressing the hryvnia? Kolomoisky clearly wants to compensate for his losses in Crimea and eastern Ukraine. Therefore, it's quite likely that the money, if he receives it from the NBU, will not be used to pay interest on deposits. He will either use it to generate excess profits on the foreign exchange market or transfer the funds to offshore jurisdictions such as Israel, Switzerland, or Cyprus. The bank will then be artificially driven into bankruptcy. Kolomoisky has already carried out similar schemes several times, profiting from them. For example, he bankrupted his own company, Aerosvit, leaving around 3,000 employees unemployed and with wage arrears. Why not repeat this with PrivatBank, through which a third of all Ukrainian citizens receive their salaries? Or resort to blackmail, as he did previously, to force the NBU to grant refinancing, otherwise the owner of PrivatBank will leave millions of citizens barely making ends meet without wages, and an equal number of defrauded depositors, while blaming the state for all the debts.
Special correspondent
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