By KYIV. Dec 27 (Interfax-Ukraine) – The Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group will provide guarantees of up to EUR 50 million for Raiffeisen Bank International AG’s (RBI) investment in the capital of its Ukrainian subsidiary, Raiffeisen Bank.
Alternate Executive Director at the World Bank for Ukraine Roman Kachur confirmed to Interfax-Ukraine that the relevant project was approved by the Board of Directors on December 20.
"The aim of MIGA’s proposed guarantee is to help RBI reduce the risk of some of its assets, which would lead to a reduction in the RBI’s RWA [risk-weighted assets] on a consolidated basis. The RWA capacity that is freed up is expected to help RBUA maintain the supply of credit, thereby supporting employment and economic activity in a country at war," the agency said.
According to it, RBI has applied for MIGA’s guarantee of up to EUR 50 million in Expropriation of Funds cover for mandatory cash reserves for a period of up to one year and one day.
In addition, MIGA provided similar guarantees to RBI for up to EUR 480 million to cover its equity investments in subsidiaries in Bosnia and Herzegovina and Serbia.
As of September 2022, Raiffeisen Bank’s portfolio included retail loans at about 10%; loans to large/mid-market corporates at 78%; and SME loans at 12%. The large/mid-market corporate portfolio is dominated by short-term working capital and trade finance loans with limited long-term project finance loans. The main sectors supported include wholesale and retail trade, agriculture (agribusiness, animal production and crop production), and food and beverage manufacturing.
Raiffeisen Bank in terms of assets (UAH 169.19 billion) as of the end of October ranked fourth among all 67 operating Ukrainian banks. Its net profit in January-October 2022 amounted to UAH 2.51 billion, and its equity capital at the end of October was UAH 16.03 billion (the official rate is UAH 36.5686/$1).
RBI at the end of last year owned 68.21% of the shares, another 30% belonged the European Bank for Reconstruction and Development.
Earlier, First Deputy Prime Minister, Economy Minister Yulia Svyrydenko said that MIGA plans to launch two pilot investment projects by the end of this year – one domestic and one foreign investor – with military risk insurance.
"Direct lending and support for trade finance from IFC, as well as insurance from MIGA until the end of the war, is a positive sign for many investors considering whether to invest in Ukraine right now. Such financing is expected to mobilize private loan capital, because IFC usually finances no more than 30% of the project cost, involving commercial banks and other IFIs in the financial consortium," Svyrydenko said, commenting on this MIGA project, as well as on the $2 billion IFC Program for Ukraine approved in December 2022.
