Page 49 - UKRRptMar19

8.1.1 NPLs
Rapid development of consumer lending reduced the non-performing loans portfolio of Ukrainian banks in October-December 2018 by 1.7 percentage points (pp) to 52.8%, the National Bank of Ukraine (NBU) said in its February's banking sector review.
The high NPL rate remains a major challenge for the Ukrainian banking sector, particularly, in state-owned banks, and was caused by the financial and economic crisis of 2014-2016. In 2018, the NBU urged bankers to step up their efforts to workout NPLs.
Over the past two years, the NPL share in five largest foreign banks has reduced by 2.7 times, to 13.9%. However, state-owned banks and banks with Russian capital have reported no progress in reducing nonperforming loans while accounting for 83% of the total NPLs, the review reads.
Since the beginning of 2019, the new rule has been applied for depreciation of collateral for loans remaining non performing 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," the central bank added.
Ukraine’s Oschadbank makes most progress dealing with NPLs in 2018 but bad loans remains a big problem for the sector
Ukraine’s banking sector returned to profit in 2018, but the sector is still not out of the woods as non-performing loans (NLPs) are still above 50% and represent a danger for the financial system.
Of all Ukraine’s banks, the former Soviet-era savings giant Oschadbank (State Savings Bank of Ukraine) made the most progress in reducing the amount of bad loans on its books last year.
Ukraine’s Finance Ministry addressed the progress of the four state banks in dealing with NPLs in 2018 in a report released on February 28, of Concorde Capital said in a note.
Regular reporting on state bank’s NPLs is part of Ukraine’s commitments to the International Monetary Fund (IMF) under the new stand-by loan program that was adopted at the end of last year.
According to the report, the four banks cut the amount of their overdue loans by UAH4.88bn ($181.8mn) in 2018 by collecting money from debtors through foreclosure and/or sale of pledged assets, including a UAH2.96bn reduction by Oschadbank and UAH0.41bn contraction by Ukreximbank.
The banks restructured UAH20.91bn in bad loans in 2018, including UAH16.03bn by Oschadbank and UAH0.23bn by Ukreximbank.
As of the beginning of 2019, Oschadbank had UAH97.9bn in NPLs (67% of gross loans). The value of NPLs at Ukreximbank was UAH83.7bn (59% of gross loans), the nationalized Privatbank had UAH224.8bn (83%) and Ukrgazbank had UAH8.8bn (17%).
The total amount of NPLs at four state bank was UAH435.2bn at the beginning of 2019, with contributions from Privatbank, Oschadbank and Ukreximbank being 56%, 23% and 19%, respectively.
49 UKRAINE Country Report March 2019 www.intellinews.com