Page 48 - UKRRptSept21

UAH97mn that month.
This year banks go off to a more modest start earning well under half as much as the did a year before in January and February of about UAH3bn in both months but business picked up noticeably from April and May when the sector earned about UAH6bn each month. As the summer arrived momentum picked again and profits were lifted to UAH9.6bn the biggest profit the sector has earned in a single month in the last five years.
The other metrics are also looking strong. Bank’s capital adequacy ratio, the amount of cash they keep on deposit to meet demand, was 21.7%, well over the 10% mandatory minimum and up from the low teens it was two years ago. However, the sector managed to maintain their capital adequacy ratios over 20% for all of 2020 thanks to the National Bank of Ukraine (NBU) efforts to clean up the sector in recent years and banks were well able to weather the pandemic’s storm.
Non-performing loans (NLPs), the last big problem Ukraine’s banks need to deal with, have also been falling steadily. With over 90% of the bad loans provisioned for there is no danger of a systemic crisis, but as NPLs still 37% of the loan portfolio a lot of capital that could be used for lending is still locked up. But with the NPL ratio falling from over 50% only two years ago more and more of this capital is being released and added to the bottom line, which is one of the sources of the super profits banks are earning at the moment.
Retail NPLs are trending down towards zero, but most of the most impared loans are concentrated amongst the leading corporates and PrivatBank, which is still holding a large amount of the $5bn of what the bank’s management calls “fraud loans” that were a result of the cash whisked out of the bank by its former owners until it was nationalised in 2016. PrivatBank’s NPLs have also been falling but they still account for 71% of its loan book as of July.
Even with a lot of capital tied up against bad debt, the banks are still accumulating resources as deposits have continued to rise steadily and bank assets are up by half in the last two years.
The lending business remains modest with retail loans growing, but at a modest pace while corporate lending has been falling in the last two years. Ukraine’s banks extended UAH808bn ($30.1bn) worth of corporate loans in July and UAH229.1bn ($8.5bn) worth of retail loans in July, which were 1.7% and 9% more than loans extended in January.
48 UKRAINE Country Report September 2021 www.intellinews.com