Ukraine sees no banking crisis amid economic recession – NBU

First Deputy Governor of the National Bank of Ukraine (NBU) Kateryna Rozhkova says the economic crisis in the country caused by the coronavirus (COVID-19) pandemic is not accompanied by the banking system crisis.

"Measures to cleanse and strengthen the banking system are really yielding results ... Not only the robustness of the banking system, but also the effectiveness of monetary policy – all these factors helped to save Ukraine from a big shock. We can say we've gone through the crisis relatively calmly. At the onset of recession, we observed a deposit outflow from banks, but the situation stabilized within two weeks," she told an online conference on September 28, according to an UNIAN correspondent.

The regulator does not see significant risks for the banking sector's capital and liquidity, as it was the case during previous crises, but there are challenges to the banks' profitability.

"Banks' revenue is declining. Now, for the past eight months, the banking sector's profit, although remaining significant, has decreased compared on year, primarily due to the formation of reserves," the official said.

Moreover, banks were forced to incur additional expenses, especially in the early quarantine stages, to ensure both online operation and the work of branches in terms of security. In addition, there was a decline in consumer demand, in particular, the volume of banking services decreased, which is reflected in the dynamics of banks' fee and commission income.

"However, according to our forecasts, the banking sector will remain profitable this year," she added.

As for the banks' loan portfolios, it's too early to give a final assessment of the quality of loan portfolios in the context of the ongoing adaptive quarantine and loan holidays, Rozhkova said.

Read alsoNBU revokes Arcada bank's license"Now we're seeing deterioration in quality of the loan portfolio. The restructuring is underway, so it's too early to give final estimates ... However, due to the fact that the growth rate of the consumer loan portfolio has decreased, we first have a situation where mortgages grew faster than consumer lending. PrivatBank, Oschadbank, and Kredobank were in the lead. Reducing the keyrate made the mortgage affordable in terms of cost for end consumers," she said.

In turn, Chairman of Board at Kyiv-based Raiffeisen Bank Aval Oleksandr Pysaruk noted that after the easing of quarantine restrictions in May, there had been a revival of all customer transactions, which indicates gradual economic recovery.

"The level of debt is the lowest in the Raiffeisen system, so I see no serious problems. But we must understand why this is so – the country got out of strict lockdown as early as in May, and this can be seen in the volume of transactions. All types of payments, including foreign exchange and card ones, started to rebound in June. The economy has resumed functioning; people receive salaries and spend money, which can be seen from transactions. Therefore, the portfolio sees no significant deterioration," he said.

Background

Ukrainian banks' net profit fell by 26.4% in January-August 2020 year-on-year, to UAH 32.6 billion (US$1.2 billion).