Net profit of Ukrainian banks falls over $1.4 billion in 2022

13 February, 01:18 PM
Banks were forced to increase reserves (Photo:НБУ / Flickr)

Banks were forced to increase reserves (Photo:НБУ / Flickr)

During the year of Russia's full-scale invasion, the net profit of Ukrainian banks has fallen by UAH 53 billion ($1.44 billion) as banks were forced to increase their reserves, according to the report of the National Bank of Ukraine, the country’s central bank, on Feb. 10.

At the end of 2022, solvent Ukrainian banks received UAH 24.7 billion ($670 million) in net profit, compared to UAH 77.4 billion ($2.1 billion) a year earlier, the central bank said.

As of Jan. 1, 2023, 46 out of 67 solvent banks were profitable and made a net profit of UAH 45.6 billion ($1.24 billion). This offset the losses of 21 banks totaling UAH 20.8 billion ($564 million).

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At the same time, the five most profitable banks accounted for 89% of the sector's total profits.

The main factor behind the decline in profits was a significant increase in provisions for incurred and expected losses due to the war. Over the year, loan loss provisions amounted to UAH 107.1 billion ($2.9 billion) and banks set aside another UAH 11.7 billion ($317 million) for other assets and risks.

The banking sector's return on equity amounted to 10.9%, down from 35.1% a year earlier. The banks' net interest income increased by 29% year-on-year.

Interest income increased largely due to a significant inflow of liquidity to the banking sector.

The central bank noted that after a sharp decline in the first months of the Russian invasion, fee and commission income resumed growth due to stable demand for banking services and a gradual recovery in commission fees. In the second half of 2022, net fee and commission income almost recovered to 2021 levels; at year-end, it decreased by 14% year-on-year.

Operating expenses accounted for about half of the aggregate net interest and fee and commission income.

Net operating profit before provisions rose 75% during the year. At the end of the fourth quarter, this figure amounted to UAH 41.9 billion ($1.14 billion) against UAH 25 billion ($678 million) in the fourth quarter of 2021.

Earlier, NV reported that in 2022, the share of non-performing loans in Ukrainian banks increased to 38% due to Russia’s full-scale invasion.

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