In Q2, 82 non-bank financial institutions were excluded from the Register, 38 of them finance companies, 8 lessors, 7 insurers, 7 pawnshops, and 6 credit unions. Most of the financial institutions gave up their licenses voluntarily. Under the Law of Ukraine On Payment Services, 16 finance companies were also excluded from the Register and included in the Payment Infrastructure Register as payment institutions. At the same time, one finance company and one lessor were registered during the quarter. This is according to the latest quarterly Non-Bank Financial Sector Review.
Insurers
The volume of life insurers’ assets increased in Q2 for the second straight time, by 4% qoq. At the same time, non-life insurers’ assets slightly declined as seven institutions exited the market.
The volume of life insurance premiums was little changed during the quarter, while non-life insurance premiums rose in volume by 12%, to the level of Q4 2021. The volume of car insurance premiums increased by 21% and exceeded the pre-war level. The share of auto insurance premiums continues to surpass half the income of non-life insurers during the full-scale war.
The insurance market is profitable: non-life insurers’ return on equity is commensurate with previous years (6%), while life insurers made a record quarterly profit.
According to 1 July data, 11 insurers violated at least one of the the solvency, capital adequacy, and operational risk ratios, and another insurer breached the asset quality requirement. In terms of assets, the share of the NBFIs that were in violation of ratios expanded to almost 1.8%, but it remains insignificant.
Credit unions
The almost-two-year decline in credit unions’ assets came to halt in Q2: they increased somewhat, although the number of these NBFIs fell. Assets grew slowly in most credit unions, but reached only 60% of the pre-war level at the end of the quarter.
New loans grew for the second quarter running, by almost one-third in quarter-on-quarter terms. The most notable increase occurred in household loans for real-estate construction, repairs, and renovation. Because of this, the loan portfolio edged higher by 5% qoq. However, one-third of the loans in the portfolio – a significant percentage – remain more than 90 days overdue.
The volume of loans issued by credit unions rose by 12%, while deposit outflows decelerated significantly. Moderate profitability ensured the growth in retained earnings.
According to data available on 1 July, ten credit unions violated the capital adequacy ratio. The number of credit unions in breach of this ratio declined by three, down from Q1, but it was five times the level of last year.
Finance companies and pawnshops
A significant reduction in the number of these NBFIs in Q2 affected the volume of the segment’s assets, which contracted by almost 9%. Retail lending slowed despite the sustained uptrend of the previous three quarters. The volume of factoring transactions was down by a quarter.
At the same time, financial leasing grew in volume for the fourth quarter in a row thanks to legal-entity lessors. Most of the agreements concluded during the quarter were to purchase cars.
The pawnshop sector continued to show signs of recovery. Interest income increased, as did income from sales of property, which made it possible to turn a profit and improve profitability indicators.
The Nonbank Financial Sector Review is a quarterly report that was first published by the NBU in Ukraine in October of 2020. It focuses on the activities of NBU-regulated nonbank financial institutions, such as insurers, credit unions, finance companies, and pawnshops. The review highlights key trends in the nonbank financial market and provides comprehensive insights into its performance.