Q1 2023 saw 111 nonbank financial institutions leave the market, the first registration of a new finance company since August 2022, and the share of nonbanks in the assets of the NBU-supervised financial sector rising to 12%. This is according to the latest quarterly Nonbank Financial Sector Review.
Insurers
In Q1, gross premiums dropped by 6% qoq in nonlife insurance, but grew by 7% yoy.
Life insurance premiums decreased by 15% qoq, remaining 13% below the level seen in the same period last year.
Over the quarter, nonlife insurers generated profits comparable to those in previous years, and achieved a return on equity of 3%.
The return on equity of life insurers was a record high in recent years (10%) as a result of lower operating expenses and higher investment income.
As of 1 April 2023, nine insurers violated at least one of the solvency, capital adequacy, or risk requirements.
Finance Companies and Pawnshop
In Q1, finance companies ramped up corporate lending by 30% and retail lending by 37%, generating a profit.
Pawnshops showed signs of recovery: assets and new loans grew, interest income increased somewhat, and the pawnshop sector made a profit.
Factoring transaction increased by a third in Q1, while financial leasing transactions grew by almost 40%. That said, transaction volumes were still below their pre-war levels.
Credit unions
In Q1, credit unions’ assets declined, albeit more slowly than in the last six months. Credit unions’ loan portfolios shrank by 3%, while the share of nonperforming loans, at 32%, remained significant.
Operating profit was not enough to cover loan loss provisions, as a result of which the segment recorded a loss. Due to the losses, the capital declined as well.
The funding raised by credit unions continued to decline: additional share contributions by 6% and deposits by 5%.
As of 1 April 2023, 12 credit unions were in breach of the capital adequacy ratio.
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.
The review has been prepared using the information from the nonbank financial service providers that submitted their relevant reports to the National Bank of Ukraine as of 8 May 2023.
As they filed their earnings reports for Q1 2023, NBFIs, at the regulator’s request, adjusted their reporting figures or submitted reports for previous periods (in particular, for Q4 2021 and Q1–Q4 2022).