The NBU published the final results of its sustainability assessment of the top-20 banks, confirming that the banking system overall currently has a high safety margin, with the maximum capital shortage across the system estimated at UAH 10bn ($0.26bn). The NBU identified three banks with elevated risk of capital losses over a three-year horizon, including state-owned Ukreximbank, foreign-owned Pravex Bank and locally owned MTB. The central bank said their prospective capital shortage stemmed from their low operating efficiency, i.e. low interest margins and high operating expense/income ratios. These banks will be required to submit to the NBU restructuring and/or recapitalization programs with a focus on asset restructuring and operating efficiency improvement. At the same time, state-owned Oschadbank demonstrated strong capital resilience in the NBU model, its total capital ratio seen almost doubling over three years to 30%.

The Ministry of Economy reported a provisional merchandise trade deficit of $2.3bn in December, slightly wider than $2.0bn in November and bringing the full-year gap to $27bn.

Natural gas production in Ukraine increased by 1.1% y-o-y to 18.7 bcm in 2023, including 13.9 bcm extracted by Naftogaz (+5.1%) and 1.1 bcm by its majority-owned subsidiary Ukrnafta (+5.8%). Private operators cut gas production by 14% y-o-y to 3.7 bcm.

NBU gross foreign reserves rose by 4.4% ($1.7bn) m-o-m in December, to $40.5bn, increasing by 42% y-o-y. The end-2023 reserve tally was equivalent to 5.4 months of prospective goods and services imports, according to a central bank estimate. The official rate of the hryvnia to the US dollar stood at UAH 37.98:USD as of end-2023, implying drops of 4.2% m-o-m and 3.7% y-o-y.

LSE-listed MHP, Ukraine’s largest poultry producer, announced on Jan. 5 that holders of its 2024 Eurobonds maturing on May 10, 2024, had tendered $138.1m or 39.5% of the outstanding principal amount of the bonds by the early deadline of Jan. 4 set by the tender offer. These bonds will be repurchased at 95% of par. All subsequent buybacks, before the final deadline of Jan. 19, will be conducted at 85% of par. MHP is to announce the final amount of bond principal accepted for buyback on or around Jan. 22, with settlement expected on Jan. 23.

According to Ukraine’s State Customs Service, automotive cargo traffic via the Shegyni-Medyka crossing point on the Ukrainian-Polish border resumed on Jan. 6 after being blocked on Nov. 23. The blockade was lifted after the Polish Agriculture Ministry agreed to satisfy the requirements of protesting local farmers with respect to state support. However, traffic via three other major border crossings remains blocked by Polish truck drivers, including at Yagodyn-Dorohusk where the blockade was resumed on Dec. 18 following a one-week break.

Naftogaz published its 9M23 results, with revenue dropping 13% y-o-y to $4.5bn, EBITDA surging by 8.5x y-o-y to $1.1bn, and net income rebounding to $418m from a net loss of $2.2bn in 9M22. The EBITDA and net margins jumped by 23pp and 52pp y-o-y to 26% and 9%. Net operating cash outflow was negative at $31m (vs. -$383m in 9M22), investment cash was positive at $247m, with $708m worth of sold cushion gas offsetting $619m of PP&E purchases. Financing cash flow was also positive at $52m, with $198m of net proceeds from borrowings offsetting a $144m payment of interest. End-9M23 cash stood at $1.3bn, up from $837m at end-2022 but down from $1.5bn as of end-June 2023, with most of it held at Ukrainian state-owned banks. Total debt increased by 17% y-o-y to $2.9bn, with net debt dropping by 1.8% y-o-y to $1.6bn, yielding Debt/EBITDA of 1.8x and Net Debt/EBITDA of 1.0x. Naftogaz reported group gas production of 10.3 bcm in 9M23, up from 10 bcm in 9M22, with full-year extraction seen at 14.0 bcm (vs. est. 13.2 bcm in 2022). The company also reported 9.4 bcm of gas in its underground storage as of end-9M23, estimating that this volume together with current production would be sufficient to go through the heating season.

Russian offensives persist but remain limited to several sectors on the eastern front and continue to make only minor gains, which actually slowed compared to December

Ukraine exported 6.0 Mt of grain and oilseeds in December, the sixth month of the marketing year (MY) 2023/24 (July 2023 – June 2024), up 32% m-o-m and 0.9% y‑o‑y. Grain exports totaled 5.2 Mt (+43% m-o-m, +4.3% y-o-y) while oilseed exports stood at 0.8 Mt (-13% m-o-m and -17% y-o-y). December sunflower oil exports stood at 673 kt, +33% m-o-m and +53% y-o-y.

Ukraine’s direct and guaranteed public debt stood at $141bn as of end-November, up 3.3% m-o-m and up 26% or $29bn YTD, equivalent to an est. 83% of 2023E GDP.

WSE-listed Astarta Holding, Ukraine’s largest sugar producer, has raised a $60m seven-year loan from state-owned Oschadbank to finance construction of a soybean protein concentrate plant in the Poltava region.

Minutes from the latest NBU Monetary Policy Committee (MPC) meeting, which preceded the Dec. 14 meeting of the central bank’s Board, showed that all MPC members voted in favor of cutting the key rate by 100bp to 15%, in line with the NBU’s forward guidance from October. All committee members agreed that such a decision was the most optimal under the circumstances, as November inflation (+5.1% y-o-y) was better than expected, mainly owing to F/X market stability, UAH-denominated instruments remained attractive, and seaborne export volumes beat projections, yet the foreign financing risk partially materialized. The majority of MPC members said they saw room for a 100-200bp cut this year in the base-case scenario, i.e. assuming sufficient foreign aid inflows. At the same time, an undisclosed minority was in favor of keeping the key rate on hold, in line with the latest guidance, in view of the potential deterioration in inflation and devaluation expectations due to the projected moderate pickup in inflation this year and ongoing uncertainty about international support, which risks fueling hryvnia depreciation pressure and spur F/X demand.

The National Bank’s PMI-type index of business expectations dropped by 3.4 points m-o-m in December, to 45.7 on a 0-100 scale, following slight declines in October and November.

Interpipe reported 9M23 net sales of $785m (+14% y-o-y), EBITDA of $288m (+2.3x y-o-y) and net income of $189m (+1.7% y-o-y). Pipe segment EBITDA tripled over the period, to $158m, wheel segment EBITDA recovered to $29m from -$3.3m in 9M22, and steel EBITDA rose by a third, to $100m. On a pass-through basis (without separate attribution to the steelmaking segment), pipe EBITDA surged by 2.3x y-o-y to $229m, rail EBITDA jumped by 3.3x y-o-y to $51m, and steel EBITDA fell 24% y-o-y to $7.3m. The EBITDA margin rose by 19pp y-o-y to 37%.

The Finance Ministry reported a provisional central budget deficit of UAH 1,330bn ($36bn) or 20% of GDP in 2023. Adjusted for UAH 425bn of grants ($11.2bn), the central budget’s cash deficit stood at UAH 1,755bn, equivalent to $48bn and 27% of GDP.

The Ministry of Finance sold $546m of bonds at the final primary auction of 2023, including UAH 12.8bn ($342m) of hryvnia-denominated debt and $203m of F/X-denominated bonds.