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Banks’ NPL Ratio Rose to 38.8% in Q1

Banks’ NPL Ratio Rose to 38.8% in Q1

In the banking sector, the nonperforming loans (NPL) ratio was 38.8% as of 1 April 2023, having increased by 0.7 pp from 38.1% as of 1 January 2023. In Q1, NPLs rose by UAH 2 billion, to UAH 434 billion.

Banks continue to recognize loan losses: since the start of the full-scale war, loan loss provisions have exceeded UAH 107 billion and accounted for more than 13% of the loan portfolio the banks had at the end of February 2022. 

Because of the war, the economic crisis, and russia’s energy terror, the potential losses of the loan portfolio might reach 30%.

At the same time, protracted full-scale hostilities have an adverse effect on lending dynamics. In Q1, total loans decreased by UAH 14.5 billion, or by 1%, to UAH 1.119 trillion as of 1 April 2023. 

Before russia’s military onslaught on Ukraine, the NLP ratio in Ukrainian banks had been declining since 2018 (from 55% to 27% as of 1 March 2022), and the loan portfolio was on the rise. 

As a reminder, the NBU has commenced the banks’ resilience assessment to evaluate the impact of the military aggression on bank asset quality, capital loss, and the banks’ capability to recover capital independently.

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