'די באַנקינג סעקטאָר פון אוקריינא איז געזונט און ריזיליאַנט ווען מיר קוקן אין 2021' - נאַשאַנאַל באַנק גאָווערנאָר שעווטשענקאָ

2020 is a year all of us will wish to forget. A global public health crisis and rolling lockdowns have brought financial difficulties to consumers and businesses in every market. In this context, governments and central banks such as that I lead, the National Bank of Ukraine, have had a particularly important duty to ensure financial stability throughout the crisis and put in place policies to bring about rapid economic recovery, writes National Bank of Ukraine Governor קירילאָ שעווטשענקאָ.

I assumed my post as governor this summer, just as the scale of the global economic crisis was beginning to bite.  Since then, my team has worked tirelessly to ensure the stability of Ukraine’s financial markets while continuing to pursue lasting reforms to the country’s banking sector. From challenges, must come opportunities.

We work side by side with the banking sector to ensure their stability and lasting prosperity. This year, we have encouraged banks in their efforts to capitalise to weather the COVID-19 storm. We have maintained interest rates at an all-time low, ensuring stability in this challenging time. This has also boosted the lending market and assisted quality borrowers access the capital they need to invest. Meanwhile, we are proactively helping banks free themselves from crippling non-performing loan (NPL) portfolios.

 

As we enter 2021, the Ukrainian banking sector is in good health, achieving UAH39.8bn (€1.17bn) profits from January-October 2020. This is only a 23% reduction from 2019 levels, despite a significant fall in demand for banking services in the first part of the year. To account for the possible effects of the pandemic, banks have prudently also increased their provisions by 2.5 times. Other indicators are very positive - despite lower interest rates, net interest income has risen by 5.1% year-on-year.

The banking sector has also become better capitalised. The sector’s regulatory capital adequacy ratio, or the ratio of banking capital held proportional to its risk, is currently 21.76%, safely above the 10% required minimum. This has increased 2.1% in the last year, reflective of a total increase in regulatory capital by almost a fifth in 2020.

We have maintained an all-time low-key policy rate of 6%, to support the economic recovery of our country amid elevated uncertainty around the COVID-19 pandemic. Combined with subdued inflation, this has paved the way for low interest rates for consumers.

אַדווערטייזמאַנט

Today, quality borrowers can take out affordable hryvnia loans to finance their short-term needs, at less than 8.5% per annum – down from around 18% a year ago. In 2020, banks reduced their hryvnia deposit rates from around 15% to 8.6%, and rates on FX deposits are at all-time lows.

We know there is room to reduce rates even further, and we will continue to work towards this as we work into 2021.

This has also contributed to the quick recovery of the lending market following lockdown restrictions in the first half of 2020. In Q3 alone, the hryvnia net corporate loan portfolio increased by 3%, while the FX net corporate loan portfolio rose by 1.1%.

We witnessed a significant increase in loans to electricity suppliers and trading companies. Naturally, we also saw an increase in loans to SMEs, as they borrowed to restructure their business operations and recapitalise in the light of the pandemic.

Thanks to pent up demand following lockdown, retail lending rose by 4% in Q3. Real estate loans grew even faster, up 6.9% over the same time period. This trend was assisted by government programs and interest rate cuts to stimulate the economy.

Furthermore - and perhaps most significantly - we have made great strides in reducing NPLs. Ukraine had the world’s highest proportion of NPLs- more than half of all loans in 2017.  In 2020 we have taken proactive steps to accelerate our NPL reduction. In Q3 alone, the ratio of NPLs declined by 2.9 percentage points to 45.6%, a trend that has continued in Q4. As of the 1^st of November, the ratio was 43.4%. Much of this progress can be attributed to the efforts of state-owned banks, who wrote off UAH111 billion (€3.3bn) in fully provisioned loans between June-November this year. The NPL ratio for state owned banks now stands below 60%.

Our efforts across all sectors have been evidenced by growing consumer confidence in the banking sector.  In 2020, hryvnia retail deposits have risen by 29% since last year, while FX retail deposits are up 5.5%. Hryvnia and FX corporate deposits are up 38% and 24% respectively. This comes in spite of the coronavirus pandemic and low interest rates.

This year, in a time of significant economic turbulence and potential financial distress, we have continued to support the development of a resilient, stable and healthy banking sector in our country. We look forward to building on these developments in 2021.

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