President Volodymyr Zelensky held a press conference on Sunday devoted to the second anniversary of the Russian invasion of Ukraine. Below is a summary of his key statements: New US military assistance is critical for reversing the current unfavorable battlefield situation for Ukraine, and members of US Congress “know we need their support within a month’s time.” Russian forces are maintaining heavy offensive pressure due to superiority in artillery fire, with Ukraine currently using seven times less artillery ammunition. Unless this ratio is brought to at least 1:3, grinding Russian advances of “100, 50 meters” will continue. Overall, developments on the battlefield this year will determine the “format” in which the war will end. Long-range weapons and enhanced air defense systems such as the US Patriot are two key areas in which the West can help Ukraine turn the war in its favor. Ukraine has lost 31,000 soldiers killed since the start of the war, but the Russian number of deadly casualties is six times higher at 180,000 (and 500,000 together with wounded). Zelensky refused to disclose full Ukrainian casualties, including wounded and missing, not to provide information for Russia that would allow to assess the full scope of Ukrainian battlefield losses. On non-military matters, Zelensky did not rule out trimming the number of government ministries and downsizing the broader state infrastructure in view of persisting financing shortages. He said decisions on that would be approved in up to two months. Zelensky also rejected the prospect of elections in the near term, saying that media speculation about his loss of legitimacy after his five-year terms in office expires in May 2024 was part of a propaganda campaign promoted and paid for by Russia.

Russian offensives do not slow despite costly capture of Avdiyivka; the bulk of attacks reported in Donetsk region

The IMF and Ukrainian authorities reached a staff-level agreement (SLA) on the third review under the Fund’s $15.6bn 4-year EFF program, paving the way for the IMF Board to approve disbursement of the next loan tranche of $880m “in the coming weeks”. The IMF said Ukraine had met all structural benchmarks and all but one performance criteria, except for a small miss on tax revenues due to the Polish border blockade at the end of last year. The Fund left its 2024 growth outlook unchanged at 3-4% y-o-y, estimating 2023 growth at 5.0% with upside risk, up 0.5pp from its previous estimate last December. The IMF stressed that this year’s budget financing and macroeconomic stability were crucially dependent on timely disbursements of external support projected at $38bn (slightly up from $37.3bn before). Finally, the Fund said that Ukraine’s “preparations for the treatment of external commercial debt are advancing, and it is essential to complete this by mid-2024 and consistent with program parameters.”

The Verkhovna Rada gave its final approval yesterday to three bills — on corporate governance reform at state-owned enterprises, on reform of domestic capital markets, and on electronic crop receipts, a new financial instrument for farmers — which are needed to unlock $1.5bn in budgetary support from the World Bank. According to Deputy Economy Minister Oleksiy Sobolev, the World Bank Board may approve the financing as soon as today, with the new corporate governance legislation also prospectively facilitating inflows of funding from the IMF and EU.

According to preliminary data released by the NBU, state-owned Ukreximbank booked net profit of UAH 1.6bn ($44m) in 4Q23, flat q-o-q, bringing 2023 net profit to UAH 5.2bn ($143m), up from a net loss of UAH 6.9bn ($213m) in 2022. Total assets increased by 8.4% q-o-q in UAH terms (+12% y-o-y), with net loans +2.3% q-o-q (-8.9% y-o-y). Customer deposits rose by 6.0% q-o-q in UAH terms (+21% y-o-y). NIM, based on net interest-bearing assets and in UAH terms, inched up by 0.5pp q-o-q to 3.7% (2.7% in 2023, flat y-o-y). Annualized cost of risk totaled -2.4% in 4Q23 compared to +2.0% (meaning a release of provisions) in 3Q23, with 2023 cost of risk coming in at pos. 1.1% following a 14% provisioning ratio booked in 2022. The total capital adequacy ratio stood at 4.2% (-5.9pp q-o-q, -3.5pp y-o-y).

State-owned Oschadbank booked a UAH 9.4bn ($258m) net loss in 4Q23 after earning UAH 7.3bn ($201m) in 3Q23, bringing its 2023 net profit to UAH 4.8bn ($130m), up from UAH 0.7bn ($21m) in 2022. Total assets in UAH terms increased by 9.1% q-o-q to UAH 344bn (+26% y-o-y), with net loans +7.3% q-o-q (+7.1% y-o-y) and the securities portfolio up 13% q-o-q (+21% y-o-y). Customer deposits grew by 11.2% q-o-q in UAH terms, to UAH 299bn (+29% y-o-y). NIM, based on net interest-bearing assets and in UAH terms, decreased by 0.7pp q-o-q to 8.0% in 4Q23 and was at the same level for the full year (+1.0pp y-o-y). Annualized cost of risk remained positive, 0.4% in 4Q23 vs. 0.8% in 3Q23 as the bank continued to release provisions, totaling 1.8% for the full year (vs. 15% provisioning in 2022). The total capital adequacy ratio came in at 16.6%, -2.4pp q-o-q and +2.1pp y-o-y.

