Fixed Income
First Ukrainian International Bank (FUIB) became the 8th-largest Ukrainian bank by assets following its July 2011 merger with DongorBank. Despite improvements in FUIB’s fundamentals, its Eurobonds are trading with a YTM of 13.0%. This yield represents a premium over sovereigns of 435bps, down from an average of 600bps in November-January, but is still at an unreasonably high level, in our view. Given that FUIB is owned by SCM, Ukraine’s premier financial-industrial group, we believe that a spread over sovereigns of 250-300 bps would be more appropriate, and we therefore see FUIB-14s as an attractive buying opportunity. We also note that the yields on Ukraine-13s and -15s have been declining, and should continue to move closer to the levels seen in the summer of 2011.
