Ukraine’s banks continue to make progress, but the progress is slow. In May the sector’s profit was up again to a cumulative UAH23bn ($876mn) over the first five months of this year.
In monthly terms the banks earned UAH5.3bn ($202mn) in May, continuing a trend of earning between about UAH4bn and UAH5bn a month this year.
This result is significantly ahead of last year when the banks were earning between UAH1.5bn and UAH4bn a month, although in June 2018 they collectively lost money, but had a good month in November 2018 when the banks collectively make UAH5.1bn. However, the best month last year has not been better than a good month this year and banks earned more than UAH5bn in three out of the five months this year.
Lending remains depressed thanks to the poor investment climate – something Ukrainian President Volodymyr Zelenskiy has promised to fix. But that means funding credits remains simple as deposits significantly lead the amount of credits, and the loan to deposit ration was 86.9% in May.
Non-performing loans (NLPs) continue to shrink but at a very low pace from a very high base. NPLs were down to under 52%, but remain elevated. Banks are using their profits to retire bad loans, but as all these loans have already been provisioned for they do not represent a danger to the system. However, as banks have had to tie up a significant amount of capital in provisions this is hurting their ability to make profits and so slowing the recovery.
Retail lending has yet to take off in Ukraine. The bank sector retail loan portfolio was UAH205bn in May, barely changed from the UAH202bn at the start of the year and only modestly up from the UAH174bn at the start of last year.
At the same time the corporate loan portfolio remains significantly larger than the retail portfolio and was UAH929bn in May. But like retail there is not much action in corporate lending either and the total portfolio of corporate loans was actually down from January’s UAH960nm. Again compared to the start of last year the corporate loans portfolio has barely changed from the UAH892bn lent in January 2018.
The banking sector is slowly returning to health, but as a business it is not doing much more than treading water at the moment.
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