Attacks on energy infrastructure continued in Q1, but the banks maintained stable functioning of branches and resumed operations in de-occupied regions. These are the takeaways from the Q1 2023 Banking Sector Review.
The sector’s liquidity remained high. Liabilities of solvent banks grew by 2.1% in Q1 as businesses and households were actively increasing their deposits. At the same time, the share of NBU refinancing halved, reaching 0.9%.
The maturity structure of funding base was improving. The growth in retail term deposits in the hryvnia accelerated to 9.6% qoq. Weighted average interest rates rose to 13.2% per annum for corporate deposits, and to 10.6% for retail deposits.
Demand for loans remained subdued. In Q1, the corporate loan portfolio shrank by 4.8% in the domestic currency and by 5.5% in foreign currencies. However, the decline in volumes of the net retail loan portfolio slowed to 1.9%.
Credit risk remained the main risk for the banks, but they became slower to recognize credit losses caused by the war. In Q1, the share of nonperforming loans rose by 0.7 pp, to 38.8%. Net loan loss provisions were as low as UAH 1.8 billion (-90.2% yoy) during the quarter."The banks successfully withstood the year of the full-scale war and have been recovering their operations in de-occupied territories rather quickly," noted First Deputy Governor Kateryna Rozhkova. "The next stage is the post-war recovery, in which the banking sector will take an active part by lending to households and businesses. Improving the structure of funding base and recognizing credit losses are important elements of this preparation."
The loans and deposits data published in the Banking Sector Review differ from the corresponding information posted in the Monetary Statistics section of the NBU’s official website, because the former:
- contain data on the banks that were solvent as of the reporting date unless stated otherwise
- include data from bank branches operating abroad
- contain data on deposits in other resident and nonresident banks
- have been adjusted for loan loss provisions unless stated otherwise
- contain data on personal certificates of deposit unless stated otherwise
- contain information on nonresident clients.