Page 16 - BNE_magazine_04_2019

16 I Companies & Markets bne April 2019
Ukraine's banks are back in profit but high NPLs and interest rates are crushing the business
Ben Aris in Berlin
Ukraine’s banks are back in profit but they remain hobbled by the crushing weight of their non- performing loans (NLPs) and steep interest rates left over from the country's economic collapse in 2015.
The Ukrainian banking sector reported UAH21.7bn ($80mn) of net profit in 2018 following a net loss of UAH26.5bn a year ago, the National Bank of Ukraine (NBU) said in a statement published on February 7, returning to profitability for the first time since 2013.
The net interest and commission fee income of the banking system increased by an average of 38% in 2018, the largest part (46%) earned from corporate loans. Investment in securities provided another 27% of interest income, and retail loans 26%.
Banking reform under the former NBU governor Valeriya Gontareva has been one of Ukraine's outstanding reform successes and her successor Yakiv Smolii is turning out to be equally competent.
The NBU has withdrawn the licences of around 100 lenders, many of them due to their involvement in money laundering, stealing depositors’ money or for having a non-transparent ownership structure, leaving 77 banks active.
However, despite this good news the amount of bad debt in the sector remains huge. Half of the loans in banks have gone
The average level of NPLs in the banking sector is over 50% and stuck there.
bad (53.19% as of February) and over the last two years that percentage has hardly changed.
Moreover, the state banks, including Oschadnybank and Ukreximbank, are even worse off than the rest of the sector, where NPLs make up two thirds (67.7%) of their loan book.
But the real elephant in the room is PrivatBank that was nationalised at the end of 2017 after bne IntelliNews exposed in a cover story “Privat investigations” the fact that a large part
“The NBU has withdrawn the licences of around 100 lenders, many of them due to their involvement in money laundering, stealing depositors’ money”
of its loan book had been stolen by its former owners, oligarch Ihor Kolomoisky and his partners, using fake loans to related party shell companies. Since then the bad loans accounting for 83% of the loan book has not changed. Despite regular calls by the authorities to Kolomoisky to return the money drained out of the bank, clearly almost nothing has been recovered.
The situation with “foreign owned” banks is a bit better, where NPLs have fallen to around 40% from 50%, but these
Ukraine loans UAH mn
NPLs% of loan book
CB "PRIVATBANK" PJSC
private
insolvent
Source: NBU
83.00 83.01
23.75 23.35 36.82 52.07
01/02/17
01/02/19
ratio of non-performing loans, %
53.99
53.19
incl. banks:
with state participation, of which:
77.23
67.69
other than CB "PRIVATBANK" PJSC
29.37
54.54
belonging to foreign banking groups:
49.66
39.80
www.bne.eu
Source: NBU