Page 52 - UKRRptSept22

results for the returns on assets and equity were reported in April, when both were around zero, but should have improved in the meantime.
Nevertheless, cut off from any source of funding and with business greatly reduced by the war, banks have been digging into their capital to fund their operations. The NBU has not updated its capital adequacy ratio numbers since the war started but it had fallen from the mid20s to 18% as of February – still well ahead of the mandatory 10%. But if the capital adequacy ratio continues to fall at some point the central bank or owners will be forced to recapitalise the banks.
8.1.1 Earnings
In the second quarter, banks' liquidity and operating profitability increased. According to the National Bank, banks' net assets increased by 3.3% in the second quarter and came close to their pre-war levels. Net hryvnia corporate loans increased by 5.3%, while foreign currency loans decreased by 7.2% in dollar terms. The growth of corporate hryvnia lending occurred exclusively at the expense of state banks, increasing about 30% per quarter. The net retail credit portfolio decreased by 11.1% in the second quarter. The amount of non-performing loans increased by 2.6% in the second quarter to 29.7%. Individual hryvnia fund amounts increased by 6.4% in foreign currency and decreased by 3.5% in dollar terms. Enterprise funds increased during the quarter by 4.3% in hryvnia and 14.4% in foreign currency. Reserve formation led to an increase in the banking sector's losses, UAH 4.5B in the second
52 UKRAINE Country Report September 2022 www.intellinews.com