PwC in its audit report on the accounts of the Bank “East” noted the significant uncertainties that “may cause serious doubts about the Bank’s ability to continue its operations in the foreseeable future.” In particular, the auditor cited the low inventory of its regulatory capital. The Bank itself during the year has taken a number of actions to improve capital adequacy. But in the current environment under attack is the main asset of the Bank — consumer lending. Therefore, as experts considered, the Bank has limited capacity to preserve profitability.The auditor of the Bank “East” PwC reporting according to international standards for 2019 drew attention to “the existence of substantial uncertainties, which may cause serious doubts about the Bank’s ability to continue its operations in the foreseeable future.” In particular, the auditor pointed to the low level of the stock of regulatory capital, as well as “not amenable to assessing the effects of a pandemic COVID-19” on the Russian economy and the profitability of the group. The auditor of 2016, according to statements of the same Bank PwC also drew attention to “considerable uncertainty,” noting that the Bank may need to increase the capital of the first level.According to the Bank reporting under IFRS, its assets at the end of 2019 made 193,8 billion roubles, having decreased over the year by 17%. Net profit decreased by 15% up to 6.25 billion rubles. While equity has grown by 25% to 29.55 billion RUB In the reporting of the Bank stated that it has no ultimate beneficiary. While significant, the influence of Artem Avetisyan, who through “Vinvin holdings” owned by 42,0% stake in the Bank. He is also Chairman of the Board of Directors. Another major shareholder Evison Holdings Ltd (associated with Baring Vostok), owns 41.6% of shares, however its representatives in the Board of Directors currently is not. The Bank is still in a state of conflict between the main shareholders, which escalated in February 2019, when he was arrested Michael Calvey and another five people associated with Baring Vostok and Bank. Trials are in the UK and Russia. Earlier detained citizens of different countries are still under arrest.As explained by the Director of financial institutions at Fitch Ratings, Anton Lopatin, “the reservation in the audit report, the so-called “going concern”, reflects the fact that the Bank’s weak capitalization”. According to him, based on the final reports for 2019, the regulatory capital adequacy “East” was below the requirements of the Basel allowances. Meanwhile, as noted in statements in the past year, the Bank implemented a number of actions to improve capital adequacy. Including sold a portfolio of debt securities shafts��th value of RUB 40 billion, repealed the payment of interest on subordinated bonds in the amount of 401 million rubles., reduced the volume of newly issued corporate loans, increased level of control over collateral for loans to legal entities and is currently actively pursuing the recovery procedure ensure in order to repay the loans.Excluding allowances requirements according to the standards for the end of 2019 was observed: N1.0 was 9%, N1.1 is 5.4%, N1.2 — is 7.7%. While in statements it is noted that as of 1 January 2020 the standard value of allowances was estimated at 2.25 percentage points (PP), actual — 0,851 p. p., on 1 January 2019 regulatory 1,875 p. p. actual: 1,175 p. However, as noted by Mr. Lopatin, supplements to capital according to “Basel III”, which is in 2019 not pulled the Bank “East”, “are not grounds to deny Bank licenses.” As follows from statements of the Bank due to non-compliance overhead it does not pay dividends.One of the auditors who spoke with Kommersant on condition of anonymity, drew attention to the fact that the audit opinion on the Bank “East” is not modified. In case it would be modified, the auditor would have painted certain situation and what negative impact they can have. Therefore, according to him, “risk average”. “In the current economic conditions, caused by a coronavirus, it would be natural to expect more frequent appearance of such paragraphs in the audit reports on the financial statements of various companies. In such cases, the auditor States the obvious: first of all, the company itself says about possible difficulties in their future activities, expressing significant uncertainty. The auditor only emphasizes this statement, as required by the audit standards,” said managing partner of the audit Department of Deloitte Igor Tokarev.One expert drew attention to the fact that the Bank “East” of the public securities is only subordinated bonds, this phrase auditors may adversely affect the securities. About the epidemic COVID-19 mentioned due to the fact, he said that the Bank’s underlying asset which allows him to continue to generate income, is the unsecured consumer lending. Due to expectations of a deterioration in the quality of borrowers, falling income and falling activity of the population is expected to decline and lending. “This will lead to the fact that the core revenues of the Bank will be under attack,” says the source “b”. This, in turn, will lead to the fact that the Bank may face difficulties in 2020 to cover all NPLs impairment reserves with the way they did before. In statements, the Bank also recognizes that there is a high R��SK that the financial situation of many borrowers and depositors of the Bank at the end of 2020 will be worse than in the beginning of the year that “may lead to decline in profits of the Bank in 2020 and the reduction of opportunities to develop profitable activities.””This will help to increase the basic capital, but it won’t be enough, as distressed assets are many, and they will continue to grow on its consumer loans. Thus with high probability the owner (“Finviz holdings”) will not support the Bank,” he said.To questions “b” Bank “the East” have not responded.Olga Cherenkova
