Loan portfolio improved across all bank groups, except banks with Russian capital

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Loan portfolio improved across all bank groups, except banks with Russian capital 1

In 2019, nonperforming loans (NPLs) in Ukrainian banks reduced for the first time in three years below 50% and as of 1 January 2020 made up 48.4% ((-4.5 pp) in 2019). Loan portfolio quality improved across all bank groups, except banks with Russian capital, NBU reports.

The main improvement factors were:

  • an increase in retail lending (by about 30% yoy). This enhanced quality of the retail portfolio: in 2019 the share of nonperforming retail loans reduced by 11.9 pp to 34.1%;
  • major credit portfolio restructuring of two state-owned banks of over UAH 30 billion on the account of the mechanism of voluntary financial restructuring. Considering these actions, the state-owned banks (save for PrivatBank) reduced the share of NPLs from 55% to 49%;
  • major efforts by banks with foreign capital in optimizing portfolios by selling and writing down NPLs on the account of loss allowance. The share of NPLs in foreign group banks (save for Russian) reduced from 23.1% to 16.0%;
  • appreciation of the domestic currency, which reduced the hryvnia equivalent in foreign currency NPLs ;

“Today, the share of NPLs remains high, however, it poses no major risks to the financial sector, since the coverage ratio exceeds 95%.  Despite minor progress, banks should continue getting rid of nonperforming exposures. This mostly concerns state-owned banks (along with PrivatBank) that account for three-quarters of all NPLs. We hope that after reappointment of supervisory boards in two state-owned banks, financial institutions will advance the efforts and align with the nonperforming exposures management strategy,” noted Kateryna Rozhkova, NBU First Deputy Governor.

According to her estimates, comprehensive actions will reduce the NPL level in banks to 10%, as prescribed in the Strategy of Ukrainian Financial Sector Development until 2025.

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