Oschadbank CEO talks about record profits, privatization and artificial intelligence

Read an interview with Sergii Naumov, Chairman of the Board of the state-owned Oschadbank, for Delo.ua.

The Strategic Program of Oschadbank, approved by the Supervisory Board at the end of 2024, — for what period is it designed and does it provide for privatization?

The program is designed for four years - from 2025 to 2028. As of today, there is no talk of privatization. All pre-war plans for privatization are currently on hold. The philosophy of Oschadbank's management is as follows: we have to make the bank so that at any time when our shareholder decides that it is time for privatization, we will be ready.

Do you include this possibility in the bank's four-year development program?

Do you mean the possibility of privatization? No. We do not. We include the bank's development in the program so that when the shareholder decides to privatize the bank, it will be a very interesting asset for potential investors.

In 2024, Oschadbank earned a record pre-tax profit of UAH 18.6 bln, twice as much as in 2023. How did the bank make such a profit? 

We made a profit due to the growth of the loan and investment portfolio. Net interest income grew by 29%, or UAH 5.5 bln, compared to the previous year. Net non-interest income increased by UAH 0.4 bln at once. Revaluation of bonds in bank's capital added UAH 4.1 bln to the profit. Improvement of the loan portfolio amounted to UAH 2.8 bln — during the year, we released provisions for bad loans formed over the past few years for this amount. Overall, the bank's loan and investment portfolio grew by UAH 76 bln over the year. The volume of government securities increased by 31%, or by UAH 54 bln. The net loan portfolio increased by UAH 22 bln, or 25%. Anticipating a possible question about the significant share of securities in the bank's asset structure, I would like to point out that if there was no war in the country, if there was economic growth and higher demand for loans, we would have grown more in the loan portfolio than in government bonds. However, there is nothing wrong with the growth of the share of government bonds in the portfolios of state-owned banks. We provide the state with the opportunity to reduce the budget deficit, which was formed due to insufficient economic growth and taxes during the war. If the country's economy grows, taxes increase, the budget deficit decreases, and business lending increases. We provide all available funds to the state at normal rates. Moreover, if the state needs it, we are ready to further increase the portfolio of domestic government bonds while lending to businesses.

In 2024, total interest income of Oschadbank amounted to UAH 44 bln, of which UAH 19 bln was the income from government bonds.There was a trend towards a decrease in banks' investments in NBU certificates of deposit and an increase in investments in government bonds. It should be understood that we do not invest in certificates of deposit to earn money, but primarily to manage liquidity. In addition, for the NBU, it is a monetary policy tool to control inflation and reduce pressure on the hryvnia exchange rate.

What amount of taxes and dividends should Oschadbank pay to the state in 2025 based on the results of 2024?

More than UAH 12 bln. Most of this amount is taxes.

Is business ready to come to you for loans?

There is demand from businesses. To be honest, I would like to see more projects. Private businesses are quite cautious about investing in development in times of war. However, such businesses do exist and come to us for loans. We are working to increase the share of the private sector in our loan portfolio. In addition, the Ukrainian economy, in particular the energy sector, the gas industry, and the defense sector, needs to recover. Therefore, I am not worried that we will not have loan portfolio growth.

What is the role of Oschadbank and other state-owned banks in financing the defense industry? What is the role and share of private sector banks in this process?

The main driver here are state-owned banks. Among the state banks, Oschad is the main one. For today. The situation may change. Several private Ukrainian banks also support the defense sector. They enter into club agreements and consortia. Today, Oschadbank sees itself as a leader in consortium lending. This applies to the energy and defense industries. Today, the volume of Oschadbank's loans to the defense industry exceeds UAH 10 billion. I think the share of such loans will increase in the coming years.

What is the current situation with Oschadbank's NPLs?

It is improving. In 2022-2023, the share of so-called bad loans was 46%. In the structure of these loans, a significant part was occupied by old debts. In addition, new ones were added, which have arisen since the beginning of the full-scale war. We are talking about loans to borrowers who found themselves in the occupied territories. We cannot do anything there, so we have to reserve these loans and recognize them as “bad”. As of the end of 2024, the NPL share decreased to 39%. Nevertheless, I emphasize: these bad loans have already been reserved, and there is no negative impact on capital. The UAH 2.8 bln of provisions I mentioned earlier is largely the result of debt restructuring. And there were assets that we simply sold. There are assets that we have written off.

Who are the biggest problematic borrowers of Oschadbank now?

The company that owns the capital's Gulliver business center has been a problem for a long time. And unfortunately, in 2024 the situation worsened. After the Gulliver BC (which is the collateral and the only source of repayment of the bad loan, which continued to be partially serviced during the war) was transferred to the ARMA by court order, loan payments stopped. There were no more payments during the second half of 2024, and there are no payments now. Therefore, Oschadbank has started the process of recovering the asset.

What is the current situation with loan servicing by borrowers from the currently occupied territories?

Most of our borrowers who are located in Ukraine-controlled territory but once have had businesses in the currently occupied territories cannot pay their loans. We are not currently collecting their debts. We are waiting for the time when we will be able to discuss restructuring or other debt repayment mechanisms with this category of borrowers. We do not communicate at all with the borrowers who remained in the occupied territories.

How does Oschadbank work with Ukrainian refugees abroad? How do they service their loans?

