Regular version of site
COVID-19 Crisis Had Moderate Effect on Bank Revenues in 2020: Banks Posted UAH 41 Billion in Profit

COVID-19 Crisis Had Moderate Effect on Bank Revenues in 2020: Banks Posted UAH 41 Billion in Profit

In 2020, banks reported UAH 41.3 billion in net profit*, down 29% from the same period last year, when the banking sector earned UAH 58.4 billion. 
 
The coronavirus crisis worsened the financial standing of banks, but less noticeably than was expected in the spring of 2020.  The number of loss-making banks did not increase. Last year, 65 in 73 solvent banks were profitable, taking home UAH 47.7 billion in net profits. This offset the UAH 6.4 billion in losses posted by 8 banks. 
 
"Banks have come through the COVID-19 crisis with confidence and a sizable margin of safety. Despite the overall cooling of business activity and declining cost of funding, Ukraine’s banking sector remains highly lucrative. In 2020, banks reported high operating profitability and acceptable credit losses. We expect that the risks of declining bank profitability will persist in the medium term. Some of these risks can be mitigated by improving operating performance. Profits will also come under pressure from provisioning. Bank profitability is thus expected to edge lower, but will continue to be high enough to sustain investor interest," said NBU Governor Kyrylo Shevchenko.

The sector’s profits were very concentrated: PrivatBank amassed 61% (UAH 25.3 billion) of all profits, while the five most profitable banks accounted for 89%.

The worst financial performance was seen in Q4 2020, when provisioning was higher than usual. In October–December 2020, the net financial performance of banks fell to UAH 3.7 billion, down 73% from Q3 2020 and 63% from Q3 2019.

Overall, loan loss provisioning was the main reason for the drop in financial performance in 2020. A number of banks recognized that asset quality had worsened as borrowers had come under financial strain. This was the reason that loan loss provisioning in 2020 surged by 91%, to UAH 20.8 billion, compared to UAH 10.9 billion in 2019.

The general slump in economic activity and a fall in demand for loans and banking services during the quarantine had a negative impact on the interest and commission income of banks, especially in Q2.  However, after a short-term decline of 1.5% yoy in H1, net commission income recovered in H2 and rose by 5.8% yoy for the year, driven primarily by the growth in cashless transactions. Net interest income was more stable than net commission income and increased over the course of the year, slowing in Q2 and accelerating markedly in Q4. In 2020, net interest income grew by 7% yoy, compared to an 8% yoy increase in 2019.

* Data may change as banks adjust their financial statements.

 

Tags
Subscribe for notifications

Subscribe to news alerts