2018, the banking sector generated record profits of UAH 21 billion.
For the first time the profit can be called real and not resulting from window
dressing the financial reports and deliberately reducing provisioning.
Conversion to the LCR, a new liquidity ratio, is successfully underway. This
year the National Bank of Ukraine (NBU) will present the concept of the new
structure of the regulatory capital, as well as the Net Stable Funding Ratio
banks’ priorities for 2019 cover fully-fledged resumption of corporate lending
and continued cleaning up of balance sheets from nonperforming loans.
According to the Banking Sector Review
(February 2019) released by the NBU.
mark up retail lending of quality borrowers
By the end of 2018,
the banks continued active lending to households. In Q4, net hryvnia retail
loans grew by 6.7%, and over the year – by 34%. The highest growth rates were
reported in private (+54.2% yoy) and state-owned
banks (+49.0% yoy).
of consumer lending reduced the NPL portfolio: in Q4, the NPL share decreased
by 1.7 pp, to 52.8%. In the last two years, the
NPL share in five largest foreign banks reduced by 2.7 times, to 13.9%.
However, state-owned banks and banks with Russian capital reported no progress
in reducing nonperforming loans while accounting for 83% of the total NPLs.
The NPL coverage
ratio is 95.5% and is acceptable according to the international standards.
Since the beginning of 2019, the new rule has been applied for depreciation of
collateral for loans remaining nonperforming for over two years. Complete
depreciation of collateral for the loans during the next two years will result
in complete coverage of nonperforming loans with prudential provisioning.
Net hryvnia corporate loans increased by 2.0% over
Q4 2018 and by 8.1% over the year. PrivatBank and private banks accounted for the highest
lending rates: 69.9% and 17.6% respectively.
continued growth of hryvnia loans to nondefaulting
borrowers is even more noticeable, i.e., by 25.8% in 2018. Reliable borrowers
show special interest in FX loans. Despite additional inherent risks of such
lending, the FX loan portfolio increased by 6.0% over a quarter and by 2.6% yoy. Main FX borrowers include alternative energy
companies, sales and agricultural export companies.
According to the
NBU forecast the banks will continue retail lending, which is expected to
increase by over 30% in 2019. The corporate portfolio increase may accelerate,
since the NBU Board sees the potential for loosening monetary policy during the
year, thus interest rates may decrease.
2019, cash inflows to remain on the same level as the previous year
2018, the banks were active in taking deposits from households and businesses;
the increase was 14.8% and 6.8% respectively. Three quarters of new deposits
had up to six-month maturity.
Over the last
quarter, hryvnia retail deposits increased by 3.9% mostly due to improved FX
rate and inflation expectations qoq. Private and
foreign banks account for the majority of deposits: the increase was 7.8% yoy and 6.7% over Q4.
In the last
quarter 2018, hryvnia corporate deposits increased by 11.1% (+6.8% yoy). At the same time, in December, the growth rate was
15.7% attributed to substantial budget spending in the last days of the year.
This seasonal liquidity inflow caused an additional demand among banks for the
NBU’s certificates of deposit at the end of 2018.
In 2019, inflows
are expected to be the same as the previous year.
quarter, dollarization of corporate deposits substantially decreased by
4.6 pp, to 34.9%. In Q4, dollarization of
household deposits reduced by 2.0 pp, to 47.3%
mostly due to strengthening of hryvnia. Thus, the dollarization trend has
resumed that decelerated in Q3 on the account of a weaker hryvnia.
interest rates on deposits were increasing from Q3 in response to slower
inflows to banks. In Q4, the average interest rate on 12-month hryvnia
household deposits edged up by 0.6 pp, to 15.7% per
annum, while that on US dollar ones grew by 0.1 pp,
to 3.6% per annum. Stronger competition for corporate deposits was reflected in
higher interest rates on corporate deposits (+5.3 pp
yoy, +1.5 pp in Q4).
successfully initiated the implementation of a new short-term liquidity ratio,
the LCR. As of middle of February, all banks are compliant with the
foreign-currency LCR and only two institutions have failed to comply with the
all-currency LCR that account for 0.2% assets in the sector.
banks are to improve operating performance
2018, the banking sector generated record profits of UAH 21.7 billion,
in particular UAH 10.8 billion in Q4. Last year, the banking sector’s
provisioning were twice as less as in the previous
year of UAH 23.7 billion, mostly on the account of banks with Russian
2019, the sector remained profitable due to lower provisioning. Banks with
Russian capital were the last to complete provisioning in the reporting year
and in 2019 are not expected to accumulate provisioning that will have material
impact on the sector.
there is still sufficient risk for the sector’s profitability due to low
operating performance of the state-owned banks. Hence, it is important for the
state-owned banks to appoint supervisory boards and improved corporate
more details, see The Banking Sector Review
posted in the Publications
section on the NBU’s website.
on loans and deposits published in the “Banking Sector Review” differ from the
corresponding data published in the “Monetary Statistics” since the former:
data from banks that were solvent as of the reporting date, unless otherwise
data from banks and their branches that operate abroad
funds deposited in other resident and non-resident banks
adjusted for loan loss provisions, unless otherwise stated
data on registered certificates of deposit, unless otherwise stated
information on nonresident customers.