Page 46 - UKRRptJan21

Non-performing loans (NLPs) remain the sector’s one unresolved headache, although progress is being made there too. As part of the clean up operation the bulk of the NPLs have already been provisioned for so they do not represent a systematic risk to the financial system, but bank managers are unwilling to unload the collateral they hold on a depressed market so they continue to carry these assets on their books.
The upshot is the pace of unwinding bad debt is very slow and the bank profitability is still not strong enough to retire debt quickly. Consequently a lot of capital that could be put to work remains locked up in the system.
Overall the bank sector NPL ratio has been falling steadily and stepped down again to 42% of the total loan book in November. State-owned banks are the worst offenders with an average of 58% NPLs and PrivatBank, which was nationalised in 2016, is even worse off with three quarters of its loans (74.4%) impared.
Privately owned banks are making the most and fastest progress towards getting rid of their NPLs and now have an average NPL ratio of 16.3% compared to 20.1% a year earlier. At the current pace privately owned banks will be able to reduce their NPLs completely within the next three years.
NPLs % of loan book
Dec 18
Dec 19
Dec 20
ratio of non-performing loans, %
53.73
48.69
42.03
incl. banks:
with state participation, of which:
68.15
63.1
58.07
PrivatBank
83.24
78.43
74.42
state banks ex-PrivatBank
55.41
48.86
44.09
Foreign owned
38.68
34.14
29.05
Privately owned
24.08
20.16
16.28
Insolvent
76.27
0
0
Source: NBU
46​ UKRAINE Country Report​ January 2021 ​ ​www.intellinews.com