Page 46 - UKRRptDec22

8.0 Financial & capital markets 8.1 Bank sector overview
Ukraine banks made five times less profit in 2022 compared to the same period last year. From January to October this year, Ukrainian banks earned net profits of $298mn, compared to 2021’s $1.58bn. Revenues grew by 32%, however, though expenses ballooned by 73%.
In Q3, the banking sector continued to adapt to crisis conditions. The banks maintained the operation of their networks and rapidly reopened branches in liberated regions.
The system’s liquidity grew thanks to continued inflows of client deposits. Hryvnia term deposits have started to increase for the first time since the start of the full-scale war, while FX term deposits returned to growth, which has not been seen since the coronavirus crisis.
Net loan portfolio declined overall. Corporate loan portfolios grew only at state-owned banks on the back of state support programs. The ratio of nonperforming loans (NPL) rose as expected, with the fastest growth seen in the retail segment.
Despite heavy provisioning, the sector posted a profit as of the end of the quarter, following a loss recorded in H1. This was facilitated by sustained operational efficiency.
In Q3, the banks posted a 7.5% qoq increase in net assets, which exceeded pre-war levels. The largest growth was observed in NBU certificates of deposit.
At the same time, the net loan portfolio declined: the hryvnia portfolio decreased due to an increase in provisions, and the FX portfolio shrank mostly on loan repayments. Net hryvnia corporate loans dropped by 2.2% qoq, while net FX corporate loans decreased by 10.0% qoq in U.S. dollar terms. Hryvnia corporate loans grew at state-owned banks only, by 4.3% qoq.
The net retail loan portfolio shrank by 13.8% qoq in Q3 due to both a decrease in lending volumes and an increase in provisioning.
The banks have been gradually recognizing their credit losses caused by the war. The share of NPLs grew by 3.9 pp over the quarter and by 7.0 pp since the start of the full-scale invasion, to 33.6%. The NPL ratio rose the most in the retail sector. Loans have been recognized as nonperforming mainly due to payments falling past due.
The NBU raising the key policy rate in June prompted banks to increase their rates on both retail and corporate deposits in Q3. Interest rates on loans went up along with deposit rates.
Volumes of hryvnia retail deposits increased by 2.7%, mainly due to larger account balances with state-owned banks. Volumes of FX retail deposits remained almost unchanged. Thanks to higher deposit rates, retail term
46 UKRAINE Country Report December 2022 www.intellinews.com