PrivatBank generated about half of $920 million banking sector net profit for Q1

18 May, 06:20 PM
In the first quarter, the banking sector successfully passed the crisis (Photo:Прес-центр НБУ)

In the first quarter, the banking sector successfully passed the crisis (Photo:Прес-центр НБУ)

Ukraine's banking sector in the first quarter (Q1) of 2023 posted a significantly high profit of UAH 34 billion ($920 million), with state-owned PrivatBank accounting for approximately half of the amount, according to the Banking Sector Review published by the National Bank of Ukraine (NBU) on May 18.

These profits indicate that Ukraine’s banking sector successfully weathered the ongoing economic crisis sparked by the full-scale Russian invasion, maintaining high liquidity and generating revenue.

While term deposits from households in hryvnias increased by 9.6%, the net loan portfolio continued to shrink due to weak loan demand. The corporate loan portfolio decreased by 4.8% in the national currency and 5.5% in foreign currency during the quarter. The decline in the net retail loan portfolio slowed down to 1.9%.

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According to the review, the sector’s interest income rose due to significant interest income from high-quality liquid assets and the retention of revenue from business loans while interest expenses grew at a slower pace, resulting in improved operational efficiency for banks.

The improved economic environment capped the growth of non-performing loans and provisioning expenses. Namely, the share of non-performing loans in Q1 increased by 0.7 percentage points, to 38.8%. However, risks, particularly credit risks, remained high.

Net interest income for the quarter was 41.4% up year-over-year. Commission income decreased by 15% compared to the previous quarter but increased by 20.4% year-over-year. Currency trading also contributed significantly to the sector’s income. Banks' operational efficiency remained high as operating expenses decreased and revenues increased.

The weighted average interest rates for raising funds from businesses rose to 13.2%, and from households to 10.6% per annum.

The regulator cautioned about the strengthening role of state-owned banks in Ukraine, which increases concentration risks and may complicate further privatization in the banking sector.

In April, the NBU’s key policy rate remained at 25%.

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