Ukraine’s banking sector saw its profit grow by 23.8% YoY in the first quarter of 2020, to UAH 16 billion, the press service of the National Bank of Ukraine (NBU) reported.
At the same time, in March alone, the banking sector received only UAH 97 million in profit due to a sharp increase in allocations to reserves. Fourteen banks suffered losses of UAH 2.7 billion. The growth rates of net interest (+6.8%) and fee and commission (+7.9%) income were the lowest in the last four years.
In the coming months, the financial performance of the sector will deteriorate sharply, mainly due to a decline in the quality of loans and the additional formation of reserves for them. At the same time, the reform of the banking sector has significantly strengthened the resilience of banks, so most institutions will be able to avoid the need to increase capital.
To mitigate the impact of the coronavirus pandemic on the banking sector and sustain the economy, the NBU has already significantly eased regulatory requirements for banks. The NBU has also introduced a new long-term floating rate refinancing instrument to enhance the positive effect of a reduction in the discount rate.
Against the background of lockdown measures, the demand for banking services is declining but remains stable, and the demand for working capital financing will increase, especially during the economic recovery. Therefore, banks must be ready to support enterprises by providing access to credit resources for quality borrowers. Due to low inflation and a reduction in the discount rate, the NBU expects loans to become cheaper.
Ukraine’s banking sector set a historical record of profitability in 2019 – UAH 59.6 billion. (Ukrinform/Business World Magazine)
