In Q1 Ukrainian banks were
once again in the black after bearing losses in Q4 of 2017. Also, banks
continued active retail lending and attracting retail deposits according to the
quarterly Banking Sector Review released by the
National Bank of Ukraine (NBU).
Banks continue active retail lending
Consumer lending remains high: In Q1 retail loan
portfolio increased by 5.6% to UAH 83.8 billion,
or by over 37% yoy. Most active retail lenders in
January–March were state-owned banks and private Ukrainian banks. Ukrainians
mostly borrow money to cover current needs such as home appliances and others.
The corporate loan portfolio saw hardly any change.
Banks focused on improving quality of the current portfolio, a series of
restructuring measures were undertaken for
non-performing loans to release loan loss provisions for loans that were
Despite the rise in retail lending and successful
business debt restructuring, the share of NPLs increase by 1.8 pp up to 56.4%
of the total debt of the banking sector. The change in accounting methodology
of financial instruments was the contributing factor.
Retail deposits continue to rise
According to first three months of the year, retail
deposits rose by 2.0% under the fixed rate at the beginning of the year up to
UAH 475 billion, at the same time both hryvnia and foreign currency
deposits expanded (by 3.2% and 0.8% in USD equivalent respectively). Deposit
growth rates are prone to acceleration due to a boost in nominal income of
Corporate deposits decreased by 4.8% during the quarter to UAH
398 billion due to seasonal factors. Growth of UAH corporate deposits was
indicative only of state-owned banks (save PrivatBank)
by 3.6%, and in foreign currency - in private banks and PrivatBank
by 6.7% and 1.3% in USD equivalent respectively.
The structure of banks’ liabilities in Q1showed practically no change:
the share of corporate and retail funds accounted for 76.8% of liabilities.
Retail deposits make up over 40% of total bank funding.
FX deposits have once again beat the record low
In response to a tight monetary policy of the NBU,
banks ceased to decrease interest rates on retail hryvnia deposits: The value
of 12-month retail hryvnia deposits remained at 14.2% over the last
5 months. At the same time a slow downslide of interest rates on FX
deposits continues. Once again, these interest rates beat the record low: The
value of 12-month USD deposits dropped by 0.3 pp to 3.3% p.a.
Interest rates on corporate hryvnia loans edged
slightly higher by 1.1 pp to 15.5% p.a., interest rates on retail loans
increased by 0.4 pp.
In Q1, banks made net profit of UAH 8.7 billion
Profitability of the banking sector is moving higher.
In January-March, banks made net profit of UAH 8.7 billion
that is almost a three-fold increase in contrast to the indicator yoy. These financial results can be attributed to a
plummeting provisioning as a result of improved
financial standing of borrowers and completed restructuring of a number of
The banking system is expected
to keep increasing profitability on the account of improved operating profit
and further decline in provisioning.
In Q1, banks initiated conversion to IFRS 9. Reduction
of equity associated with converting to the new standards was
largely set off by profits of the banking sector in Q1. Adjustments to
the new standard will last till the end of this year.
Banks’ profits and losses presented in Q1 statements are preliminary and
For greater detail, see The Banking Sector Review posted in the Publications section on the NBU’s website.
Data on loans and deposits published in the "Banking
Sector Review" differ from the corresponding data published in the "Monetary
Statistics" since the former details:
banks solvent as at the reporting date, unless otherwise specified;
covering banks together with their branches operating abroad;
deposited with other resident and non-resident banks;
adjusted for loan loss provisions, unless otherwise specified;
personal certificates of deposit, unless otherwise specified; and