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 8.1.3​ NPLs
       The situation with non-performing loans (NLPs) deteriorated over the first five months of this year​. The sector remains burdened with about half of all loans on sectors books as an average are bad.
However, under the leadership of the recently departed governor of the National Bank of Ukraine (NBU) Yakiv Smolii the share of NPLs had been falling throughout 2018 and 2019 as part of the banking sector clean up he lead.
But since the start of this year, before the coronacrisis began, the level of NPLs for the sector as a whole started to creep up again rising from 48.36% in January, its lowest point since the 2015 meltdown, to 49.62% as of June.
But NPLs are not evenly distributed amongst the banks, with the bulk being concentrated in the state-owned banks, and the state-owned PrivatBank having the most, what the management called the “fraud loans” created by the bank’s former owner oligarch Ihor Kolomoisky, who used various fake loan schemes to drain $5.5bn out of the bank, which was eventually nationalised in 2016.
As the table shows the privately owned banks are in the best shape with only 18.57% of loans being NPLs, followed by foreign owned banks with 34.25% NPLs in June. And after falling briefly below 50% in January-March, the NPLs at the state-owned banks has risen again over the half way mark to 51.05% as of June.
The deterioration in the quality of the loan books of all Ukraine’s banks is not dramatic, but it is a worrying sign and as the economy crisis drags on the NPLs will rise over the rest of the year. However, with more than 90% of the already bad loans provisioned for they do not represent a danger to the sector, but they are an enormous drag on lending growth and profitability. The strong profits that the banking sector should have earned in 2020 would have gone a long way to alleviating the NPL problem but the repair work will now have to be put off until at least 2021.
    NPLs % of loan book
                   Jun 18
    Jun 19
   Jun 20
   ratio of non-performing loans, %
      56.05
    51.3
   49.62
   incl. banks:
                with state participation, of which:
      71.83
    66.03
   64.79
   PrivatBank
      85.07
    81.63
   79.27
   state banks ex-PrivatBank
      60.14
    52.13
   51.05
   Foreign owned
      42.83
    37.4
   34.25
   Privately owned
      25.05
    21.68
   19.57
   Insolvent
      58.38
    0
   0
 Source: NBU
           55​ UKRAINE Country Report​ July 2020 ​ ​www.intellinews.com
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