The decline was primarily driven by the major increase in provisioning for incurred and expected losses inflicted by the full-scale war. Thus, annual loan loss allowances amounted to UAH 107.1 billion, another UAH 11.7 billion of provisions were allocated for other assets and risks.
Net interest income grew by 29% yoy. Interest income grew largerly owing to significant inflow of liquidity to the banking sector and its investment into assets with higher return than in 2021.
After having fallen sharply in the first months of the full-scale war, fee and commission income resumed growth due to stable demand for banking services and a gradual recovery in tariffs. During H2 2022, net fee and commission income almost reached the 2021 figures, however, it decreased by 14% yoy for 2022 as a whole.
Operating expenses accounted for around a half of total net interest and net fee and commission income. Net operating income before provisioning increased by 75% over the year. In Q4, this indicator was UAH 41.9 billion in contrast to UAH 25 billion in Q4 2021.
Operational efficiency provides banks with the first line of defense and allows to absorb credit losses. The NBU expects that financial institutions with viable business models capable of generating the operating income will successfully cover losses from risks and recover their capital.
As of 1 January 2023, 46 out of 67 solvent banks were profitable with a net profit of UAH 45.6 billion, which offset the UAH 20.8 billion in losses incurred by 21 banks. The sector’s profits are concentrated: the five most profitable banks generated 89% of all profits.
*Preliminary data, may change as banks adjust their annual financial statements after auditing.