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Corporate Loan and Mortgage Growth Rates Reach Decade Highs, Profits Hit New Record – Banking Sector Review

Corporate Loan and Mortgage Growth Rates Reach Decade Highs, Profits Hit New Record – Banking Sector Review

In Q3 2021 (hereinafter Q3), the banking sector ramped up lending to record highs, most notably in the corporate and mortgage segments. Deposit growth dynamics remained positive, but became slower. The dollarization rate of deposits decreased.

The sector’s profit rose by 50% yoy in Q3. The increase in net interest income in annual terms was the highest in a decade. Net commission income continued to surge. At the same time, provisioning almost halved in annual terms.

The sector’s current standing suggests that banks are ready to further implement the previously planned capital requirements.

This is according to the latest Banking Sector Review published by the NBU.

Bank assets are growing as lending revives

Net assets of banks increased with the revival of customer lending. At the same time, banks reduced their holdings of domestic government debt securities and NBU certificates of deposit.

Net hryvnia corporate loan portfolios grew by 13.1% qoq. In annual terms, this increase exceeded 40% yoy.

The growth in net hryvnia retail loans accelerated to 31.2% yoy compared to the previous quarter and surpassed the pre-crisis level. Mortgages climbed by more than 16% qoq and 54.5% yoy, continuing to outpace consumer lending.

The NPL ratio shrank by 3.9 pp in Q3, to 33.3%, thanks to this year’s largest NPL write-off and efforts by banks to step up lending.

Hryvnia retail deposit declined seasonally in Q3

Hryvnia retail deposits decreased by 1.4% qoq in Q3, primarily because of the decline in demand deposits amid a seasonal increase in consumer spending. On an annual basis, hryvnia retail deposits were up 15% yoy.

Hryvnia corporate deposits grew by 6.9% qoq and 28.1% yoy.

Sector profitability exceeded the pre-crisis level of 2019

The banking sector in Q3 posted profits of UAH 21.3 billion, 1.5 times the level of Q3 2020. In the first nine months of 2021, the sector made UAH 51.4 billion in profits, up from the same period of the pre-crisis 2019. Profitability drivers have been the ongoing growth in operating performance and the significant cuts to provisioning.

The current high profitability and available capital buffer will allow banks to easily meet the updated regulatory capital requirements.

For reference

The loans and deposits data published in the Banking Sector Review differs from the corresponding information posted in the Monetary Statistics section of the NBU’s official website, because the former:

  • contains data on the banks that were solvent as of the reporting date unless stated otherwise
  • includes data from bank branches operating abroad
  • contains data on deposits in other resident and nonresident banks
  • has been adjusted for loan loss provisions unless stated otherwise
  • contains data on personal certificates of deposit unless stated otherwise
  • contains information on nonresident customers.

 

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