Diagnostics of the stability of the banking sector 2023: results of the first half of the year
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On August 30, 2023, the “Standard Rating” rating agency published an information and analytical study of the stability of the banking sector of Ukraine.
According to the research, despite the war and the realization of numerous credit risks, the banking system of Ukraine is not threatened by capital shortage. The conclusions indicate a positive view of the increase in the level of solvency of the banking system in the conditions of opposition to the aggressor.
Aggregate regulatory capital of banks began continuous growth in October 2022. From that time until July 1, 2023, it grew by 28% to UAH 251.5 billion. During the same period, the regulatory capital adequacy standard (up to 24.3%) and the core capital adequacy standard (up to 14.81%) showed significant growth.
What contributed to the increase in profitability?
The identified trend is related to the growth of banks’ profitability due to the high level of interest rates on deposit certificates of the NBU and OVDP.
Specialists assessed this positively, as the level of solvency/security of banks increased along with the increase in profitability.
According to the agency, the stability of the banking system in the first half of 2023 was most influenced by two groups of banks: banks controlled by the Ukrainian Government and banks with foreign capital.
Among the TOP-30 banks with the highest adequacy of regulatory capital, in particular, those that also had a high level of external support from shareholders: Deutsche Bank DBU (Deutsche Bank, Germany), ING BANK (ING Group, Netherlands), CREDIT AGRICOLE BANK (Credit Agricole Group, France), CITIBANK (Citigroup, USA), COMINBANK (shareholder Stefan Paul Pinter, Great Britain).
Increasing liquidity of the banking system
Also, as of July 1, 2023, Ukrainian banks were well provided with liquidity. This is partly due to the increase in the yield of NBU Certificates of Deposit, and then the yield of OVDP.
“The increase in the liquidity of the banking system of Ukraine since the beginning of the war, together with the increase in the level of solvency, reduce the probability of a banking crisis in the future, even with the implementation of unacceptable scenarios in the national economy”, – emphasizes Andriy Nikitin, director of RA “Standard-Rating”, Ph.D. economy Sciences, associate professor.
The bank with foreign capital AGROPROSPERIS BANK topped the ranking according to the ratio of liquidity coverage for all currencies (LCRvv). Banks with foreign capital, such as UKRSIBBANK (BNP Paribas), COMINBANK, PIRAEUS BANK IKB, UNEX BANK, PRAVEX BANK, Raiffeisen Bank, etc., also entered the TOP-30.
Banks controlled by the Government of Ukraine, such as PrivatBank and Oschadbank, also entered the TOP-30 in terms of liquidity provision.
Non-performing loans or about the NPL indicator
The share of NPLs stabilized at 38.94%: this is still more than the pre-war level (by 9-9.5%), but taking into account the dynamics of the level of NPLs in state-owned banks, it is quite an acceptable level for Ukraine.
Among the banks that had significant loan portfolios, the following can be noted from the TOP-30 banks by NPL level: PIRAEUS BANK MKB, PRAVEX BANK, Raiffeisen Bank, CREDI AGRICOLE BANK, COMINBANK, etc.
The level of non-performing loans in the credit portfolio of the banking system was stabilized.
“It is reasonable to conclude that the level of capital provision of the banking system of Ukraine has increased, and the level of liquidity provision of banks has also increased.” – summarizes the expert.
The full version of the Report on the stability of the banking sector from RA “Standard-Rating” is posted on the website.
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