The share of non-performing loans (NPLs) in Ukraine’s banking sector has fallen to its lowest level in a decade, even as the country’s lenders continue to deliver strong profits despite the strains of wartime conditions, reported Ukraine Business News.

The National Bank of Ukraine (NBU) said that as of Aug. 1, 2025, NPLs accounted for 26.1% of total loans, a drop of 4.2 percentage points since the start of the year. In the first seven months alone, non-performing loans declined by 14.8bn hryvnia ($372mn), or 3.8%.

The sector reported cumulative profits of 90bn hryvnia in 2024, edging up from 86.5bn in 2023, while profits for January-April 2025 came in at 52.9bn, almost unchanged from a year earlier. Analysts say a key factor supporting banks’ performance has been strong demand for domestic government bonds (OVDPs), which offer favourable yields. Between the start of the war and April 30, 2025, the state raised nearly 1.18 trillion hryvnia (€26.5bn) through primary debt auctions.

As bne IntelliNews reporte, the improvement in loan quality has been particularly visible at state-owned lenders, which hold around half of banking assets. Their NPL ratio fell to 40.9% in May 2025 from 48.5% a year earlier. PrivatBank, Ukraine’s largest bank and the sector’s biggest holder of bad debt, reduced its share of NPLs to 51.4% from 58.7% in the same period.

The steady reduction in bad loans and robust profitability suggest Ukraine’s banking system remains resilient, though challenges persist as lenders continue to manage risks from the ongoing conflict and sluggish investment activity.