The independent auditor has confirmed the poor quality of CB PrivatBank PJSC’s loan portfolio.
CB PrivatBank PJSC’s audited financial statements as of 31 December 2016 show that loan loss provisions have been increased by UAH 155.9 billion on the bank's books.
Furthermore, the auditors identified the need for additional provisioning in the amount of UAH 10 billion. As a result, the bank's capital position turned negative at UAH 882 million as of the end of 2016.
The auditor was unable to verify the bank's profits and losses as well as cash flows due to the lack of documented evidence to support audit findings about the period when the impairment of loans and advances to customers occurred. The audit findings suggest that CB PrivatBank PJSC fell into distress long before 2016.
Ernst & Young (EY) accounting firm was hired to identify the bank's capital needs in accordance with Article 411 of the Law of Ukraine On Households Deposit Guarantee System. Based on the audit findings, it was established that CB PrivatBank PJSC will require additional equity injections with public funds as a result of the mismanagement by the former bank’s owners and managers.
According to the Memorandum between Ukraine and the IMF, a forensic audit of PrivatBank’s operations performed to identify whether wrongdoing or bad banking practices took place prior to the bank’s nationalization will be completed by mid-September 2017.