REUTERS
The decrease was due to the deduction to reserves, as well as lower demand for banking services, which led to a drop in fee and commission incomes.
The loan portfolio of banks in the second quarter of 2020 (Q2 2020) decreased, while profits fell over COVID-19 and quarantine.
The relevant information has been reported by the National Bank's press service in its banking sector review.
Consequences of pandemic
"In April-June, the banking market felt the effects of the pandemic and quarantine measures over the reduction of the loan portfolio and profitability decline. At the same time, unlike in previous crises, the volumes of deposits of the population and businesses grew. The National Bank continues to contribute to banks and borrowers safely passing through the current crisis, while requiring from market players proper risk assessment, while next year it will analyze quality of restructuring," the NBU report says.
Net loan portfolio
The National Bank says the portfolio of net business loans (i.e. the portfolio excluding reserves) decreased over the quarter by 6.3% in hryvnia and 3.6% in dollar terms. The portfolio of net loans to the population was down by 5% this quarter (-4.4% in April) for the first time since the beginning of 2017. The key factor behind the reduction was the buildup of reserves by banks, while demand for loans dropped due to the worsening consumer sentiment. In particular, loans for household appliances and motor vehicles in Q2 2020 decreased.
Profit in Q2
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Q2 2020 saw continued growth of individual and business deposits in banks. In particular, businesses boosted hryvnia funds in bank accounts by 9% over the quarter (+24.6% year-over-year). individual deposits in hryvnia grew by 10.9% (+24.1% y-o-y) in Q2, mainly due to demand deposits. This increase contrasts positively with the crises of previous years when depositors were actively withdrawing funds from banks.
Banks' profit in April-June fell to UAH 7.7 billion (US$278 million), and in H1 2020 it was 23.4% lower y-o-y, amounting to UAH 23.8 billion (US$859 million). The decrease in profit was due to the deduction to reserves, as well as a decrease in demand for banking services, which led to a decrease in fee and commission income.
Debtor banks
As of July 1, 2020, debts of solvent banks for refinancing by the NBU amounted to UAH 9.2 billion (US$332 million). According to the regulator, they grew to UAH 12.7 billion (US$458.5 million) over the month.
During 2014-2017, 96 banks in Ukraine lost their solvency. The total amount of funds received by bank depositors transferred to the management of the Deposit Guarantee Fund during this period amounted to almost UAH 90 billion (US$3.2 billion).
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For payments to its depositors, the Deposit Guarantee Fund received loans from the Finance Ministry worth UAH 59.6 billion (US$2.1 billion) during 2014-2016, and over UAH 20 billion (US$722 million) from the NBU.
On July 17, 2019, the Deposit Guarantee Fund published on its website updated data on all borrowers, directors and former shareholders of insolvent banks who must repay debts in accordance with a court ruling.