Page 46 - UKRRptOct20

Ukraine’s banking sector is performing remarkably well given the negative impact on the economy from the coronacrisis.
Bank assets have been rising strongly since the end of 2019 and continued to climb thorough out 2020 to reach UAH1.6 trillion as of September.
The average profitability of the banking sector is struggling to take off and while earnings have stabilised at around UAH4bn ($141mn) a month for the whole sector profits are still lagging the results of 2019, although they are well ahead of both 2018 and 2017.
The sector had an extremely good year in 2019, its first year of strong growth, and was on course to have an even better year in 2020 until the coronavirus epidemic hit. The cumulative profits of the banking sector in September were UAH32.6bn, which is UAH16bn less than the same month a year earlier, but when compared to the UAH10.9bn banks had made by this point in the year in 2018 and the mere UAH1.4bn in 2017 then the sector appears to be on a solid footing.
That is backed up by the improving capital adequacy ratio (CAR) of the banking system, which was 21.4% as of September – a comfortable level for an emerging market and double the mandatory minimum required.
The cumulative profits are not rising that fast as the sector has had several bad months this year losing money in June (UAH5.1bn) and it made nothing at all in August.
Loans and deposits
The outlook for profits remains uncertain as the country was going into a second wave of the coronavirus at the end of September and another lock down is possible.
Retail lending has continued to rise steadily, up from UAH214bn ($7.5bn) in January to UAH225bn in September. Retail borrowing is rising on the back of recovering incomes, but those incomes took a hit between December 2019 and June 2020 which saw more Ukrainians turn to bank loans for help. However, real income growth began again as the summer came to an end and made it easier for people to repay their loans.
Corporate lending has not faired as well. After a spike in borrowing in April as the lockdown came into effect when corporate borrowing jumped to UAH226bn, borrowing fell back again to UAH218bn in May, June and July. More recently in August and September corporate borrowing crept up again to c.UAH225bn.
On a year-on-year basis, retail borrowing is ahead of the last two years and well ahead of 2017. Corporate borrowing is behind last year’s level, although in the summer months was closing the gap and may over take the 2019 level of borrowing if the increase in borrowing activity of the last two months continues.
The situation with NPLs continues to improve with the overall banking sector average NPLs definitely below 50%, printing an average of 48% in September. However, the picture is very mixed.
46​ UKRAINE Country Report​ October 2020 ​ ​www.intellinews.com