In 2021, solvent banks made UAH 77.5 billion in net profits*, a historical maximum that is almost twice what they earned in 2020 (UAH 39.7 billion) and 33% higher than in the pre-crisis 2019 (UAH 58.4 billion). The sector’s return on equity increased to 35.2%, up from 19.2% in 2020.
Banks’ net profit peaked in Q4 2021, when in addition to the record growth in interest income, they released UAH 26.1 billion in provisions, 12.6 times as much as in Q4 2020.
The main factors underlying the surge in sector profitability in 2021 were a further increase in operating efficiency and the significant reduction of provisioning. Specifically, the annual increase in net interest and commission incomes was 39% and 25%, respectively. This was facilitated by the growth in interest income from lending, which revived significantly after the crisis. Further growth in the volume of cashless transactions drove an increase in banks’ commission income. Increases in net interest and commission income outpaced the growth in operating expenses, taking banks’ operating efficiency to the next level. Provisioning shrank by 58% for the year. In addition, banks released the previously accumulated provisions against legal risks.
"The solid financial performance of 2021 reaffirms that the banking sector is in great shape: it is stable, efficient, attractive to investors, and able to provide resources to support the economy. This is a result of the tremendous systemic work done in recent years. The all-time high profitability and available capital cushions indicate that banks are ready for new regulatory requirements that aim to shore up the sector’s resilience to future challenges and maintain financial stability," said NBU Governor Kyrylo Shevchenko.
As of 1 January 2022, 66 out of 71 solvent banks were profitable with a net profit of UAH 77.9 billion, which covered the UAH 0.4 billion in losses incurred by five banks. The sector’s profitability is concentrated: the five most profitable banks generated 67% of all profits.
*Data may change as banks adjust their financial statements.
