OREANDA-NEWS. January 24, 2011. In 4Q10, total net loss at FORM came out at UAH 1.2bn mostly due to a double uptick in provision charges which rose to UAH 1,077mn (vs UAH 568mn in 3Q10). Although total revenue expanded by 23.8% qoq on the stronger NII (+22.5% qoq), the PbP was depressed by the mounting operating costs (+70.8%). Forum’s loan book contracted by 6.3% qoq in 4Q10 alone (UAH 14,118mn vs UAH 15,070mn in 3Q10) while customer funds were down by 5.5% qoq.

Millennium Capital views the results as NEGATIVE in the short-term but find some positive implications for earnings post 2011. Despite a depressed picture of the bottom line exacerbated by the loan portfolio contraction along with higher NPLs (~50% vs 40% in 3Q10), Millennium Capital assumes a positive stance on the current provisioning policy of the bank since an accelerated cleanup of the balance sheet should improve the near-term profit outlook for FORM, while FY2010 results would have been terrible anyway. Millennium Capital attributes a sizeable increase in opex to restructuring related costs and therefore perceive it as a one-off loss, but still believe it should impact the stock negatively in the ST.