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Financial sector rebounds, investor confidence restored

Article - September 15, 2011
While government reforms help boost the financial sector, surviving private firms such as Sparta Investment Group maintain high levels of quality from the pre-crisis era
The global financial crisis severely affected Ukraine’s banking sector. Liquidity dried up, millions in deposits were withdrawn and inter-bank lending froze. Several banks declared bankruptcy, while others were restructured.

According to Konstantin Vaysman, chairman of First Ukrainian International Bank, the change, albeit slow, finally came about with the new government.

“Recovery was slower than in Russia, for example, as good signs for recovery started there in 2009, whereas here this only showed in 2010,” he says. The economic comeback and stabilization, he adds, came “from a team sharing the same values and looking for a very stable and prosperous country.”

Fedir Yaroshenko, Minister of Finance, explains that the current administration’s effective economic reforms served to steady the financial system. “We had an empty budget and severe economic problems. The government has managed to achieve very high results in this very short term,” he adds.

While several reforms are currently underway, the first to be implemented was the new tax code. “Investing in Ukraine should be very profitable, as personal income tax is very low at just 15%, which is very favorable in comparison with other European countries,” claims Petro Poroshenko, head of the council at the National Bank of Ukraine, the republic’s central bank. “Corporate tax is just 17% and VAT will be lowered to 17% or 18%, whilst at the same time, most European countries are increasing taxes.”

Mr. Poroshenko points out that despite these advantages for investors, Ukraine must still improve transparency and tackle the high complexity of the tax system in order to create a more business-friendly environment.

Whereas Ukraine’s banks suffered losses of some $4 billion in 2009, statistics show that 2010 losses were closer to just $1.6 billion. “We can see that confidence is being restored step-by-step as people are starting to make deposits in the banks again and figures indicate that there was 26.4% growth in deposits last year,” comments Oleksandr Sulyayev, president of Sparta Investment Group and member of the Ukrainian Association of Investment Business.

Established in 2005, Sparta provides a full range of investment services, including asset management, wealth management and investment banking. The group, which considers itself a kind of army fighting for its clients’ well being, weathered the financial crisis rather well and in 2010 subsidiary Sparta Capital was named Best Underwriter by The Banker magazine. Sparta’s authorized capital of $8.5 million allows it to manage funds in the amount of $53.3 million.

Moreover, Sparta’s diversified open-end investment fund “Sparta Balanced” was the most profitable mutual fund last year, with an annual yield of over 36% in 2010.

 Sparta’s reliability and professionalism has attracted both local and foreign clients.

“We have long-term clients that we trust and work with, one of them is Boryspil Airport. Last year we made two issues for Boryspil, amounting to UAH500 million ($62 million),” says Mr. Sulyayev. “We also have a large number of foreign investors we consult and we suggest areas where they might want to invest in. This is positive because it brings foreign money into our economy. Also, we’re seeing investors that left the country during the crisis are now coming back.”

Apart from “Sparta Balanced”, the group manages four other funds: “Sovereign Sparta” and the AC Real Estate Fund (two closed non-diversified corporate investment funds), AU Ascending (a closed diversified corporate venture investment fund), and “Sparta Galaxy” (a private non-diversified mutual fund venture).