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8.0​ Financial & capital markets 8.1​ Bank sector overview
There is no sign of a bank crisis but the NBU is being very careful to maintain confidence in the system. ​Banks were prohibited from refusing to give depositors their money, Yakiv Smolii told reporters on March 19. “We forbade banks to introduce any restrictions on deposits whose term has expired,” said the Governor of the National Bank of Ukraine. “That is, if your deposit has expired, you can do anything with it: extend, withdraw. There are no restrictions.” He said there has been virtually no outflow of deposits this month.
However, some banks are reacting badly to the crisis. Due to coronavirus restrictions, Raiffeisen Bank Aval, the largest foreign-owned bank in Ukraine, suspends operation inthe week of March 24 at 71 branches – about 15% of the total. Bank Board Chairman Alexander Pisaruk said branches will not close in cities where there is only one branch. Separately, through work at home programs, the bank has been cut in half the number of staffers inside branches that are open.
Ukraine’s bankers must be very frustrated as 2020 was supposed to be a good year. ​As bne IntelliNews has reported 2019 was the first year that the sector fully returned to health and profits and earnings were growing strongly after nearly five years of woe. After making loses as a sector as a whole of UAH26.5bn in 2017, the sector returned to profit in 2018 (UAH22.3bn) and more than doubled that in 2019 (UAH59.6bn).
In the first month of this year banks made UAH5.6bn in profits​, up moderate from the UAH5.4bn they made the year before and well ahead of the UAH1.7bn they made in January 2017. The numbers for February are not out yet, but are likely to show further gains, but clearly profits will disappear in March as the economy has been brought to a stand still by the stop-shock of the coronavirus pandemic.
Lending to retail clients has also been growing strongly​ since the start of 2018 to reach UAH211.3bn in January. Lending to corporate has gone less well. After rising strongly in 2018, lending peaked in December and began to fall again over 2019 to end atUAH822.2bn in January, down from the peak of UAH948.6bn in December 2018.
The bulk of credits are still financed by deposits​ which have grown steadily over the last two years to reach UAH1,532bn in January, up from UAH1,359,7bn in the same month a year earlier.
Going into a fresh crisis, the banks face the storm in relatively good shape. While non-performing loans (NLPs) remains a problem in the meantime all the bad debt has been provisioned for so does not present an existential threat to the banks nor the system. And regulatory capital have grown over the last two years to reach UAH150bn and 20.3% respectively, up from UAH109.6bn and 12.6% in January 2017 when the recovery began.
39​ UKRAINE Country Report​ April 2018 ​ ​www.intellinews.com