In the first nine months of 2024, solvent banks made net profits of UAH 118 billion. The sustained high net interest margin continues to be the primary driver of profitability as lending volumes and investments in domestic government debt securities increase.
In Q3, the average yield on loans and on the domestic government debt securities portfolio practically stabilized, while the volumes of these instruments kept rising. Specifically, the volume of the gross portfolio of hryvnia loans made to clients had increased by 14.5% since the beginning of 2024 (the net portfolio, by 23.6%), while the volume of investments in domestic government debt securities was up 21.1%. Meanwhile, the cost of funding edged lower in the wake of a decrease in market deposit rates. As a result, the banks retained a fairly high net interest margin.
Despite the further increase in costs, operational efficiency remained high. At the same time, provisioning levels were low thanks to the high quality of the loan portfolio.
In the first nine months of 2024, only eight small banks out of 62 solvent ones were loss-making, taking a total of UAH 342 million in losses. Most of these institutions operated inefficient business models and failed to resolve a number of chronic issues.
As financial performance grew, the amount of income taxes accrued by banks for that period also rose, to UAH 35 billion.
The banks’ return on equity in the first nine months of 2024 was 45.8%, down from 56.9% in the same period a year ago.
If the law that puts a 50% tax on the banks’ 2024 profits takes effect, the sector’s return on equity will drop to about 30%. This will cool the banks’ efforts to build up capital to strengthen their resilience and keep lending to the economy going forward.
As previously reported, according to revised data, the banks earned net profits of UAH 82.8 billion in 2023, after having accrued UAH 76.2 billion in income taxes at a hiked rate of 50%.