The Ministry of Finance placed UAH 5.0bn ($131m) of hryvnia-denominated bonds and EUR 275m of USD paper at a primary auction yesterday.

WSE-listed Kernel Holding, Ukraine’s largest sunflower oil producer and grain exporter, will hold an EGM on Mar. 21 to vote on canceling 6,602,000 treasury shares.

Ferrexpo’s Board of Directors decided not to proceed with a proposed interim dividend of 3.3 US cents per share, which was due to be paid on Feb. 23. The decision to cancel the dividend followed a Ukrainian appeal court’s ruling that upheld a $128m claim against Ferrexpo’s Poltava Mining subsidiary on Jan. 29, 2024.

The Finance Ministry expects to receive an additional $1.8bn from Japan in 1Q24, to be channeled via World Bank facilities, on top of $0.4bn disbursed in January.

Metinvest CEO Yuri Ryzhenkov described Russia’s battlefield advances over the past week that resulted in the capture of the town of Avdiyivka near Donetsk “alarming”. The company’s Pokrovske Coal and Zaporizhstal steel mill are both located within 40 km of the current front line. On a different note, Ryzhenkov reiterated Metinvest’s plans to increase iron ore and steel production to 75% and 65% of capacity, respectively, this year, with labor shortages caused by conscription being a key obstacle.

S&P Global Ratings upgraded its long-term issuer credit rating on MHP to CCC from Selective Default (SD), with a negative outlook, after the company completed a second buyback of its 2024 Eurobonds ($138m tendered at 95% of par). S&P said that while it had initially viewed the buybacks as a distressed debt exchange, those ultimately resulted in a more manageable 2024 debt maturity profile for MHP. The negative rating outlook reflected Ukraine’s sovereign rating.

According to a Feb. 5-10 poll by the Kyiv International Institute of Sociology (KIIS), the share of respondents expressing trust in President Volodymyr Zelensky dropped to 64% from 77% in December. At the same time, the share of those distrusting the president rose to 35% from 22% over the period. The same poll showed the level of public trust in the former army commander-in-chief Valeriy Zaluzhny, whom Zelensky dismissed on Feb. 8, remaining overwhelmingly high at 94%, virtually unchanged from 92% in December. Zaluzhny’s successor, Oleksandr Syrsky, was trusted by 40% of those questioned and distrusted by 21%, with 35% not aware of him.

Metinvest reported 4Q23 iron ore concentrate production of to 3.6 Mt, up 29% q-o-q and 255% y-o-y, bringing full-year output to 11.1 Mt (+3.5%). Crude steel production totaled 494 kt in 4Q23 (-1.0% q-o-q, +98% y-o-y, bringing full-year output to 2.0 Mt (-31% y-o-y), with the volume of finished and semi-finished products 0.7% q-o-q and up 30% y-o-y at 737 kt in 4Q23 and down 18% y-o-y to 3.1 Mt in 2023. Quarterly coking coal concentrate production fell by 11% q-o-q and 10.7% y-o-y to 1.1 Mt, rising by 10% y-o-y to 5.5 Mt for the full year. Lastly, coke production totaled 293 kt in 4Q23 (-2.0% q-o-q, +2.8% y-o-y) and 1.2 Mt in 2023 (-25% y-o-y).

Russian forces capture Avdiyivka ruins, but these remain tactical-level gains; yet Russian offensives seen unlikely to subside

The Ukrainian military command announced shortly after midnight Saturday that it ordered a withdrawal of troops from Avdiyivka in order to avoid encirclement and save solders’ lives. The retreat was reportedly completed in an orderly fashion (even some Russian propaganda sources called it “more or less well-organized”). The Ukrainian command had brought in an experienced assault brigade shortly before the retreat in order to protect a narrow withdrawal corridor and thus enable units fighting in the practically encircled town to leave their positions. However, Ukrainian commanders admitted that an undisclosed number of Ukrainian soldiers were taken prisoner as Russian forces intensified their onslaught in the final stage of the withdrawal operation. Unconfirmed reports circulating on social media, including by Ukrainian soldiers, speculated about dozens of wounded Ukrainian servicemen being left behind due to a hasty retreat, suggesting that Russia’s last-minute assault on the withdrawing Ukrainian forces may have partially succeeded. In any case, although the number of Ukrainian troops that were deployed in Avdiyivka is not known, the withdrawal was extremely difficult to perform as the gap between Russian assault units closing in from the north and south to complete an encirclement apparently narrowed to under 2 km by Saturday.