bne IntelliNews – Ukrainian banking sector is profitable again – just

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Ukraine’s banking sector returned to profit for the year in July, but barely, with a cumulative 3.4 billion UAH ($91.98 million) year-to-date, according to the latest data from the National Bank of Ukraine (NBU). (chart)

This year should have been a good year, with banks making more profits in the first two months than they did a year earlier, entering their second year of strong growth as the economy finally emerged from recession. caused by the Dignity Revolution of 2014.

However, the onset of the war at the end of February brought banking activity to a halt and the banking sector recorded heavy losses in April and May. (chart)

Russia presented its Stage 2 from the war in April and withdrew its forces from the north of the country to concentrate its efforts in the Donbass region. This allowed the rest of the country to start getting back to work. The easing of tensions was immediately noticeable in the banking sector, which returned to strong profits at the same level as the past two years in May, or 6.1 billion UAH. June saw a setback with losses of 3.3 billion UAH, but July was very strong with a rebound to 8 billion UAH, slightly behind July in 2021, the best month for the sector in more than five years.

The strong first two months of this year meant that earnings in July were enough to put the banking sector’s cumulative profits back into the black for the first seven months of this year.

The central bank has not released all the data covering the sector and the latest results for returns on assets and equity were released in April when both were around zero but should have improved in the meantime. time. (chart)

Lending has picked up and while business lending has fallen steadily since the start of this year when tensions rose dramatically, personal borrowing has jumped dramatically over the past two months as the population contracted loans to overcome the instability of the first months of the war. Business loans totaled UAH 900 billion ($24.3 billion) in July, while personal loans increased by UAH 250 billion ($6.8 billion). (chart)

Despite the war, the banking sector remains stable. Non-performing loans have increased in recent months to 35.3% of the loan portfolio for businesses and a reasonable 18.2% for individuals. But remarkably compared to previous years, the overall level of NPLs remains low. (chart)

The total NPL ratio for the sector was 30% in July, compared to 37.2% in July 2021 and 48.5% in the same month in 2020. Focusing on the sub-sectors, public banks remain the most exposed to NPLs with a ratio of 45.2% and public banks, PrivatBank, takes the lion’s share with 67.1%, although this figure is down from the 71.4% reported the same month a year earlier. early. Foreign banks are in better health with 11.8%, followed by Ukrainian private banks with 14.6%.















NPL % of loan portfolio

Jul 20

July 21

Jul 22

non-performing loan ratio, %

48.47

37.18

30.01

included banks:

with State participation, including:

63.12

54.56

45.19

Private bank

79.3

71.35

67.07

State banks ex-PrivatBank

46.64

40.31

29.54

Foreign ownership

34.81

24:25

11.81

Private property

18.94

11.97

14.64

Insolvent

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Source: NBU

Nevertheless, cut off from all sources of financing and with activity greatly reduced by the war, the banks drew on their capital to finance their operations. The NBU has not updated its capital adequacy ratio figures since the start of the war, but these had fallen from the mid-20s to 18% in February – still well ahead of previous figures. 10% compulsory. But if the capital adequacy ratio continues to fall, at some point the central bank or the owners will be forced to recapitalize the banks. (chart)

This article is from bne IntelliNews Ukraine monthly country report. Sign up to receive the report in your inbox each month, which covers slow-moving macro and micro trends, top policy news, and a roundup of major sectors and company news. The first month is free and you can unsubscribe at any time.

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