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8.1.2 NPLs
The banking sector’s non-performing loans (NLPs) continue to decline, despite the economic slowdown and the crisis.
NPLs remain the sector’s main problem. But as 90% of the bad loans have been provisioned for they do not represent a danger to the stability of the sector. However, that has tied up an enormous amount of capital, which is a drag both on the growth of the banking sector and the economy has a whole.
NPLs for the whole sector fell below 50% of the total loans in the middle of last year, but despite progress in reducing the figure progress has been slow. The incoming governor of the National Bank of Ukraine (NBU) Kyrylo Shevchenko has promised to take action to pick up the pace. However, the crisis means profits that could have been used to pay down bad debt has disappeared and depressed business climate means clients behind on repayments will also struggle to pay of their debts.
The distribution of bad debt remains unchanged with the state banks in the worst shape (NPLs are 63%) and the privately owned in the best shape (18%).
NPLs amongst corporates remains flat at around 60%, but more worryingly the NPLs at the retail level have started to tick up, albeit from a much lower base, and were 35% of total retail loans in July.
53 UKRAINE Country Report August 2020 www.intellinews.com
