Page 41 - UKRRptMar20
P. 41
8.1.2 NPLs
Part of the reason for the low level of corporate loans is the bankers themselves are also reluctant to lend to companies and complain there are not enough high quality borrowers to lend to and build up their credit portfolios.
Bankers are still shy of dealing with large corporate loans as they are still holding a huge amount of non-performing loans (NLPs) on their books from the crisis years. Part of the reason that net interest income has been doing well in the last year is that slowly the recoverable of these NLPs are being paid off and that is the main credit business rather than the extending of new loans.
During the crisis years typically rather than write off the loans and book the loss, bankers simply restructured the loans, extending the terms indefinitely until such time as a client was able to re-start making the payments. It seems that Ukraine has reached that point now as NPLs fell to below 50% of all outstanding loans for the first time in years by the end of 2019. NPLs were 48.4% as of January 1, a reduction of 4.5 percentage points compared January a year earlier.
Loan portfolio quality improved across all bank groups, except banks with Russian capital, which have been sanctioned by the NBU and are essentially unable to operate in Ukraine now.
The new retail lending seen in 2019 has also helped to improve the quality of loan books as banks are being more careful about who they lend to: in 2019 the share of non-performing retail loans fell by 11.9 pp to 34.1%. At the same time the two major state-owned banks restructured more than UAH30bn ($1.2bn) of loans via the mechanism of voluntary financial restructuring which also improved the quality of the loan book. "Considering these actions, the state-owned banks (save for Privatbank) reduced the share of NPLs from 55% to 49%," the NBU said in a statement in January. Privatbank’s NPLs remain the highest in the sector at over 80% as of the end of last year.
41 UKRAINE Country Report March 2020 www.intellinews.com
