Because of the war, Ukrainian banks became unprofitable for the first time in five years.
As a result of the crisis and against the backdrop of war, Ukrainian banks will lose at least 20% of their loan portfolio.
This is stated in the new NBU report on financial stability, published by the regulator.
The National Bank notes that the country's banking sector became unprofitable for the first time in five years due to a sharp increase in contributions to reserves.
“According to the NBU’s expectations, banks will lose at least 20% of their loan portfolio as a result of the war and the economic crisis,” the NBU stated in its report.
At the same time, the NBU notes that such losses will have a significant impact on the capital adequacy of banks.
To assess the maximum level of losses that banks can cover with their current capital reserves, the NBU conducted reverse stress testing.
“His results indicate that the twenty largest banks can lose on average up to 25% of their loan portfolio, while maintaining a positive capital stock. Even with such losses in the loan portfolio and corresponding interest income, more than half of the twenty largest banks will remain operationally profitable,” the NBU indicated.
In addition, the NBU report talks about changes in the structure of retail deposits of Ukrainians in banks against the backdrop of the war.
“Since the beginning of a full-scale war, the share of smaller deposits has been growing. The volume of hryvnia deposits in the range from 10 to 200 UAH increased in March-April by 000%, and large ones - only by 21,8%,” the report says.
The NBU points out that this trend differs from the pre-war period, when large deposits grew faster.
The share of current accounts is also growing. “During war, the population strives to have unhindered access to their money. So the demand for term deposits has expectedly decreased and is likely to be low in the near future. The share of demand deposits in household funds in all currencies increased from 56,1% in January to 64,7% at the end of May,” the National Bank notes.
It is indicated that current accounts and cash are the key means of preserving the population’s funds.
“In extreme war conditions, liquid and mobile assets have the highest value. Funds in accounts and cash are now the most attractive forms of savings. A significant portion of the people’s hryvnia accounts received in the spring remained in banks. The ratio of funds in bank accounts and household incomes remained at the pre-war level,” the NBU reports.
It is also reported that in response to falling incomes and uncertainty, the population has limited consumption. The index of the appropriateness of large purchases fell rapidly in March and remains significantly lower than before the war.
Due to low consumer demand, in particular for expensive goods, the need for loans has decreased. At the same time, the population, as noted, is slowly repaying previously received loans.
However, the current crisis has led to the fact that a significant part of the population has lost their jobs (and, accordingly, income) and even property. It will be difficult for such debtors to service their debts in a timely manner, the NBU points out.
Due to the war, Ukrainian banks have become unprofitable for the first time in five years.