We work with them as with ordinary clients. We try to make the service as convenient as possible for them; in particular, we introduce remote services as much as possible. However, most importantly, we regularly extend the validity of payment cards. In addition, we have recently canceled the fee for payments with Oschadbank cards abroad.

Bankers say that most Ukrainian refugees - business owners and wealthy Ukrainians - have returned to Ukraine. The number of wealthy VIP clients of domestic banks abroad has decreased by three times. Do you see this trend?

We do not keep such statistics. Nevertheless, we see that a significant part of our clients is still abroad. The general problem of the Ukrainian banking system is the reduction in the number of clients.

Please tell us about the status of Oschadbank's claims against russia for compensation for losses due to military aggression.

Back in December 2022, we finally won the arbitration in Paris on a claim against russia regarding the loss of Oschadbank's assets in Crimea. We are now at the stage of legalizing the judgment in other jurisdictions and searching for russian assets around the world for their further seizure. But finding assets is very difficult.

What do you think about the future Ukrposhta bank? To what extent can it compete with Oschadbank? In particular, Oschad is currently the leader in terms of the number of operating branches during the war. How are you going to share the “laurels” with Ukrposhta Bank?

Of course, the emergence of a new state-owned systemic bank with an extensive branch network is a factor of increased competition in the market. Although given the fact that Ukrposhta Bank is conceived as an inclusive bank, this is only a plus for our country. Another issue is the extent to which Ukrposhta Bank branches can operate profitably in small, remote communities. For example, according to the NBU requirements, Ukrposhta branches will need to strengthen cash desks and security measures, introduce a financial monitoring system, and carry out cash collections. All of these are additional costs. Oschadbank, for example, has mobile branches. Their advantage is that they cover numerous settlements with banking services. Currently, eight mobile branches cover 125 territorial communities. People in these territories need mainly basic banking services, such as cash withdrawals, utility payments, and card reissues. As a rule, from what I have personally seen, it is enough for people to use banking services twice a month. Soon we will launch two more branches that are mobile. Therefore, the total number will be ten.

How much does a mobile branch car cost?

Such a car is not cheap, but it is ten times cheaper than building stationary branches. Such cars are energy-autonomous and equipped with power generators and Starlink.

By the way, who are Oschadbank's main competitors? How do you divide the market with other state-owned banks and non-state financial institutions?

We do not deliberately divide it. We all work to attract customers. Oschad does not involve administrative resources to take away a piece of the market from other banks. We simply have experience and some advantages, and the government turns to us with programs. But, of course, all state-owned banks are fighting for the attention of their shareholder, i.e. the state.

The new limits on transfers between cards and using IBAN details - how justified are they, in your opinion? What prevented banks from carrying out high-quality financial monitoring of clients before these restrictions were introduced? (The NBU claims that the relevant regulations on financial monitoring in banks were in place before the introduction of the limits.)

The fact is that each bank has its own risk-oriented approach. By agreeing to introduce limits on transfers for UAH 50-150 thsd per month, banks have additionally made their approaches to financial monitoring more demanding and unified in order to prevent, foremost, such phenomena as drops.

To what extent did Oschadbank's clients feel the introduction of the limits? What has changed in the work of Oschadbank? Are there any interesting results and cases at Oschadbank after the restrictions were introduced?

Most customers were not affected. On the other hand, we see a downward trend in the number of violators. People are beginning to realize that once they are blacklisted in one bank, they will not be able to be served in others. It turns out that selling your personal data is not that profitable. And this stops people from violating the law.

In 2024, the amount of funds in the accounts of individuals in Oschadbank increased by 11.6%, reaching UAH 210 bln. It is definitely good for the bank. But what does it testify: people have nowhere to invest? People do not trust the state (because they could buy government bonds rather than put money for deposits)? Everything is bad with business (because people do not invest in business, but carry money to a bank)?

I think that everything you mentioned is true. Additionally, it is the result of a number of restrictions during the martial law. Besides, the accumulation of funds in accounts is facilitated by the overall increase in money supply in the country. As for the purchase of government bonds - the dynamics are positive here; people buy government securities. But businesses are not now ready to invest in development.

The question is ambiguous and not so much about Oschadbank. Your Contact Center of received more than a million appeals on a monthly basis in 2024. 75% of the requests were automatically processed. Such indicators are ensured, in particular, due to the work of the intellectual assistant Sofia, which replaces the work of 500 operators. How do you evaluate the progressiveness of such technologies, taking into account that 500 people are potentially left out of work?

These 500 people can find themselves in other areas, including IT. If there is a demand for such programs, artificial intelligence, then there is an automatic need for specialists who will develop such technologies. In general, the labor market is scarce today. We cannot find people. We currently have more than 800 vacancies. Artificial intelligence can just be a partial solution to problems with staff shortages, which are the result of war and the overall deterioration of the demographic situation in Ukraine.

How many women work as collectors in Oschadbank?

So far, only one woman. But we want more. Therefore, we urge all women who want to try themselves as collectors, please address the bank! It can be a cool job for a woman.

At the end of January 2024, Deputy Minister of Finance Yuriy Draganchuk stated that the government was preparing for the sale of two state-owned banks, for which there are already potential buyers. It was about Ukrgasbank and Sense Bank, as far as I know. How do you evaluate the prospects for the state's exit from banks’ capital during the war?

The likelihood that some state banks will be privatized by the end of the war is very small. This is my subjective opinion, but I can be wrong without having full information on potential negotiations. However, now it is very difficult to organize a state-owned bank privatization competition with enough potential investors.